Asha Javeed

Lead Ed­i­tor In­ves­ti­ga­tions

asha.javeed@guardian.co.tt

Af­ter 17 years with­out change, ad­just­ments to elec­tric­i­ty rates in T&T will be an­nounced this week. This means that cus­tomers will have to pay more for elec­tric­i­ty.

Over the past year, the Reg­u­lat­ed In­dus­tries Com­mis­sion (RIC) has been re­view­ing the T&T Elec­tric­i­ty Com­mis­sion’s (T&TEC) busi­ness plan for 2022-2026 which pro­posed stiff rate in­creas­es of 40 to 65.75 per cent for res­i­den­tial cus­tomers and 128.5 per cent rate for com­mer­cial and in­dus­tri­al cus­tomers.

T&TEC pro­posed to have the in­crease stag­gered over a five-year pe­ri­od for res­i­den­tial, com­mer­cial and in­dus­tri­al cus­tomers.

The RIC’s pro­posed rates are an ad­just­ment of be­tween 15 and 64 per cent for res­i­den­tial cus­tomers, 51 and 63 per cent for most com­mer­cial cus­tomers.

The RIC em­barked on a 12-week pub­lic con­sul­ta­tion in the first quar­ter of 2023.

In his con­tri­bu­tion to the 2024 Bud­get de­bate last week, Pub­lic Util­i­ties Min­is­ter Mar­vin Gon­za­les said the rate re­view process had been com­plet­ed and would be pre­sent­ed to the pub­lic with­in a week.

“I was ad­vised by the RIC that it had com­plet­ed its rate re­view ex­er­cise for the Trinidad and To­ba­go Elec­tric­i­ty Com­mis­sion (T&TEC) and that they will be speak­ing to the pop­u­la­tion one week from to­day (Wednes­day) with re­spect to its de­ci­sion on a rate re­view,” he said.

T&TEC chair­man Rom­ney Thomas said while the RIC has not in­formed the com­pa­ny about the spe­cif­ic ad­just­ments, an ad­just­ment is nec­es­sary for the util­i­ty “to main­tain a de­pend­able sup­ply to its cus­tomers.”

T&TEC blamed its fi­nan­cial po­si­tion on the ab­sence of a rate re­view by its reg­u­la­tor since 2009.

“The av­er­age sales per kWh in dol­lars have re­mained un­changed at about $0.35 over the past few years. The op­er­at­ing cost per cus­tomer has re­flect­ed a plateau­ing over the past four years, high­light­ing a lev­el of pru­dent man­age­ment of op­er­at­ing costs de­spite the ef­fects of in­fla­tion both lo­cal and im­port­ed,” it said in its busi­ness plan.

The com­pa­ny said fol­low­ing five years of an­nu­al sur­plus­es (2007-2011), the Com­mis­sion re­turned to a deficit po­si­tion in 2012, main­ly due to the ab­sence of a rate re­view since 2009.

“This trend con­tin­ued to 2020. Elec­tric­i­ty sales in­creased by al­most 13 per cent over the 2011-2020 pe­ri­od, while op­er­at­ing ex­pen­di­ture in­creased by ap­prox­i­mate­ly 65 per cent over the same pe­ri­od,” it said.

“In the ab­sence of an eco­nom­ic tar­iff T&TEC will con­tin­ue to face very chal­leng­ing times. The years from 2012 to 2016 re­flect­ed in­creas­ing lev­els of deficits from $693 mil­lion in 2012 to $1.621 mil­lion in 2016. This trend is ex­pect­ed to con­tin­ue to 2025 and be­yond with­out a rate ad­just­ment. The deficit is pro­ject­ed to in­crease to over $2 bil­lion by 2025,” it said.

Bil­lion-dol­lar debt

Thomas said T&TEC’s debt now stands at $9.32 bil­lion in­clu­sive of its debt to the Na­tion­al Gas Com­pa­ny (NGC).

“T&TEC ser­vices a por­tion of its debt through its light and pow­er col­lec­tions as well as long-term loans for which pay­ments are cur­rent. How­ev­er, T&TEC is un­able to ser­vice its debt to NGC for gas pur­chased over the pe­ri­od Jan­u­ary 1, 2019, to present. We are al­so con­tin­u­ing to en­gage with all stake­hold­ers to re­cov­er our out­stand­ing re­ceiv­ables,” he said.

Ac­cord­ing to the loan pay­ment sched­ule for 2022-2026 con­tained in the com­pa­ny’s busi­ness plan, T&TEC will have to pay $6.4 bil­lion in prin­ci­pal and $4.2 bil­lion in in­ter­est.

For T&TEC, the need to ad­just rates is im­per­a­tive as the com­pa­ny looks to ad­dress its debt, equip the util­i­ty and im­prove its ef­fi­cien­cy.

“T&TEC is op­er­at­ing with a fi­nan­cial deficit that is not sus­tain­able for any or­gan­i­sa­tion and will sig­nif­i­cant­ly af­fect the qual­i­ty of sup­ply to the cus­tomers. One of the Com­mis­sion’s pri­ma­ry man­dates is to main­tain a re­li­able elec­tric­i­ty sup­ply for all its cus­tomers i.e. the coun­try as a whole, how­ev­er con­tin­ued an­nu­al fi­nan­cial deficit will neg­a­tive­ly af­fect the Com­mis­sion’s abil­i­ty to meet its in­fra­struc­tur­al main­te­nance and up­grade re­quire­ments.

“Fur­ther­more, the de­fer­ral of ma­jor projects will sig­nif­i­cant­ly im­pact the re­silience and re­li­a­bil­i­ty of the elec­tric­i­ty net­work. Any de­te­ri­o­ra­tion on the net­work is not eas­i­ly rec­ti­fied in the short term there­fore, fail­ure to con­tin­u­al­ly ad­dress these works could af­fect re­li­a­bil­i­ty and take years to re­verse,” Thomas said last Jan­u­ary.

This, he said, is why the rate in­crease is vi­tal to the sus­tain­abil­i­ty and func­tion­ing of the or­gan­i­sa­tion.

“Any ad­di­tion­al rev­enue from the rate in­crease will great­ly as­sist T&TEC’s in­debt­ed­ness but more im­por­tant­ly is geared to pro­vide the Com­mis­sion with the nec­es­sary rev­enue to meet its ex­pen­di­ture re­quire­ments to pro­vide a re­li­able elec­tric­i­ty sup­ply. It is note­wor­thy to men­tion that this re­view has tak­en in­to con­sid­er­a­tion the present cir­cum­stances and con­di­tions, should these cir­cum­stances change, it can neg­a­tive­ly im­pact our abil­i­ty to meet our man­date,” he said.

T&TEC’s chal­lenges

Since the last ad­just­ment in No­vem­ber 2006, in which small in­cre­ments were ef­fect­ed un­til Sep­tem­ber 2009, the land­scape in which T&TEC has had to op­er­ate has changed dra­mat­i­cal­ly.

The com­pa­ny is faced with high­er gen­er­a­tion costs which are im­pact­ed by in­fla­tion, the fu­el which T&TEC is re­quired to pro­vide for gen­er­a­tion is sup­plied by NGC and there is a price in­crease at a rate of three per cent an­nu­al­ly, and its cap­i­tal projects that im­pact the re­li­a­bil­i­ty of the trans­mis­sion and dis­tri­b­u­tion net­work, such as up­grade and con­struc­tion of new sub­sta­tions, over­head lines, etc. In ad­di­tion, cap­i­tal ex­pen­di­ture for the ac­qui­si­tion and/or re­place­ment of an aged fleet of ve­hi­cles among oth­ers have in­creased, as well as the main­te­nance of plant and equip­ment.

Thomas said T&TEC has op­er­at­ed with a fi­nan­cial deficit for sev­er­al years “which is not sus­tain­able as it may af­fect the fund­ing of projects for main­te­nance and up­grade of T&TEC’s in­fra­struc­ture, which in turn, may af­fect the qual­i­ty of sup­ply to the na­tion.”

Ul­ti­mate­ly, he said, “the rate in­crease is geared to en­able the Com­mis­sion to bet­ter meet the needs of its cus­tomer base.”

T&TEC’s busi­ness plan ob­served that many of the in­ef­fi­cien­cies high­light­ed as weak­ness­es of the or­gan­i­sa­tion can be ad­dressed through a dig­i­tal trans­for­ma­tion ex­er­cise in­volv­ing an en­ter­prise-wide plat­form where da­ta in­puts for all its process­es are en­tered by users at dif­fer­ent lev­els and de­ci­sions are au­to­mat­ed for mun­dane ac­tiv­i­ties.

Strate­gic de­ci­sions, it said, can be eas­i­er made us­ing the Busi­ness In­tel­li­gence (BI) and Ar­ti­fi­cial In­tel­li­gence (AI) da­ta ob­tained from such a sys­tem.

“The analy­sis of the or­gan­i­sa­tion’s weak­ness­es and threats is par­tic­u­lar­ly in­struc­tive as it demon­strates key ar­eas of the or­gan­i­sa­tion’s vul­ner­a­bil­i­ty. Threats posed by pan­demics, ter­ror­ism, nat­ur­al dis­as­ters, theft and sab­o­tage place the em­pha­sis on strength­en­ing some per­ti­nent ar­eas of weak­ness. Man­u­al process­es, cy­ber se­cu­ri­ty, ra­dio cov­er­age, dis­as­ter pre­pared­ness, video an­a­lyt­ics, SCA­DA and trans­mis­sion re­li­a­bil­i­ty are the vul­ner­a­ble ar­eas iden­ti­fied that must be ad­dressed.

“A fi­nal item of cli­mate change and a shift in the so­cial land­scape to in­clude greater il­le­gal ac­tiv­i­ty are threats that de­mand ex­ten­sive en­gi­neer­ing de­sign, tighter main­te­nance sched­ules and faster re­sponse times. The or­gan­i­sa­tion must pre­pare it­self in all ar­eas, for de­ploy­ment of greater ro­bust­ness where need­ed, greater flex­i­bil­i­ty in oth­er ar­eas and se­cured sys­tem in­tel­li­gence through­out,” the plan said.

Need for sub­sidy

De­spite moves to ef­fi­cien­cy, the Gov­ern­ment will have to con­tin­ue to sub­sidise T&TEC, as no rate in­crease will en­tire­ly erad­i­cate the com­pa­ny’s debt.

A rate re­view  has been on the cards for many years but has been re­peat­ed­ly de­layed.

The plan not­ed that the last in­crease, for a busi­ness plan for the pe­ri­od 2004-2008, fol­lowed two years of dis­cus­sions with all stake­hold­ers with the RIC is­su­ing its Fi­nal De­ter­mi­na­tion on June 1, 2006, for the five-year pe­ri­od 2006–2011.

As it stands, T&T en­joys the low­est elec­tric­i­ty rates in the Caribbean.

The cost of en­er­gy in var­i­ous Caribbean coun­tries range from as low as US$0.20/kwh to as high as US$0.37/kWh. In T&T, how­ev­er, the av­er­age sub­sidised cost is US$0.05/kWh.