PRIME Minister Samuel Hinds yesterday called on Guyanese to view the tariff increase proposed by the Guyana Power and Light (GPL) Inc., as one that is coming after five years of no adjustment during which time oil prices had risen by about 60 percent. The cost of oil constitutes about 80 percent of the cost of providing electricity.  

The power company has been facing dire financial constraints over the past few years as a result of high technical and commercial losses, and this position has been compounded with the slashing of its $5.2B subsidy by the Parliamentary Opposition during the consideration of the 2013 National budget. As such, it has made a proposal to institute a 26.7 percent tariff increase, which has been submitted to the Public Utilities Commission (PUC).  The new rates have not yet taken effect but the GPL Board is actively engaged in planning its implementation.
At present, the average price per kilowatt hour is $63 and with the 26.7 percent increase the new rate will be about $80 per kilowatt hour.
Speaking on a programme on the National Communications Network (NCN) yesterday, the Prime Minister, who has responsibility for the electricity sector, said GPL has been foregoing the increase in tariffs that it ought to have been receiving. The company has calculated over $20B of foregone income.
The Prime Minister said that while this increase will be very demanding on people, this adjustment should have been coming in smaller steps of about five percent per annum.
“This 26.7 percent is a big step, but it comes after five years of no increases and five years of greatly increased cost, especially for oil…the alternative for the future is for the annual review to be put into effect, in which case one would probably see increases of no more than five percent per year,” he said.
 

SUBSIDY USED FOR SHORTFALLS
 The annual government subsidy has been meeting a lot of the shortfalls in the income required by the company. It has been part of the Government’s efforts to ensure that customers are not made to bear the burden of the high cost.     
The Prime Minister said GPL needs to have enough money to keep its operations running, and if this tariff is suppressed then ultimately the level and quality of service will be degraded.
When the PPP/C took office it began focusing primarily on improving generation capacity and this saw the purchase and installation of the first set of Wartsila units. However, it was recognised that transmission and distribution were also issues to be addressed, and it embarked on an aggressive programme to upgrade these. These, when completed, will see the installation of seven new substations across the country and the expansion of three others.
As a result of the significant investments that have been made, today the supply of electricity has been tremendously improved compared to the level at which it was in the 1990s.
 
MISMANAGEMENT CLAIM REJECTED  
The Prime Minister rejected the claims made by the Opposition and other political commentators in sections of the press that the company is not being properly managed and said that the big cost factor is technical and commercial losses.
He said there has been a lot of pressure on GPL to reduce technical losses. However, this would require significant investments. In preparation for the Amaila Falls Hydropower Plant, many studies have been conducted and one of the consulting groups that were retained by the Inter-American Development Bank (IDB) noted that GPL needs an investment of US$250M to bring the networks up to the required level. This investment is not within the company’s reach at this time.
 
COMMERCIAL LOSSES
With regards to commercial losses, the Prime Minister said that one in every 10 customers is billed for less electricity than they use. At present, the company suffers a technical loss of 31.5 percent and there have been times when it has been as high as 41 percent.
“The commercial losses require investments, but most of all it requires a culture change from people…it is essential that we have a culture change in Guyana with respect to paying for less electricity than one uses,” the Prime Minister said.
He explained that the budget cut that GPL suffered has reinforced the argument that the company should have been charging a tariff each year that is established in its licence.
With regards to the AFC’s comments that the tariff hike can provoke unrest, the Prime Minister said this action could lead to a complete deterioration of the system as it did in 1978 when there was no power in Georgetown for about three days.   
“We have been giving great consideration to the issue of electricity tariffs, but costs eventually have to be met…our hope was that we could somehow manage until Amaila came along,” the Prime Minister said. 
According to the Government Information Agency, the 26.7 percent is calculated in accordance with the 1999 Electricity Sector Reform Act (ESRA) and its Licence. GPL’s 2012 audited accounts showed that the company suffered a loss of $7.6B in 2012.
GINA said only two increases have been implemented by the company in the last 10 years.