The Editor Speaks: The timing for CUC’s base rate increase was perfect!
It didn’t take long for CUC to announce a base rate increase after government’s reduction in duty to their fuel charge.
When you are the only game in town and you have a Rate Cap Adjustment Mechanism (RCAM) procedure mandated by your government licence alongside a rate rebalancing exercise also required by the licence every 5 years, you hold all the aces.
We are the jokers in the pack.
In April this year I wrote an Editorial under the heading “Electricity. Is it really fuel costs why we pay so much?” – see: http://www.ieyenews.com/wordpress/the-editor-speaks-electricity-is-it-really-fuel-costs-why-we-pay-so-much/
The story was about the electric utility company Fortis Inc. that operates in Canada, the United States, Central America, and the Caribbean. Fortis owns a piece of Grand Cayman’s electricity provider Caribbean Utilities Company (CUC).
According to a report in the TCI Journal it showed that the company made a profit on each of their customers in the Cayman Islands of $444. In Turks and Caicos Islands their profit margin is $846 per customer! We are second in the list of 8 jurisdictions with the others ranging from $61 up to $208.
The TCI Journal accuses Fortis of “creative accounting” to achieve their base rate increase approvals from the various government regulatory authorities.
On May 11th CUC announced increased profits for their first quarter ending March 31st 2014!
Within just a few days of the Cayman Islands government announcing in their budget they were cutting 25 cents off the diesel fuel duty paid by CUC and saying how we all were going to benefit from it the company announced a basic rate increase!
I thought that would be the case and I hinted at such when government made the announcement.
They obviously knew what government were planning and with their calculators made a case for the increase that obtained Cayman’s Electricity Regulatory Authority (ERA) required approval.
I am not suggesting for one moment that there is any skullduggery going on with the calculations but it was obvious to CUC they were going to get the public’s wrath on this increase they cleverly worked their increase out like this:
Residential bills will be cut on average by 1%
General business customers will increase an average by 2.8%
Large commercial customers will increase an average by 1.1%.
So the struggling small businesses are hit the hardest and these are the ones the government are trying to help.
The hike in the electricity rates equate to an average 1.5% increase.
So how did CUC manage to get away with this?
It is because of the aforementioned RCAM.
CUC submitted their rate hike application in April to the ERA and was based on the level of the price index and CUC’s financial statement. Additionally it took into account the results of a cost of service study (COSS) that examined customer numbers, energy sales, impact on peak demands and revenues.
Was all this independently checked?
I said CUC probably knew what government was planning because of the timing of their announcement, but government definitely y knew what they were doing since CUC had sent the application to them in April. Government then tried to soften the blow with the 25 cents fuel duty reduction in the budget.
If the government doesn’t entertain solar power as an energy source in their recent bid applications for additional power generation they should be taken to task a hundredfold.
A number of Caribbean countries have started embracing solar but we in Cayman play tiddlywinks at it.
The sun provides as much energy in one hour as the world consumes in one year.
Whilst CUC can make healthy profits from the high cost of diesel as their energy supplier nothing will change here.
But we will be left behind. We bury our head in the sand and leave it to someone else to make the decision.
We can, however, also pay out a few million dollars on a new report on the idea of solar energy and form a 25 member committee comprising 24 government employees to read it and come to a conclusion.
In the mean time all we can do is moan and pay up. We don’t have a choice. We just wait for the next perfect mean time for the next mean announcement.
