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Raffique Shah


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Realistic rates hikes for T&TEC

By Raffique Shah
March 7, 2018

As the nation grapples with two seemingly intractable problems, crime and the economy, we pay little or no attention to two critical issues that are bound to generate a furore sometime soon—increases in water and electricity rates.

The Regulated Industries Commission (RIC), which determines how much the Water and Sewerage Authority (WASA) and the Trinidad & Tobago Electricity Commission (T&TEC) can charge consumers for these vital supplies, has indicated it will soon set in motion the procedures that will guide it with respect to granting or denying these agencies rate increases.

This week I shall focus on T&TEC and electricity, which has improved considerably over the past 20 years, both in relation to reliability of supply and customer service. Regarding power generation, in which Government (through T&TEC) owns fully or the controlling interests in three of four companies-Cove (Tobago, 65MW), Powergen (Point Lisas, 838 MW and Penal, 235 MW) and Union Estate (La Brea, 720 MW)...Trinity (Point Lisas, 225 MW) is privately owned.

Recent reports are that T&TEC is billed for 400 megawatts (MW) per day beyond its requirements. A "spinning reserve" is normal in power generation, the excess being held in case there is a breakdown at any of the plants. In this instance, the reserve ballooned because of the construction of the La Brea plant that was built to service the aluminum smelter that was aborted.

So T&TEC, with approximately 3,000 employees and an annual wage bill of around $1 billion, carries an annual operating deficit of $2.4 billion, and debt amounting to $5.6 billion, according to Public Utilities Minister Robert Le Hunte. Much of that debt, I suspect, is owed to the National Gas Company, which sells natural gas to the power plants at a ridiculously low price, and which the NGC will want to increase soon, since its suppliers are increasing their prices as new contracts are negotiated.

The utility will therefore need to become more efficient by streamlining its workforce. But consumers will have to come to terms with the reality that they can no longer enjoy among the cheapest electricity rates in the world—an average of US five cents per kilowatt/hour (kwh) for residential service, and six cents for commercial enterprises.

By comparison, the average price in the Caribbean is 33 cents. Barbadians pay 28 cents, Indians eight cents, Canadians 16 cents, and Americans 21 cents.

T&TEC has an equitable, extremely generous rates system in which residences that consume less than 400 kwh per 60-day billing cycle pay $104 (plus VAT of $13). That translates into $58.50 per month for a basic dwelling house with lights, fans, refrigerator, television set and a washing machine.

To put this in perspective, it is cheaper than a family-size chicken and chips, a pizza, three packs of cigarettes or admittance to a cinema. Two pensioners in one such household can easily afford to pay, say, $100 per month for electricity. But one does not want to go overboard with increases, so let's settle for a 50 percent hike, or $75 per month.

Note that this dog-cheap rate for the first 400 kwh is applicable to all consumers, from paupers to millionaires.

In the second band that applies to larger dwellings equipped with additional appliances such as dryers, electric stoves, more TV sets, computer, and air conditioning in bedrooms used wisely, consumers currently pay 32 cents per kwh for the next 600 kwh, or approximately $100 per month. Surely, if you can afford these conveniences and comforts, you can pay, say, $175 per month to power them, making your total bill $250. And if you conserve power, you pay less.

Beyond 1,000 kwh per month, those with mansions that are fully air-conditioned and laden with electronic appliances and devices of all descriptions pay 37 cents per kwh. They should be made to pay at least 50 cents per kwh. If all these increases are imposed—and I know Government and the RIC will not have the fortitude to so do—the poorest consumers will pay $75 per month and the wealthiest not even $1,000 per month, the latter being half of what they will spend at a family dinner at an upscale restaurant.

Commercial consumers currently pay 41 cents per kwh: because they generate employment and other revenues to Government coffers, I suggest they pay no more than 60 cents.

T&TEC, by implementing operational efficiencies and benefitting from substantial revenues from increased rates, will be expected to eliminate its annual operating deficit and return to being a profitable utility. It enjoys the power of disconnecting consumers who fail to pay their bills, hence, unlike WASA, can easily enforce compliance.

T&TEC's consumer database can be useful to the Valuation Division of the Ministry of Finance in the latter's implementation of the Property Tax. Deviant owners may use all kind of ruses to "hide" properties from the Division. But they need electricity for every occupied structure, and, electricity consumption can even be a guide to the values of properties.

One final note to T&TEC: the Commission facilitates squatting on State and private lands, and the erection of illegal structures, by connecting them to the grid. There must be some guidelines governing all connections to ensure compliance regarding ownership or tenancies, and approvals by authorities.

T&TEC must not be complicit in lawlessness that have dire consequences, especially their impact on disasters like flooding.

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