GPL taken to task over rental of generators, loss reduction

– at PUC hearing

Owner of the Kaieteur News Glenn Lall and Attorney-at-Law Christopher Ram went to town on the Guyana Power and Light (GPL), accusing that company of not providing straight answers regarding the rental of Caterpillar generators, loss reduction and the infrastructure development loan from China.

This was during a Public Utilities Commission (PUC) hearing on the utility company, held at the Hotel Tower yesterday. The duo was among a sizeable audience that gathered for the hearing, all of them with an interest in the utility and its operation.

Lall accused the company of “running a cake shop” when it disclosed the cost paid to rent 12 Caterpillar generators as opposed to purchasing them. The rental of the machines cost GPL about US$5 million.

But Deputy CEO of GPL Aeshwar Deonarine responded that one of the reasons for the company renting the Caterpillar generators rather than purchasing them was affordability. He said that the 12 units would have cost about US$10.8 million and it was more feasible to rent them for the short-term nature of their operation. He also explained that because the Caterpillars are high speed units, they were unsuitable for base-load operations. He said it is for this reason that the company is purchasing Wartsila units for boosting base-load capacity.

But both Ram and Lall pressed the company to say when it was that the Caterpillar was discovered as unsuited to the task. Deonarine said that it was always known that the Caterpillars were for a stop-gap arrangement and not permanent, as high speed units should not run on a 24 hours basis.

The company also explained that the Wartsila units can take up to one year from ordering before they arrive and are set up, while the Caterpillars can be had instantaneously.

Deonarine used an analogy that it is like someone who wanted an item for their home and couldn’t afford to pay for it at once, hence entering into a hire-purchase agreement. However, Ram was furious with GPL comparing itself to the ordinary man or woman who wanted items for their home. Deonarine had to explain that he was simply using the scenario as an illustration and not making a comparison of GPL to an ordinary person of modest means.

Lall further pressed the management of the GPL as to why the Caterpillar gen-sets were ordered through authorised agents MACORP. At this point, CEO of GPL Bharat Dindyal explained that this was a part of the agreement with Caterpillar so that there could be the requisite servicing of the equipment.

Lall then claimed that he could buy a Caterpillar generator from Miami for significantly less than he would through the local agents.

Both Lall and Ram appeared incensed by what they felt were inadequate answers coming from the officials of GPL. They said the company was giving varying amounts regarding the Chinese loan meant to improve transmission and distribution. But according to Deonarine, the loan is in the amount of US$42.9 million. Lall had pointed out that the Chinese loan was said to be US$42 million, so he wanted an accounting of the additional million US.

On the vexing issue of losses, Ram wanted to know how much in terms of cost and revenues foregone did losses mean for the consumer and taxpayer in 2011. To this Dindyal responded that for every one percentage point of loss, the company is dealt a blow of $400 million.

Dindyal said the company could reduce these losses – now in the vicinity of 33 per cent – significantly. These losses were in the neighbourhood of 43 per cent, when the government bought back its shares in the company from the foreign investors CDC/ESBI in 2003. However, he said that with the significant sums required as capital investment, it would be unsustainable and unaffordable in terms of the tariffs that would have to be set to recover those capital costs.

Lall wanted to know if what the GPL managers were saying about loss reduction was “factual”.

Dindyal also made the point that the Amaila hydropower project had nothing to do with loss reduction and that if that project were to magically start operating today, the issue of loss of power still had to be addressed. He said the company must try to bring its losses down between now and when the hydro project comes on stream.

With regard to commercial losses, Dindyal said the culture of theft of electricity is still a pervasive one and Guyana can be compared with Jamaica and the Dominican Republic. He said, too, a large per cent of the power thieves are from the business community. He said that in 2010 the company found more than 1,000 cases of meter tampering. But the progress that was made in 2010 seemed to vanish in 2011.

On billing, a question came from the floor as to whether GPL should not take into account all the power interruptions and compute the light bill accordingly. To this, Dindyal said that one must look at the duration of the outages and not their frequency. He said too that whatever percentage of power that is not delivered to the customer, this is translated into a reduction of the charge on the bill, albeit by about four per cent. However, he said people may not notice it because on a bill of about $9,000, a four per cent reduction would appear miniscule.

In terms of the prepaid meters, the company said that these have been selling themselves over the past year. Prepaid meter accounts numbered over 12,000 by the end of last year and accounted for revenues of about $56 million per month. When questioned as to whether the prepaid meters were meant to have an effect on loss reduction, Dindyal said that they were meant to conserve energy even though they may lead to reduction of commercial losses.

At the hearing, the PUC reviewed a number of benchmarks, among them, billing, power interruptions, losses and financial reporting.

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