Georgetown: Prime Minister Samuel Hinds disclosed that Government has allocated more than $40 billion to the Guyana Power and Light since the consortium comprising the Commonwealth Development Corporation (CDC) of the United Kingdom and the Electricity Supply Board International (ESBI) of Ireland pulled out of the 50/50 equity deal with the Administration.
He also justified this year’s $3.8 billion subvention to the entity, saying that it is to stave off tariff increases and should not be viewed as a “handout”. Hinds was at the time delivering his 2014 Budget debate presentation to the National Assembly. The Prime Minister noted that the amount allocated to the power company is to offset tariff expenses so that citizens will not feel the burden.
Suppressed tariffs
“Let me say that the $3.850 billion capital allocation for GPL is neither a handout nor money being thrown down a black hole. It is a quantity of money which GPL in 2014 ought to be receiving from tariffs. The tariff calculation established at the time of GPL’s privatisation, which is based on international practice, sets the annual tariff adjustment of GPL for 2014 at about 12 per cent, which would provide GPL with $4.2 billion more from this increased tariff,” the PM said.
This allocation will go towards completing various upgrade works. These works include the completion of transmission upgrades and acquiring new equipment for a new substation at Williamsburg, Number 53 Village, Berbice; the completion of a current loss reduction programme with the Inter-American Development Bank (IDB); the installation of generators at Leguan and Wakenaam, and the construction of an additional power station in Essequibo along with the acquisition of equipment to increase the power supply to Bartica.
Hinds explained that the $3.8 billion was taken out of the $4.350 billion allocation to the Office of the Prime Minister (OPM) and was for GPL’s capital investments. In addition, he disclosed that the current estimates of the Finance Ministry also contain contributions to the sum of $3.176 billion, of which $2.830 billion is for Linden and the remaining amount for Kwakwani.
In trying to justify the allocation to GPL, Hinds said there have been large allocations to the entity, since the core investor departed in April 2003 and handed its 50 per cent shares to the Government. He said total provisions would have been more than $40 billion. However, he said since the 1970s, Government has worked assiduously to suppress electricity charges to customers by some 30 per cent.
“So whilst the Government allocations to GPL have totalled over $40 billion during this period, the net total suppression of tariffs, the net foregone revenue of GPL, has totalled about $27 billion and one might say, okay, you still have another $15-20 billion to talk about,” he noted.
According to Hinds, when the tariffs within a utility company are suppressed, that company is still in need of money and if it is not accessible, then the sector will eventually “run down” due to its lack of sustainability. Hinds explained that if this happens, the company and the country will both return to a state of destitution not experienced since 1992. Prime Minister Hinds went on to say that GPL has expanded its service significantly over the years with in excess of 40 megawatts of new generation at two locations and transmission upgrades. Government, as the “owner”, had to provide the funds for these works. He stressed that the Government continues to critique the work of the company and constantly pushes it to do better.
Hinds went on to say that GPL’s work is further being examined by energy and electricity specialists and consultants from the IDB who have studied and reported on all aspects of its operation. The Prime Minister revealed that these reports will soon be published on the IDB’s, GPL’s and OPM’s websites. He explained to the combined parliamentary Opposition that if they institute the cuts they claim they will, there will be no opportunity to make any investments at the concessionary charge of four per cent.
He added vehemently: “Well, if they cut, and in our need to survive and make these investments and to improve our supply in the Corentyne, Leguan, Wakenaam and Bartica; that if we go out and get it on the private market at 15 to 25 per cent, I hope they don’t come back and shout corruption.”
Hinds urged the Opposition to let this year’s budget pass without any cuts.
In 2012, some $1 billion was allocated to the power company to offset fuel expenses; however the combined parliamentary Opposition eliminated that proposed subvention, leaving the GPL without any funds.
In 2013, the proposed $10.2 billion subvention was slashed by over half, with the power company only receiving $5 billion.
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