Govt. has been more than keeping its part of the bargain in Lethem

Feb 11, 2014 Letters

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An Open Letter to:
– Chairman and Board of Directors of Lethem Power Co. Inc. (LMPCI);
– CEO and all Employees of LMPCI;
– Regional Chairman and Councillors of Region 9;
– Chairman and Councillors of Lethem Neighbourhood Democratic Council (NDC);
– All Customers of LMPCI.

As Lethem has been growing, and as more households and businesses and institutions, such as the new hospital, have come on line, the demand for electricity has been growing.
Electricity prices at Lethem were set, initially, to meet the operating costs of the Moco-Moco Hydro-power Plant, but since 2004, LMPCI’s demand has increased three-fold and generation has been solely based on diesel-fuelled generating-sets (gensets).  LMPCI has, thus, been experiencing more frequent and greater shortages of money.  At times, LMPCI’s electricity supply has been curtailed because LMPCI did not have enough money to meet its operational and maintenance needs.
From early 2013, the very pressing need was evident that the prices, which were in place since 2007, needed to be reviewed.  Even as 2012 ended, LMPCI was facing many challenges.  The Caterpillar genset which GPL Inc. had loaned at no charge, in 2009, to LMPCI for the opening of the Takutu Bridge, failed, and other units failed apparently as a result of, among other things, dusty conditions and dirty fuel.
Electricity supply became uncertain, and availability was cut back. Government-provided emergency supplementary support was beyond that which was budgeted.
I travelled to the area on at least two occasions, and reviewed the situation at town meetings to which all were invited.  It was accepted that the pricing structure would need to be brought into accord with Government’s policy, but that there should be a stay in implementation until it was evident that plans were rolling to restore the 24×7 supply, by, in particular, the ordering of two new 750 kVa FG Wilson Generators at a total cost of about G$ 50 million. The generators were ordered, and are now in Lethem.
The existing site, set initially perhaps decades ago, to supply lights at night to Government buildings, is prone to flooding, as is the adjacent telecoms exchange.  The new generators are being set up at a new site in the industrial area, high above any historical flooding.  Over the next year or two, the new site will be fully developed, and the existing site may be released.
The Government has been more than keeping its part of the bargain, and earnest, honest, responsible citizens of Lethem should be keeping their part of the bargain, no less. And, what is that bargain?
The Government’s policy in providing “a degree of electrification across our hinterland” is that Government would put in the capital requirements, and expects the beneficiaries (the customers) to meet the recurring costs – operations and maintenance.
For most communities in the hinterland, buildings are 100 metres or more apart, and the provision of a grid network is uneconomic, hence this Government’s acquisition, supply and installation of a total of about 13,500 photo-voltaic solar home systems which, on average, provide about 9 kWh per month.
We began pilot operations with a few hundred installations of 125-watt panels, but at about $325,000 per household, that was beyond our country’s means, at this time, given our commitment to bring a similar degree of electrification to every household.  We soon settled for 65-watt installation, at costs averaging about $80,000 to $ 100,000 per household-installed.  Each village/community has entered a covenant/contract with us that households will put in a fund, an average of $ 500/month, for sustainability – to replace lamps and batteries, from time to time.
We have embarked on acquiring some 6,000 additional sets for near-hinterland, riverain homes that are beyond the Guyana Power and Light (GPL), Inc., or any other network.
And, what has been the case with Lethem?
This Government, recognizing that Lethem ought to be given as good an opportunity as we could provide to make itself into an important secondary town on our border with Brazil, directed an offer from the Government of China of a small hydro-power plant to the Moco-Moco site at Lethem.  This 0.5 MW hydro-power plant cost about G$700 million, inclusive of an initial network.
At that time, without a continuous Linden-Lethem road, materials had to be transported via Venezuela and Brazil, and flown in from Georgetown.  Unfortunately, this station, which was started up in 1999, was put out of operation in 2004, after a massive landslide broke the penstock.
Over the four to five years of operation, we learnt that there would likely be a two- to four-month period before the May rains, when only a half, or no, electricity could be generated.  Full diesel back-up would be required if the electricity supply were to be maintained through to the end of the dry season, and as the demand grew, additional diesel generation would be required at all times to meet peak demands of more than 0.5 MW. Government granted the capital to meet the changed and growing needs.
The historical electricity prices at Lethem were set with the assumption that the majority of electricity required, would have been provided by Moco-Moco, but this has not been so since 2004. Already by 2011, there was a subsidy to operating costs of more than G$100 million per year – that is more than an average of G$100,000 for each of LMPCI’s 1,050 customers, but likely ranging from $ 25,000 to $1,000,000 across the 1,050 different households and businesses receiving electricity in Lethem. Capital costs on which the Government has been making good, would add one-quarter to one-half more.
The Government, in 2009, invested G$50 million in revamping and expanding the network, and has provided a number of gensets on an emergency basis.
Mr. Carl A. Parker, Sr., in his recent letter demanding even increased subventions to Lethem, either has not taken time to learn the degree of support to customers in Lethem, or is being unconscionable.
Now – for a consideration of the cost of electricity and structuring of the charges!
Historical all-up costs for electricity, mostly for lighting in hinterland areas, using small gasoline- and diesel-engine sets, have been in the region of G$150 to G$ 200 per kWh, available over four to six hours.  We hope to do better with our small grids, with diesel- generation in larger-sized units.  At Lethem, running costs, so far, including operations and maintenance, and losses, have been averaging about G$125 per kWh billed.  We believe that with experiences gained over time, ‘all-up’ running costs could be gradually reduced to about $100 per kWh billed.  So, in putting a cap on the cost-recovery charge at $100 per kWh billed, there is still a subsidy beyond capital costs.
We have been involved in international discussions about how to subsidize and support (if at all) the supply of electricity (and water). There is the question if the Government subsidizes, how it should subsidize.  If you think of it, if the unit rate is subsidized by, say, one-third, then a large household or commercial operation that takes, say, 500 or 1,000 or more units, is enjoying a subsidy that is, in quantity, ten, twenty or more times the subsidy to the 50 units which a low-income household may take.  There are arguments that if there is to be subsidy, it could be better in the form of a small- or no-charge on the first 10 to 30 kWh consumed.  In that way, each and every consumer enjoys an equal quantity of subsidy.
Hence, our position in these small hinterland locations, being aware that many households are not yet into a regular cash-economy, is to provide the first 15 kWh at absolutely no charge.  This could be compared to the approximate 9 kWh for households, with the 65-watt photo-voltaic systems.  Also, 15 kWh, at a price of $100 per kWh, is a grant of $ 1,500 per month, $ 18,000 per year, and a bit more, as explained before. This grant of $18,000 (and more) each year, is enjoyed by every customer, and compares well with the $ 20,000 assistance, each year, granted to all old-age pensioners on the GPL Inc. grid, in whose name the meter is listed.
Note that, in Lethem, households which choose to burn more electricity than the no-charge 15 kWh base, say 30, 45, or 60 kWh/month, would be billed $1,500, $ 3,000, or $ 4,500 per month, at average costs of $ 50, $ 67 and $ 75 per kWh, respectively. This is the situation with the large majority of consumers.
On the question of being fair to large consumers, it should be kept in mind that they too enjoy the initial grant, and also the subsidy that remains even at $100 per kWh. They have the right, in law, as everywhere in Guyana, to choose to self-generate at any time, if they judge that they will be better off doing so: without seeking permission, only registering after being set up.  As indicated earlier, large houses and businesses, at current prices, are enjoying subsidies up to G$1 million per year. Any business or “big house” that finds subsidized electricity essential for its survival, is not being built on a sound basis, and is rather “mining” the subsidy.
I hope that Mr. Parker, Sr., after studying this letter, would see wisdom in changing his position.  I cannot imagine Mr. Parker, Sr., could expect that the subsidy to Lethem would be increased indefinitely.  Citizens at other locations would need subsidies too!  Citizens at Mahdia and Port Kaituma are abiding, from the inception, with the pricing of no-charge for the first 15 kWh and $100 for every additional kWh, for a 24×7 service.  And other communities at Moruca, Mabaruma and Matthew’s Ridge are calling for a 24×7 service; and Kamarang, too, as I heard just a week ago.  They must be ready, too, to abide with the policy to receive 24×7 electricity supply.
Lethem has been getting more than it should – if this is maintained, moreso, if it is increased, there would be less money to provide an appropriate subsidy to other developing communities across our hinterland.  Our hinterland electrification programme would be greatly slowed down; there have always been the questions before us as to whether we are not proceeding too rapidly. If Lethem customers hold on to Mr. Parker, Sr., the Government would be greatly delayed in getting to 24×7 electricity supply in the centre of villages like Annai-Aranaputa, Aishalton and Karasabai.  I can feel the growing desire for such in those villages.  Lethem customers would not be fair to their fellow citizens in those villages.
If there is no return to our policy in Lethem, the electricity supply, at some point, would be limited by the subsidy, with the likelihood – as has occurred – of cutting back the hours of electricity, and of finding in October or November that all of the subsidies are gone, and the electricity company faces being shut down altogether.  That would not be a situation under which to live, much less grow.  The continued growth of Lethem would be curtailed!  Electricity customers would be better off, coming into accord.  Mr. Parker, Sr., should be encouraging them to do so, as they promised.
Even as we engage in this debate, the Government is pursuing a number of possibilities to stay ahead of electricity demand in Lethem and the Rupununi, and is in talks with private investors and multi-lateral agencies about renewable energy, restoring Moco-Moco, and constructing a hydro-power station at Wamakaru (3.2 MW, and networks for about US$21 million, providing power in about 2020).
A basis for all this is that any such development should not bring greater burdens to the nation’s treasury.  We expect that average costs of generation would be lower than costs based, as now, on petroleum products.  However, it would be good, if not essential, as we go ahead, to have the assurance that beneficiaries in Lethem, and the Rupununi, in general, would be willing to pay what is required.
Mr. Parker, Sr., I have no doubt that we Guyanese can build for ourselves the better life of which we are worthy, and not by looking for more subsidies – subsidies have to come from somewhere, anyhow – but, rather, by facing up to the requirements and working to meet them.  And we must all have the faith, as we in the PPP/C have always had, that with our earnest work, we would be as successful as other people around the world!
Samuel A. A. Hinds
Prime Minister and Minister for Parliamentary Affairs and Energy

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