Electricity costs are staggeringly high here on Grand Cayman and the blame is laid squarely on the cost of diesel that our electrical supplier, Caribbean Utilities Company (CUC), uses to run the electrical generators. However, is that the whole story?

A “concerned reader” asked me to look into the electric utility company Fortis Inc., who is currently the attention of the media and residents in Turks and Caicos because of the high cost of electricity there. If you think costs are high here in Cayman, read on!

Fortis also own a piece of our own utility company CUC.

According to Wikipedia:

Fortis Inc. is a St. John’s, Newfoundland and Labrador based international diversified electric utility holding company. It operates in Canada, the United States, Central America, and the Caribbean. In 2005, it earned a profit of $137.1 million Canadian from revenue of $1.44 billion.[2]

Fortis was formed in 1987 when shareholders of the regulated transmission and distribution utility Newfoundland Light & Power Co. voted to form a separate holding company. NL&P shares were exchanged for Fortis shares on a one-to-one basis, with the regulated NL&P becoming a 100% owned subsidiary.

Fortis currently owns the following regulated utilities:

    FortisBC, a utility in British Columbia

    FortisAlberta, a holding company for assets purchased from Aquila, Inc.

    Central Hudson Gas & Electric, a utility in New York

    UNS Energy, a utility in Arizona

    Newfoundland Power, serving 85% of the population of Newfoundland and Labrador

    Maritime Electric, serving 90% of the population of Prince Edward Island

    FortisOntario, a holding company for Canadian Niagara Power, Cornwall Electric, and Algoma Power[3]

    *Caribbean Utilities, a utility in the Cayman Islands

    FortisTCI, a utility in the Turks and Caicos Islands

    Belize Electricity Limited, a utility in Belize

Fortis also operates three non-regulated companies:

    Fortis Generation, hydro generation in New York state and central Newfoundland.

    Fortis Properties, a real estate company.

    Griffith Energy Services, a petroleum supplier in the eastern United States.

* Caribbean Utilities Company, Ltd. (TSX: CUP.U), known locally as “CUC”, commenced operations as the only public electric utility in Grand Cayman, the largest of the three Cayman Islands, in May 1966. The Company currently has an installed capacity of 114.63 megawatts (MW), and a new record peak load of 85.03 MW was experienced in September 2004.

**The company has more than 200 employees, most of whom are Caymanian, producing electricity from diesel fueled generators. In the past, the company has recorded substantial damage to its assets from hurricanes.

CUC is partly owned by Fortis Inc., a holding company based in St. John’s, Newfoundland and Labrador, Canada. CUC’s shares are traded on the Toronto Stock Exchange.

** According to the CUC website – Caribbean Utilities Company, Ltd. (CUC) currently has 193 employees, 90% of whom are Caymanian, and is structured in four divisions: Executive, Financial, Production and Transmission and Distribution.

Operations

CUC relies upon diesel generation to produce electricity for Grand Cayman.

From The TCI Journal:

March 31, 2014 – Even after Creative Accounting, Fortis Inc. STILL makes more on each Customer in the Turks and Caicos Islands than in ANY other jurisdiction in which they operate.

The TCI Government must ask for an Independent Audit of Fortis Turks and Caicos before any meaningful negotiations can continue.

Their recent belligerent and misleading advertisements about renewable energy must be met with calm and cold calculation.  The first step of which is to require an independent audit.

The TCI Journal is in communication with TCI citizens who have offered to pay for a full independent audit.  It need not cost the government one red penny.

Insider whistleblowers speaking to the TCI Journal report creative accounting on the part of Fortis TCI as it pertains to what is classified as capital expenditure and what is classified as expenses as well as on intra-company billings for debt.

Fortis operates in 8 jurisdictions.  The following is how much they made in profit on each of their customers, for their latest reporting year – 2013.

$61 – Central Hudson

$152 – Ontario

$158 – British Columbia

$181 – Alberta

$191 – Newfoundland

$208 – Maritimes

$444 – Cayman Islands

$846 – Turks and Caicos Islands

$160 – Company Average

Until an independent audit has been performed, we are only going on “hearsay” in our community’s effort to develop a National Energy Policy.

Note the cost per customer. In TCI they pay nearly twice as much as we do.

The term “Creative Accounting” is a euphemism referring to accounting practices that may follow the letter of the rules of standard accounting practices, but certainly deviate from the spirit of those rules. They are characterized by excessive complication and the use of novel ways of characterizing income, assets, or liabilities and the intent to influence readers towards the interpretations desired by the authors. The terms “innovative” or “aggressive” are also sometimes used. Other synonyms include Cooking the books and Enronomics.

The term as generally understood refers to systematic misrepresentation of the true income and assets of corporations or other organizations. “Creative accounting” is at the root of a number of accounting scandals, and many proposals for accounting reform – usually centering on an updated analysis of capital and factors of production that would correctly reflect how value is added.

The motivations of creative accounting

Personal incentives

Bonus-related pay

Benefits from shares and share options

Job security

Personal satisfaction

Cover-up fraud

Tax management

Management buyouts

I am not accusing CUC of doing anything illegal or using any of the ‘creative accounting’ tactics as above. I am questioning the apparent huge stretch in PROFIT per customer between the different operating jurisdictions.

IF the figures stated in the TCI Journal are correct then the Cayman Islands government should immediately instigate an INDEPENDENT audit of CUC. It could be money well spent.

Looking at the figures it would seem it is not just the high cost of diesel why our electricity bills are so high it is because of the electricity supplier’s PROFIT margin.