GPL defends rate hike as ‘moderate’

The increase in electricity rates announced on Friday is moderate, the Guyana Power and Light (GPL) maintains.

On Friday, as it tries to cope with vastly higher fuel prices and other woes, GPL announced price hikes of between 6% and 20% for the various categories of consumers. It said most residential consumers will only have to pay a 6% increase.

In a press release last night, the power company said that following the announcements of the rate increase certain opposition groups have come out against the increase. GPL said that it believes that these statements do not take into account certain facts including since July 2005, the utility has not implemented any increase despite rising fuel prices.

The release stated that GPL has foregone revenue in excess of $7B between 2003 and 2007. Based on the current level of fuel prices, GPL intends to maintain the announced increase as the applicable rates for next year, the release said.

In addition, the release noted that for Industrial/Commercial consumers, “the proposed increased tariff is not an increase in the current applicable tariff calculated in accordance with its license but simply a reduction in the current discount provided to these customers”.

On Friday, GPL Chairman Winston Brassington had said that residential customers account for 90 per cent of the total number of customers and comprise `lifeline’ and other residential customers. He said that lifeline customers are being redefined from 100kWh per month to 75 kWh and as a result from next year the 65,000 lifeline customers would only face an increase of 6%.

GPL said yesterday that the Government role in the company has had a significant impact on lowering rates and this role would be further expanded next year. The current increases are the absolute minimum to allow GPL to be financially sustainable in 2008, the release asserted.

All private consumers are benefitting from the increased burden that Government is taking in allowing a larger rate of increase for Government agencies and the discount on calculated tariffs that GPL will continue to pursue by GPL in favour of all customers, the release said.

It said that the following should be noted:

“Since 2003, GPL has been implementing less than its authorized rate calculated in accordance with its license.

Since July 2005, GPL has not implemented any increase in rates despite rising fuel prices.

The current increase in rates is within the authorized rates for GPL based on

the calculated tariffs for 2007. These rates are based on the audited

financial results for 2006 and the methodology, formulae, and principles laid

out in the GPL license.

GPL has not implemented any fuel surcharge for this year; it is entitled to add

an additional fuel surcharge to the above figure

GPL would be entitled to charge an additional increase next year based on the

cost of operations of 2007; this would be in addition to the above two figures

of the 2007 calculated rates plus the fuel surcharge. As a result of the above, GPL has foregone revenue in excess of G$7 B

between 2003 and 2007″.

The release argued that if GPL had been in private hands the price of power would have been in accordance with its licence and much more expensive. It noted that the argument has been made that the higher tariffs are partly due to higher than normal commercial and technical losses. While this is true, GPL said this situation is completely mitigated by the following:

“GPL is charging tariffs at a discount to that provided for in its license;

Tariffs under the license calculation is much lower as a result of the action of the Government to write off certain obligations to Government agencies and to reduce the return on equity to 8% before tax;

Reductions in technical and commercial losses require substantial investment which would carry a cost-this cost would push up tariffs.”

The power company also said that it had reduced technical and commercial losses in 2006 by over 3% and is expected to have a similar or larger cut in 2007. In 2008, GPL targets lowering technical and commercial losses by almost 7%.



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