GPL escapes financial penalty despite failing key benchmarks

-blackouts exceeded target

Despite having failed key targets in 2016 – including the number and length of blackouts – the Guyana Power and  Light (GPL) has escaped what could have been a hefty financial penalty with the regulatory body stating that overall the utility had put in a creditable performance.

On an annual basis, the Public Utilities Commission (PUC) reviews eight benchmarks in GPL’s  Operating Standards and Performance Targets (OSPT).

In its order on Friday, the PUC said that the standard set system losses at 28.6% of dispatched power for 2016.

For the reporting period GPL stated to the PUC that the system losses were 29.2% of dispatched power. The standard was therefore not met. The PUC said that the explanations offered by the company for not meeting the standard were the closure of the Loss Reduction Division for approximately three months at the insistence of the shareholder – the government – to facilitate an investigation of the Division. It was noted that during this period there were no activities by the company. A shortage of meters to complement the work of the Loss Reduction Division was given as a secondary reason resulting in the target not being achieved, the PUC said.

An explanation being given on customer interruptions (PUC photo)

In its review of the standards not achieved, the PUC said it attaches significant weight to the systems losses target and in the circumstances was disappointed that the standard which could hardly be described as challenging was not met.

“By the company’s own admission a system loss of 1% translates to approximately $200 million. The increase loss of 0.6 of 1% over 2015 translates to a loss of $120 million”, the PUC lamented.

It said that it  noted the company’s explanation for not meeting the target was that there was a closure of the loss reduction department at the insistence of the shareholder to carry out a probe into alleged malpractices.

“(This)  statement by GPL at the hearing casts a damning indictment on the employees of the company. When an admission is made that workers have to be monitored, condign actions should have been taken to have them not only disciplined but dismissed from the service.

We are yet to be convinced that the closure of the loss reduction department is the main reason for the target not being met. The reason for the failure may have more to do with the inability of the     company to commence its metering programme envisaged in its 2016 to 2020 Development and Expansion Programme. The metering of consumers as planned in the D & E Programme should in theory significantly reduce commercial losses and by extension reduce the overall percentage of system losses”, the PUC said.

While GPL made the announcement of the closure of the Loss Reduction Division before the PUC no such announcement had been made to the public.

Blackouts

A key irritant to the public has been the number of blackouts and their duration and in both of these categories, GPL failed.

In relation to the System Average Interruption Frequency Index: (SAIFI), the PUC noted that the intent of this standard is to limit the average number of outages a consumer would have experienced during the year to no more than 75.

The average number of outages a consumer actually experienced in 2016 was 118.

The PUC said that the reason that GPL gave was that  the submarine cable that transferred power from the Vreed-en-Hoop power station to the Demerara interconnected system malfunctioned resulting in approximately 16 megawatts of power being lost to the Demerara system. The loss of power led to the company operating without reserve capacity in the Demerara System and forced the company to revert to older stations that are not always reliable.

The PUC said that GPL also stated that should the protective device detect a fault in the transmission network it would trip the system. The standard practice is to wait for ten minutes and if there is no report of a fault, the system would be re-energised. These transient trips upped the number of outages albeit for short periods, GPL explained.

In the category of System Average Interruption Duration Index (SAIDI),  the PUC noted that the intent of the standard was to limit the average duration of outages that a consumer would have suffered during the year to no more than 90 hours. However, the average duration experienced by consumers during the year was 125.8 hours.

The PUC noted that the company’s explanation in not meeting the target was the same for not attaining SAIFI; namely the loss of power as a result of the Demerara River cable failure.

Giving its assessment of the failure of GPL to meet these two benchmarks, the PUC said “The performance of the company with respect to both indices deteriorated significantly when compared to the previous year. This no doubt would have been distressing to consumers. In reviewing the performance of this standard the Commission considered whether the failure of the cable to deliver electricity from the Vreed-en-Hoop power station constituted a force majeure and whether redundancy should have been in place for such eventualities. We feel that the latter, though ideal, may have been too costly to the company at this time. We do, however, wish to place on record our disapproval of the time taken by the company to have the cable fully functional.”

The other benchmarks in the OSPT were voltage regulation, meter reading, issuing of bills, accounts receivable and average availability. Some of these benchmarks were met. In relation to voltage, Part I of the standard says that GPL shall seek  to maintain in stable conditions, voltages of plus or minus 5% of the nominal voltage and plus or minus 10% following a system disturbance. The PUC said that the company has maintained from the inception that it would be difficult to monitor and report on the voltage supplied to each customer. Therefore, this standard as in previous years was not measured.

In relation to meter reading, the PUC also lamented GPL’s consistent failure to meet the target in relation to maximum demand consumers.  The PUC added that the lack of meters experienced by the company during the year seemed to be as a result of poor planning and that this was unacceptable.

In its overall decision,  the PUC said that in reviewing the company’s performance, it took into consideration the resources that were available under the period of review along with other factors that may have had an impact on the GPL’s overall performance. “We find the company’s efforts creditable, but for system losses”.

If the PUC found that the Company failed to meet its Operating Standards and Performance Targets, monetary penalties as much as 25% of the total value of dividends payable to the company’s shareholders could be applied.

“Given the weight that should be attached to (the losses) standard an under par performance casts a shadow on the overall performance of the OSPT. Having regard to all we have heard and noted and taking into consideration the explanations offered by the officials of GPL we do not think it appropriate at this time to make any award of monetary penalty on the Company,” the PUC decision said.

It added that the company’s failure to meet certain targets as adumbrated was diminished by the fact that they were not excessive and the impact on the consumers was not extremely burdensome.

“We do not, however, wish for it to be held as a precedent for the current performance of the Company,” the decision said, while adding that the PUC expects that its comments will “ignite the company’s interest and obligation, which is owed to the public, to ensure that they fulfil their mandate in providing a safe service at reasonable prices”.

The PUC is chaired by Justice Prem Persaud and comprises Maurice Solomon, Dela Britton, Vidiahar Persaud and Moorsalene Sankar.