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GPL set to lose US$200M this year – says PUC

Apr 08, 2012 News

 

Rabindra Rooplall

 

Last year was a difficult year for Guyana Power Light (GPL). Since power generation is mainly fossil fuel based, its cost of operation will invariably remain high and by extension its tariffs, according to the Public Utilities Commission (PUC) 2011 annual report.
The commission disclosed that the power company had budgeted to spend just under $10 billion on its capital expansion programme in 2011. However, disbursements from the EXIM Bank of China that is funding major transmission and distribution upgrades delayed the start of the programme.
It was noted that GPL had budgeted to pay approximately US$80 per barrel of oil throughout 2011. The average price paid throughout 2011 was US$109 per barrel.
The financial losses to the power company were rated at $40 billion. At the current rate of exchange this translates to US$200 million.
GPL in its current five-year strategic plan is projecting to reduce system losses from 30 per cent in 2011 to 24 per cent in 2016. Even so, system losses are conservatively estimated to cost the company $15 billion or US$75 million during this period.
The PUC report disclosed that last year GPL had a number of programmes in place to address and to reduce these losses. Some of these are:  The ITRON programme that includes the installation of up to 2,900 ITRON meters that is expected to secure 60 to 65 percent of GPL’s billed power.
In addition, the power company intends to install 54,000 prepaid meters over the next five years. Significant upgrades to the transmission systems, financed mainly through a loan from the EXIM Bank of China.
“Relative to the earnings of the working class, electricity is an expensive commodity.  It is for this reason, in spite of GPL’s best efforts the company faces an uphill struggle to reduce commercial losses. Capital Expansion Programme GPL plans to spend US$92 million on its capital expansion programme 2012-2016.
“To finance the programme, the company is expected to contribute approximately 50 per cent of the funds from its internal operations. The remaining 50 per cent will be from loans that have already been negotiated,” the PUC annual report noted.
The report further disclosed that should the hydro project begin operations within the stipulated timeframe it is by no means certain that tariffs would be substantially reduced.
For the year under review the company is expected to report a loss of approximately $4 billion. In its 2011 budget the company had anticipated an after tax profit of $2.53 billion and to realize a cash flow of approximately $4 billion from its operations.
The main reason for the huge disparity between budgeted profits and the actual result was the procurement cost of fuel being substantially higher than budgeted.
On a positive note the company added a 15.6 MW Wartsila station to the Demerara interconnected system.  It did not mean that avenues were unavailable to GPL to cushion the impact of higher oil prices. GPL’s licence gives the company the right to implement a fuel surcharge on a quarterly basis in the event that fuel prices increased by a certain percentage point over the previous quarter.
Had GPL triggered the surcharge it may have collected approximately $4 billion more in 2011 through increased billings.
“The Commission will not speculate on the reason(s) why GPL did not trigger the fuel surcharge but its reluctance not to, has contributed to the substantial loss suffered by the company,” the PUC noted.

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