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GPL’s application to reduce interest rate on deposits turned down
The country’s utility regulator has turned down an application by the Guyana Power and Light for a reduction on the interest rate payable on consumers’ deposits.
The Public Utilities Commission (PUC) has instead recommended that the power company maintains its rate of interest at 2.4 percent per annum compounded annually.
This was the same rate that PUC ordered back in 2011 for a two-year period. 
PUC said that the rate is “reasonable, equitable and just and we order same to be applied to the consumers’ security deposits with effect from November 01, 2013, for a period of two years ending October 2015.”
However, at least one Commissioner, Maurice Solomon, did not agree with the rest of the PUC members and proffered a dissenting opinion.
“It is his view that having regard to the weight of the consumers’ submissions and to present circumstances, the rate of interest on consumer’s deposits should be pegged at 3.4%.”
GPL had been asking for the rate to be reduced to one per cent.
“The approved rate will therefore, remain in effect for two years and will expire on the 31st October 2016, when it will again be the subject of a review. GPL will again have to apply to the Commission for such a review,” PUC said in its statement.
Interest on consumers’ security deposit is authorized by the provisions of the Standard Terms and Conditions for Electric Services of GPL’s Licence which sets out the terms and conditions for the supply of electricity to consumers.
It was approved in October 1999 and modified in March 2000, December 2001, January 2005 and in October, 2010.
The licence gives GPL the right to require any customer to provide a security deposit and to increase the amount.
According to PUC, the licence provides that interest on the deposit shall accrue at the rate of 7% or such other rate as agreed by GPL and approved by PUC compounded annually, from the date the deposit is received by GPL, provided that the company holds the security deposit for more than six months.
If a customer fails to pay any amount billed for services rendered, GPL can apply all or any portion of that consumer’s security deposit to the unpaid amount.
“If GPL takes that step the customer will be required to adjust his security deposit in accordance with the amount allowed under Section 4.9 failing which, GPL will have the right to disconnect the customer’s supply.”
Up to and including October 2011 the interest rate for the security deposit was 7%, and GPL had applied to the Commission in 2011 to vary and reduce that rate to 1.6% per annum, claiming that since the original consumer deposit interest rate was set at a discount of 32% on the then existing term deposit rate, the same basis and discount rate should prevail and be applied to the current term deposit interest rate.”
In the November 15, 2013, application, GPL was seeking to have the Commission approve a reduction of the interest to 1% on the grounds that the interest rate on a twelve-month fixed-deposit account is currently 1% and in effect is really 0.08% when the withholding tax is taken into consideration.”
The Commission held a public hearing on April 02, 2014 which was attended by officials of GPL, Guyana Consumers’ Association and members of the public.
GPL argued that it is incorrect to equate the interest on consumers’ deposits with interest payable on loans at the commercial banks.
The company explained that GPL is precluded from borrowing funds through the banking system because of the HIPC (Heavily Indebted Poor Countries) conditionality, and that because of this it receives loans at concessionary rates from the Government of Guyana and from International Financial Agencies.
However, PUC said it contended that commercial banks have tended to “become mercenary and this accrues to the detriment of consumers. Reductions in savings rates over the years and the multiplicity of innovative miscellaneous charges that surface from time to time have disadvantaged the customer.”
Savings rates are significantly lower than the rate of inflation, resulting in the shrinkage of the customers’ savings on an annual basis, and the withholding tax compounds the plight of the savings public, PUC said.
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