The on­go­ing con­sul­ta­tion process be­ing host­ed by the Reg­u­lat­ed In­dus­tries Com­mis­sion con­cern­ing the pro­posed in­crease of rates charged by the T&T Elec­tric­i­ty Com­mis­sion is be­ing ques­tioned by se­nior econ­o­mist Dr Vaalmik­ki Ar­joon and At­tor­ney Kiel Tak­lals­ingh.

In their doc­u­ment ‘A Shock to the Sys­tem: In­ves­ti­gat­ing the Caus­es and Im­pacts of Soar­ing Elec­tric­i­ty Prices in T&T’, the duo called the con­sul­ta­tion flawed.

The doc­u­ment said, “First­ly, it is trite and in any event a max­im of law­ful con­sul­ta­tions that suf­fi­cient and/or rea­son­able time should be af­ford­ed to af­fect­ed par­ties to con­sid­er the ma­te­r­i­al, which is the sub­ject of the con­sul­ta­tive process, in or­der to elic­it in­tel­li­gi­ble re­spons­es. It should there­fore be not­ed that the RIC has on­ly pro­vid­ed a mere two-month pe­ri­od for re­spons­es to a doc­u­ment of ap­prox­i­mate­ly 300 pages, which is tech­ni­cal in na­ture, and would re­quire re­search, tech­ni­cal ad­vice, and ma­ture con­sid­er­a­tion to pro­vide a re­sponse.”

The state­ment al­so ques­tioned if all the com­mis­sion­ers of the RIC would be present at every pub­lic con­sul­ta­tion to law­ful­ly en­gage with the pub­lic and par­tic­i­pate in an­swer­ing ques­tions from the pub­lic.

The re­port said, “Ul­ti­mate­ly, the con­sul­ta­tion process is not on­ly about al­low­ing peo­ple to gath­er and vent, but al­so a process which is im­bibed with de­mo­c­ra­t­ic spir­it, it al­lows peo­ple to in­ter­act with the ac­tu­al de­ci­sion mak­er, as op­posed to func­tionar­ies. The pres­ence of the ex­ec­u­tive di­rec­tor, with all due re­spect, an­swer­ing ques­tions on be­half of com­mis­sion­ers begs the ques­tion as to the un­der­stand­ing by com­mis­sion­ers of their role and func­tion in this process.”

The RIC made pub­lic its pro­posed changes to T&TEC rates in De­cem­ber, to much furore from the pub­lic as the in­creas­es ranged from 15 per cent to as high as 64 per cent for res­i­den­tial cus­tomers based on kilo­watt con­sump­tion with com­mer­cial cus­tomers fac­ing per­cent­age in­creas­es rang­ing from 51 per cent to 63 per cent.

Dr Ar­joon and Tak­lals­ingh ad­mit­ted that the ad­just­ment in rates was long over­due as the cur­rent rates are in­suf­fi­cient for T&TEC to cov­er their costs.

How­ev­er they note that the last rate re­view was done 17 years ago, and the duo ar­gued that the fail­ure to im­ple­ment the rate in­creas­es on time, has placed an ad­di­tion­al eco­nom­ic bur­den on T&TEC which is now set to be passed on to the pub­lic.

The re­port said, “In this time, the cost of op­er­a­tions for T&TEC would have nat­u­ral­ly in­creased, such as the cost of equip­ment, re­pairs, salaries etc, which al­so put T&TEC in a more pre­car­i­ous fi­nan­cial po­si­tion. Had the rate re­views been done when they were due in short­er in­ter­vals–every five years, then per­haps the elec­tric­i­ty prices would have in­creased mar­gin­al­ly and in­cre­men­tal­ly each year, and there would be no need to have these dras­tic in­creas­es which are be­ing pro­posed now, as the price of elec­tric­i­ty would have placed T&TEC in a bet­ter po­si­tion to cov­er their costs.”

The re­port con­tin­ued, “Nat­u­ral­ly, if lengthy pe­ri­ods (eg 17 years) pass be­fore rates in­crease, then there is a se­ri­ous risk of hav­ing to im­ple­ment a large tar­iff in­crease, which is what is hap­pen­ing now, in­stead of small in­cre­men­tal in­creas­es that the five-year rate re­views were sup­posed to achieve!

“Giv­en that these rate re­views didn’t hap­pen, as usu­al, cit­i­zens and the busi­ness com­mu­ni­ty have to bear the brunt of this mis­take, and it is as­ton­ish­ing that the RIC did not an­tic­i­pate this years ago.”

The re­port al­so ac­knowl­edged that T&T en­joyed sig­nif­i­cant­ly cheap­er elec­tric­i­ty rates than the ma­jor­i­ty of the re­gion, and while this was al­so not­ed by the RIC in bring­ing for­ward its pro­posed changes, the cheap­er rates had been a key rea­son this coun­try “ at­tract­ed sig­nif­i­cant pri­vate sec­tor in­vest­ments by both lo­cal and for­eign in­vestors for decades, de­spite a litany of ob­sta­cles ex­ist­ing in our busi­ness en­vi­ron­ment.”

How­ev­er, the re­port ques­tioned what im­pact the pro­posed changes would have on these in­vest­ments in ad­di­tion to im­pact­ing the qual­i­ty of life of the pub­lic.

The re­port said, “These elec­tric­i­ty price in­creas­es will yet again com­pound the over­all cost of do­ing busi­ness lo­cal­ly. So far, a myr­i­ad of fac­tors has ex­ac­er­bat­ed busi­ness costs, in­clud­ing high­er fu­el prices and trans­port costs, in­creased prices from in­ter­na­tion­al sup­pli­ers and con­comi­tant high­er tax­es paid on these im­ports due to high­er prices, cus­toms over­time and in­ef­fi­cien­cies at our ports caus­ing high­er rent and de­mur­rage charges for busi­ness­es, among a host of oth­er ob­sta­cles in the busi­ness en­vi­ron­ment.”

The doc­u­ment ar­gued that these costs and ob­sta­cles will in­evitably be passed down to the pub­lic, who are al­ready reel­ing from the ef­fects of sig­nif­i­cant in­fla­tion­ary pres­sures stem­ming from the COVID-19 pan­dem­ic and the Rus­sia-Ukraine con­flict.

“Nat­u­ral­ly, not on­ly man­u­fac­tur­ers, but all busi­ness­es will pass on this added cost to con­sumers in the form of high­er prices. This will com­pound the cost of liv­ing for all house­holds, as con­sumers will face these in­creased prices plus their own high­er res­i­den­tial elec­tric­i­ty charges.

“In the short term, in­fla­tion will wors­en. CBTT da­ta shows that over­all prices have in­creased by 14 per cent from Jan 2020 to Dec 2022, with prices of food, the most con­sumed item dai­ly, in­creas­ing by 28 per cent in the same pe­ri­od. Bread in­creased by 27 per cent, meat in­creased by 24 per cent and milk, cheese and eggs in­creased by 17 per cent.

“Prices of these and oth­er food items will fur­ther com­pound with the rate in­crease, a key rea­son be­ing that su­per­mar­kets will have to pay high­er elec­tric­i­ty charges, es­pe­cial­ly since their re­frig­er­at­ed and frozen sec­tions are in con­stant use,” said the doc­u­ment, which raised ques­tions if by proxy the pub­lic was ul­ti­mate­ly pay­ing the price for years of in­ef­fi­cien­cy by T&TEC.

“Go­ing for­ward it is in­te­gral that T&TEC mit­i­gate their in­ef­fi­cient prac­tices and low­er their cost struc­ture, as this has ex­ac­er­bat­ed their op­er­at­ing costs and con­tributed to re­strict­ing their prof­itabil­i­ty for years, leav­ing the state with lit­tle choice but to spend hun­dreds of mil­lions each year to sub­sidise them,” said the doc­u­ment, which added there were many po­ten­tial ben­e­fits to keep­ing the rates low.

“Low­er costs could have meant re­duced sub­si­dies to be paid and less need for these high­er rates. It al­so ne­ces­si­ties that they be more re­li­able with their pow­er sup­ply to the coun­try and avoid pe­ri­od­ic cuts in their ser­vice which seems to be hap­pen­ing reg­u­lar­ly in sev­er­al parts of the coun­try.

“More­over, this could cause us to lose some in­vestors, both lo­cal and for­eign – with the deep­en­ing of the en­er­gy sec­tor in Guyana and Suri­name, high­er elec­tric­i­ty prices lo­cal­ly to­geth­er with the oth­er prob­lem­at­ic fac­tors in do­ing busi­ness could en­cour­age some busi­ness­es es­pe­cial­ly those in the in­dus­tri­al sec­tor to re­lo­cate to these coun­tries, in the very like­ly event they low­er their elec­tric­i­ty prices,” said the doc­u­ment which al­so stat­ed that T&TEC un­der the cur­rent Pow­er Pur­chase Agree­ment was on­ly re­quired to pay for the gas which had been con­vert­ed to elec­tric­i­ty sug­gest­ing that in­creased ef­fi­cien­cy could save both the pub­lic and T&TEC mon­ey.

“The flaw is that the RIC failed to utilise the reg­u­la­to­ry prin­ci­ple of use and use­ful that it dis­cussed in the Draft De­ter­mi­na­tion. In oth­er words, it may be use­ful for pow­er gen­er­a­tors to have ex­cess ca­pac­i­ty but on­ly the cost as­so­ci­at­ed with that which is used should be al­lowed to be re­cov­ered.

“Fur­ther, the RIC’s Draft De­ter­mi­na­tion es­tab­lished that in­stalled sup­ply ca­pac­i­ty ex­ceeds cur­rent de­mand. Con­sumers are there­fore al­so pay­ing for that ca­pac­i­ty which ex­ceeds de­mand (for both nat­ur­al gas and elec­tric­i­ty not gen­er­at­ed),” said the doc­u­ment.