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GPL rate hike continues on hold

Jul 23, 2008 News

The issue of increased tariffs at the Guyana Power and Light Company is currently at a stalemate following discussions between the Government and the utility.

When asked for a comment, Chairman of the GPL Board of Directors, Winston Brassington, said that he would prefer that the Government makes a detailed pronouncement on the issue.

The policy of GPL at this time, as it relates to the rate collection, is to ensure that revenue collection can meet cash flow.

However, the current fuel price does not allow rates collection to meet cash flow, and it is unclear how long the company could allow this situation to exist.

The company is currently not collecting enough rates to balance cash flow, Brassington insists.
Brassington is on record as saying that, unless there is significant influx of funds from the Government, GPL would have to hike its rates again.

And, according to Prime Minister Hinds, the hope that Government will inject money into GPL operations would be a tedious, if not unlikely, task.

Among the problems compounding the situation is the fact that the company is experiencing technical and commercial losses amounting to some 34 per cent of generation.

On May 28 last, GPL announced that the tariff hike, which it considers a last resort, could come within a month. Today, almost 60 days later, any future prices for electricity bills are still unclear.

At that time, Brassington lamented that the company’s losses were recorded at $400M per month.
GPL is currently examining three alternatives that may ward off a tariff increase to consumers.

The measures include an increase in conservation efforts, load shedding at peak hours and Government support to GPL in the form of higher tariffs for Government customers, or an overall level of cash support.

The fuel bill is $24B per annum, according to Brassington, and fuel prices on the world market are currently in the vicinity of US$140 per barrel.

Brassington added that, since April, the continued increase in fuel price implies that, for the rest of the year, a shortfall of some $4B can be expected. This, he said, is based on current prices that have been rising rapidly.

“With each new shipment, we face a higher price practically…The current problem is impacting us financially, in that we have a relative build-up in recent times.”

In an attempt to balance cash flow without significantly increasing the prices consumers will have to pay, the company has had to cut all its non-essential expenditure on the operational side. “We do have to make a decision shortly, because the situation is not sustainable.”

One key factor in determining GPL finances, Brassington noted, is the effect of the daily peak and the benefits of the conservation.

As the peak falls, GPL is expected to use less fuel for generation, while the opposite occurs as the peak rises.  GPL services approximately 120,000 domestic customers.

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