WE refer to Mr. Christopher Ram’s letter of Monday  June  10, 2013 in the Stabroek News captioned,“GPL cannot  be allowed  to  continue  operating  with a  failed  model   and  incompetent  management.” In his letter, Mr. Ram referred to the rate calculation in accordance with the 1999 Electricity Sector Reform Act (ESRA) and the licence.  As the independent accountants appointed under the Electricity Sector Reform Act (ESRA), we now wish to clarify certain aspects of the rate calculation, which we hope will provide a better understanding    (1) Electricity rates are based on the Final Return Certificate which is certified by an independent firm of Accountants appointed under the Electricity Sector Reform Act (ESRA).  

(2) The  prescribed  format  of the Final  Return  Certificate  is  set out  in  Part  (D)  of the  Licence  to  supply  electricity  for the  public purpose  granted Guyana  Power and Light  (GPL)  under Section  4 and 42(3) (c) of the ESRA.

(3) Since the  Final Return Certificate  is due  on or before  April 30 in the  year  following  the  year  of return, any increase in electricity rates will apply to billings as of  May. Therefore, to achieve  the required  return  based on the  proposed increase, that rate has to  be  scaled  up to  take  account  of the  shortened period viz eight (8)  months (May to  December ). In this particular instance, simple math would show that the required increase of 17.8 % for the year when applied to the shortened period of eight months  would amount to 26.7%  (12/8 x 17.8% ).

(4) It appears from Mr. Ram’s analysis that  he used  a very  simplistic  approach  of assuming  that the rates  of  26.7% was obtained by taking the  revenue deficit as  per the  Financial  Statement  of  $7.668 Billion as a  percentage of the  total revenue for the  year of $29,028 Billion  and concluding that any accountant  ought to know that  deferred tax is  not  a  recurring  charge  and that  deferred tax entry  ought not to  have been made .

Mr. Ram may wish to know that deferred tax was not included in the computation, as the licence clearly does not allow inclusion of such expense. Had Mr. Ram  understood that  it was the rate of 17.8% computed under the licence when applied to the  shortened period  of (8) months that gave  rise  to the  26.7%, he  would  not  have erroneously  concluded that   deferred tax  is  included  in the  rate  calculation .

(5) Mr. Ram’s firm which performed the function of External Auditor of GPL for several years would have been privy to the methodology used in the rates computation.

Had Mr.Ram  consulted or revisited his  audit  files for the period  over  which  his  firm  presided as auditors, he would have  been  able to  make  a  more informed  analysis rather  than try to  impugn the  integrity  of the independent  accountant  when he  made the  statement:  “Contrary to what whichever accountants  loosely  might have said, GPL  did  not  lose  $7.6 Billion in  2012 . It lost  $4.872 Billion  but  is now playing around  with a  book entry  of  $2.795 Billions of  deferred tax”.  

Contrary to what Mr.Ram has said, deferred tax was not included in the rate computation and is not being played around with!