Latest update February 4th, 2025 9:06 AM
GPL urged to review tariff structure to avoid reduced profit for 2017
Guyana Power and Light (GPL) has been encouraged by the Public Utilities Commission (PUC) to review its tariff structure, so as to prevent recording reduced profit for 2017.
The PUC has urged GPL to review its tariff structure.
This recommendation was made in the PUC’s Annual Report for 2016. This was linked to the global price for oil. According to the PUC, the international price of oil is a significant factor that determines GPL’s operating cost.
The report said that the steep reduction in global oil prices in the latter half of 2014 that continued through most of 2016, resulted in the company’s profits being significantly greater than its approved rate of return in 2015 and 2016.
The PUC added that in its 2015 report it was stated that a resurgence of oil prices was unlikely to hit the heights it once did, but that the current low prices would prove unsustainable in the long run and that oil prices will increase sometime in the future.
Further, it was mentioned that at the end of 2016, the acquisition cost of the price of a barrel of oil was approximately twice the price it was at the beginning of the year.
“This coupled with fuel rebates in 2015 and 2016 and a tariff reduction in 2016 is likely to reduce profits below the rate of return threshold in 2017 unless the company reviews its tariff structure and its fuel rebate/surcharge mechanism.”
As it relates to an increase in fuel rebate, the Commission said that as a result of a reduction in the price of oil and consistent with the fuel rebate mechanism that is reviewed each quarter, GPL had filed an application to the Commission requesting a five per cent fuel rebate, across all tariff categories effective from the March 2016 billing cycle.
“The application was approved by the Commission.”
Further, the PUC said that in response to a fall in the price of oil and a perception that the company’s earnings will be significantly above the allowable rate of return for 2016, the company had filed an application with the Commission requesting a five per cent reduction in the then existing tariff rates, across all tariff categories, from the March 2016 billing system. This too was approved by the PUC.
Based on information received from the Ministry of Finance, GPL customers had benefited from a 10 per cent net reduction in electricity rates with effect from March 1, 2015 as a result of a five per cent reduction in the tariff rates and a further five per cent on top of the 10 per cent final rebate which was given in April 2015.
More recently, in 2016, GPL had applied a 20 per cent reduction in net rates for the supply of electricity across all tariff categories. This was done after world market prices for fuel during 2015.
The reduction was applied as a five per cent reduction on the basic rate of both fixed charge and energy charge and a further 15 per cent fuel rebate on the energy charge. Further, since the company had applied a 10 per cent fuel rebate on energy in 2015, the effect of the reduction was an additional 10 per cent reduction on electricity bills.
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