GPL wants $5.2B budget cut reversed

Apr 23, 2013 News

-says Amaila Falls hydro, major projects affected

Officials of the state-owned Guyana Power and Light Inc. (GPL) yesterday called on the Opposition to rethink its $5.2B cut to a government assistance programme last week.
During a press conference at its Kingston office yesterday, the utility company said that the amount slashed would seriously affect several large scale enhancement projects currently underway to improve its efficiency.
It could also lead to the very real possibilities of tariff increases for customers and impact financing by the Inter-American Development Bank (IDB) for the US$840M-plus Amaila Falls

GPL officials: (R to L) – Chairman, Winston Brassington; CEO, Bharat Dindyal and Deputy CEO, Aeshwar Deonarine.

hydro-project.
Calling for the Opposition to reverse its decision to slash that sum from the $10.2B sum allocated, the officials said that it is unthinkable to place a hold on the projects which include new transmission lines, frequency upgrades and a new 26-megawatt Wartsila power plant at Vreed-en-Hoop, West Bank Demerara.
Both A Partnership For National Unity (APNU) and Alliance For Change (AFC) used their one-seat majority last week to reduce the amount during the considerations of 2013 National Budget in the National Assembly.
The combined Opposition also slashed the budgets of National Communications Network (NCN) and Government Information Agency (GINA), two state-owned media entities which have come under criticisms for its seeming biased coverage of the same opposition.
The Opposition, in justifying the cuts to GPL, said that it was not satisfied that the company is doing enough to remain competitive, keeping costs down and addressing the issue of customers’ tariffs.
But the GPL officials painted a different picture yesterday, pointing to challenges of increasing demands for power and the need to urgently make the power company ready for the advent of hydro power.
At the press conference yesterday were the Chairman, Winston Brassington; Chief Executive Officer, Bharat Dindyal and his deputy, Aeshwar Deonarine.
According to Brassington, the slashing of the subvention by $5.2B has left GPL with few choices- including raising tariffs or cutting its capital projects. With 2008 the last time tariffs were raised, it is a fact that the power company had foregone $27B in revenues.
Making a case for the subvention, Brassington said the fuel cost has doubled from US$60M in 2006, placing pressure on the company to quickly reduce costs and improve efficiency.
Insisting that local electricity rates are among the lowest in the Caribbean, the Chairman said that the $5.2B are low rates’ loans from China’s Exim Bank, PetroCaribe fund and IDB earmarked for critical projects targeting the improvement of GPL’s development and expansion plans. These include fixing problems with transmission and distribution, generation, metering and loss reduction.
“This (cut) has consequences.”
Brassington rejected GPL going the tariff increases route as it would affect the businesses which depend on power for their operations.
The situation is now a dilemma- the capital projects cannot be compromised and GPL has to continue spending more to improve efficiency and to meet generating demands.

GPL said several projects like this ongoing sub-station construction at Columbia, Mahaicony, are under threat.

Dindyal was even blunter, and believed that the Opposition went ahead making the cut in “total ignorance”.
Addressing concerns of the Opposition over continuing high losses by company which stands at 31 per cent, the CEO noted that several projects are underway simultaneously to address the problems.
To reduce line or technical losses due to faulty equipment and transmission lines, Dindyal disclosed that seven new substations are currently being constructed with critical components on the ground and now under threat facing damage unless installed soon.
Also under threat is the new Wartsila US$32M generating plant at Vreed-en-Hoop. Another loss reduction project is the frequency conversion project to standardize the city to the 60 Hertz cycle.
With 50,000 new customers added to the grid since 1992, the cut would also likely threaten new customers awaiting meters. GPL currently has in stock only 4,000 meters. “There is simply no logics to the cuts,” Dindyal said.
Also likely to be affected is a project to link the power systems in Berbice and Demerara.
On the issue of finances, it is a fact that GPL’s biggest expenses remain fuel and employment costs- the two alone account for 92 per cent of revenues collected with 78 per cent being fuel costs.
Deonarine noted that GPL is puzzled with the call to reduce tariffs as already it is way below the fuel costs. “We have been sharing information.”
GPL estimates it will have to raise tariffs by 17 per cent to recover the $5.2B.
Regarding its financial situation, the officials said that while new customers have increased GPL’s income from $24B in 2009 to $29B last year, correspondingly, total expenses have risen since then from $21B to $32B last year, which meant that fuel has eaten away the little cash that the company may have been hoping to spend in other areas.
GPL is paying $2.5B annually in wages.
The Opposition is also targeting cuts to other critical areas of the 2013 budget including projects under the Ministry of Public Works which is handling the roads to the Amaila Falls hydro project in Region Eight.