The Guyana Power and Light (GPL) has not formally applied to the Public Utilities Commission (PUC) for a tariff increase, but has submitted its Final Return Certificate (FRC), which is considered the beginning of the process.
A source at the PUC, who explained the process to this newspaper, said the PUC will now examine the FRC to see whether a rate increase is justified, taking into account the entity’s rate of return. However, the source said, the shareholder of the company – the government – will have an important say in the whole process.
The source said that ultimately, the rate of any increase is tied to the company’s rate of return. “Upon examination of the FRC, it will be determined whether the company makes an application for an increase,” said the source.
As part of the process, the company can make a decision to forego its return with a view to keeping the tariff affordable.
GPL’s tariff determination is spelt out in the Electricity Sector Reform Act and it prescribes what GPL must do if it wants electricity rates increased.
The company has blamed the cut of a $5.2 billion government subsidy by the opposition and rising fuel costs as giving rise to the need for the increase.
GPL, in a statement, expressed regret that as a result of funding being denied, it has no other option but to raise revenue to remain financially viable. The company said the board was actively planning the implementation of the 26.7 per cent tariff hike.
Following the cut of the subsidy during the consideration of the budget in April, GPL’s management had signalled that higher tariffs would be a possibility. Company Chairman Winston Brassington had suggested that the increase would have been around 17%.
The combined opposition, during the examination of the budget estimates in April, slashed GPL’s funding of over $10 billion by $5.2 billion. Government was injecting $5.8 billion to support the company in meeting its cash flow requirements and had dedicated a further $5.4 billion to support key projects such as the upgrade of its transmission and distribution network, the loss reduction programme, and other activities required in anticipation of the Amaila Falls Hydropower Project.
According to the opposition, the reason for the cut of GPL’s expenditure was that the planned spending was not properly explained.
Meanwhile, GPL explained that the allowable increase of 26.7 per cent is calculated in accordance with the 1999 ESRA and its licence.
According to GPL, the FRC tariff filing computes how much GPL may increase or decrease its tariffs annually, using an internationally acceptable methodology that is based on its rate of return. GPL explained that this methodology calculates the tariff looking at GPL’s income and expenses, assets, debt and equity during the previous year.