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TWENTY PER CENT CAN’T WUK
With a small financial outlay, the average household consumer can reduce his or her electricity bill by 20%. All that is required is a change to energy efficient incandescent bulbs and, boom: the average consumer can enjoy reduced tariffs of about 20%.
Right now electricity tariffs are high because of the high costs of fuel. The price of fuel is about four times what it was about a decade ago when fuel prices were below US$30 per barrel. If the price of fuel is halved, it is expected that electricity tariffs can be reduced by as much as 20%. There is a real possibility that fuel prices will eventually fall below US$50 per barrel, which will be more than enough to achieve a 20% reduction in tariffs.
This along with the use of more energy efficient lamps will mean that the average consumer can reduce his or her overall electricity bill by more than 40%. For this reason alone, it makes no sense Guyana investing in a costly hydroelectric station, unless there is a guarantee that tariffs will fall by 40% to 60%.
It seems, however, that every time the government tries to sell this hydroelectric project to the public, the goalpost keeps shifting. At one time there was the claim that tariffs were going to be halved. At another time, just before elections, the figure ranged from 35% to 40%. Now, we are being given an example of the anticipated reduction to households. And it is a disappointing and shocking 20%.
Twenty per cent cannot work. If this is the benefit that the largest investment in Guyana is going to bring, then the project should not go ahead. With far less money, the country can reduce commercial and technical losses, which can run as high as 30% and still match that 20%, which is what the Amaila Falls will deliver. Guyana should abandon this project unless it can be proven that the tariffs will decrease by between forty to sixty per cent. This must be the basis upon which this project should be given the green light.
The public should not be distracted by claims that the project is not a BOOT (Build Own Operate Transfer) one. Forget also about the contention that we should not be waiting twenty years before the project is handed over. Equally, forget about the claim that GPL may not be able to purchase 150 MW. These are criticisms without any foundation. They should be ignored.
Firstly, the project is a BOOT one. It will be built, owned and operated by the investors with equity contribution by the government of Guyana. No major venture capitalists are going to come to Guyana and sink considerable funds into a hydroelectric project, unless they have tangible assurances that the State will have a stake in a project of this nature, and the best demonstrations of that interest are the equity contributions and the guarantees that provide comfort and security for investors.
Twenty years is not a long period before the project is handed over to the people of Guyana. Investors are not going to sink moneys into a project of this nature unless they will enjoy a fair rate of return for a considerable period. This is what we have with the Berbice River Bridge and this is what we are supposed to have with the Amaila Falls Hydroelectric Project. Twenty years is a reasonable period given the magnitude of the investment and the risks involved, including the political risks.
As for GPL, there is no reason to doubt that by the time this investment is ready to deliver power to the national grid, there will be a demand for more than 150 MW of power. In fact, GPL is still going to have to keep many of its generating plants so as to cater for the additional demand for power and for future growth in power usage.
The bottom line for this project remains whether the benefits to consumers outweigh the costs. And with only a 20% reduction in tariffs, it makes absolutely no sense for Guyana to raise its debt ceiling, issue the guarantees that it is required to do under the contract, or for that matter, amend the hydroelectric laws.
It may be much better for us to ask Brazil to build a massive hydroelectric plant in Guyana capable of generating thousands of megawatts for eventual distribution in Brazil, and in turn, give us a 150 MW free for all time.
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