PUC fines power company over failures

-says since 1999 system losses have totalled over US$400m

The Guyana Power and Light (GPL) has been fined by the Public Utilities Commission (PUC), for failing to meet six of its eight performance targets in 2017, including in the areas of power interruptions and system losses.

“In our previous Order we cautioned that it was not appropriate to make any award of a monetary penalty on the company, we had expected GPL to make a concerted effort to fulfill its mandate in providing a safe service at [a] reasonable price to consumers….Unfortunately, our expectations of an improved service did not materialize,” the PUC said in its Order, dated April 25th      2018.

“The Commission, in fulfillment of its obligations and having considered the extent to which the company has failed to meet the OSPT (Operating Standards and Performance Targets), together with the impact on the Licensees’ consumers, hereby fines the company in the amount of 5% of the total value of the dividends payable to the company’s shareholders in the just concluded calendar year,” it further stated, noting that the Commission would continue to monitor the company and demand reports as it sees fit.

According to the PUC’s report, GPL’s performance is assessed based on eight OSPTs, with the assessment taking place by March 31st of each year, accounting for the previous year.

The targets measured are: (1) Customer Interruptions, (2) Voltage Regulations, (3) Meter Reading, (4) Issuing of Bills, (5) Accounts Payable, (6) Accounts Receivable, (7) System Losses and (8) Average Availability.

Based on information provided by GPL to the Commission, the entity was able to satisfy only two of their targets, reaching the standards for the “Issuing of Bills” and “Accounts Payable”.

In regards to “Customer Interruptions”, according to the report, in 2017, consumers suffered an average of 128 power outages, 171% more than the standard limit, which is set at an average of 75 outages per year. Additionally, the average duration of these outages was said to be 133.18 hours, 48.1 hours more than the standard, which is expected to be no more than 85 hours.

GPL has attributed the high number of outages to downtime on its alternators, one of which reportedly failed and took six months to become operational again, and another two, which also needed significant repairs after it was discovered that their failure was also likely.

It was further stated that the company’s reserve capacity is insignificant, and its transmission unstable. The former was said to account for generation shortfalls when the generators unexpectedly failed in instances where there was scheduled maintenance, or where the megawatt sets were withdrawn from service. The latter reportedly accounted for no less than 25 power disruptions during last year. It was emphasized that those disruptions were “in no way due to human error”.

The PUC noted in its response, however, that the generation shortfall was foreseeable, stating that GPL should have put in place provisions for its mitigation.

System losses

GPL’s “System Losses” were calculated at 29.6%; 2% more than the 27.6% standard. GPL related to the Commission that a shortage of essential materials and meters were what were responsible for the high rate. The report stated that the 2% by which the company was above the standard requirement, equated to a $400 million loss in revenue.

The PUC, noting that the explanation provided for this shortfall is a legitimate constraint, also warned of the crippling effects that failing to upkeep such a standard can have on the company, as well as the citizens of Guyana.

The commission noted that because significant weight is placed on this standard, “an under-par performance casts a shadow on the overall performance of the OSPT”.

“The Commission attaches significant weight to this standard and it is disappointed that the standard, which is not challenging, was not met. By the company’s own admission, a system loss of 1% costs the company approximately $200 million…” the report stated.

“From the inception of GPL in October 1999 to the end of 2017, the cost of system losses to the company and by extension to the consumers was more than $400 million United States dollars.

Relative to the size of the economy this is a significant figure; and the overall cost is an impairment to the lives of its citizens. This is contrary to the mandate of the utility, which is part of its fabric in the promotion of human development to the nation, by providing a quality service at an affordable price. To not achieve this standard, reflects adversely on the company’s endeavors,” it admonished.

The “Average Availability” target was documented at 78.24%, where it was expected to be 80% on average. The failure of the generation sets were also blamed for GPL not achieving this target.

The report noted that in past years the “Voltage Regulations” standard was not applied, as GPL stated that it would be difficult to monitor the voltage supplied to each customer. It was related, however, that in place of this standard, GPL made a commitment to complete 100% of voltage complaints that resulted from network reconfigurations, vegetation, line upgrades, and other elements, in no more than 30 days; a standard they failed to meet.

The report said that no explanation was provided for why this was not so, and the PUC noted that there is evidence to show that the voltage received by some customers is not in line with what GPL was contracted to deliver. The PUC advised that GPL take “appropriate and urgent steps” to enhance this service.

Under the “Accounts Receivable” standard, the cash collection cycle was documented as being 35 days, where it should have been 30. The report said that late payments from the Neighbourhood Democratic Council for street lighting, the Mayor and City Council and the Guyana Water Incorporated, caused them to fall short in this regard.

While the report said that GPL has been able to improve on its collection service compared to previous years, they still did not meet the target.

“The company conceded that the Standard is very challenging since it gives twenty-one days credit to consumers and a further grace period of seven days before taking action to enforce compliance,” it was reported.

The PUC, in its review, noted that the failure to collect these monies, however, did not seem to affect GPL’s operations, and agreed that disconnection of essential services should be a last resort.

Accounts payable

Under “Accounts Payable”, GPL is required to settle its debt with creditors within 26 days. They met this target exactly, as it was reported that 26 days was the average amount of time the company took to settle its indebtedness to its creditors.

The “Issuing of Bills” standard requires that GPL issues bills to commercial customers within seven days and residential customers within 10 days. They reportedly managed to achieve these targets within an average of five days and eight days, respectively.

Notably, although it was reported that GPL was able to issue their bills in a timely manner, they failed to satisfy the “Meter Reading” standards, which calls for the company to read 97% of the meters belonging to commercial customers and 90% of those belonging to residential customers. Only 91% of commercial meters were read, while 88% of residential meters were read.

One of the explanations provided was that in the case of residential consumers, GPL meter readers may have been unable to access the premises to read the machines. As for commercial consumers, malfunctioning of the hand-held devices used to read the meters, as well as the occasional failure of meters that were defective themselves, were blamed.

It was further stated that last year, there was a shortage of commercial meters, making the process of replacing the defective ones difficult. Also, it was stated that the timeline to deliver the bills leaves a “short window”, usually two days, in which corrective action can be taken, resulting in “a higher than intended estimation of bills.”

While the PUC found that the explanation provided for why GPL failed to meet their meter reading requirements for residential consumers was satisfactory, they noted that the company has consistently failed to meet the standard as it relates to its commercial customers, which it was noted form a “very small” pool.

“Meters are integral in the provision of a service to consumers and it is difficult to envisage that such a situation was allowed to continue for such an inordinate period of time…The impact, if any, on consumers and on the company, may be negligible, however, the Commission is of the view that the company should take pride in its performance and to ensure at a minimum it achieves this standard in 2018,” the PUC advised.

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