GovernmentLooking at Power Rate Review
The Cayman Islands Government is now saidto be reviewing a financial report from Caribbean Utilities Company,Ltd. (CUC) in which the firm is seeking a two per cent rate increase.
The company has announced that a statementon its 2001 final return is in the hands of government and itis expected that an agreement on a new electricity rate structurewill be in place by the end of October.
The company named the October date for agreementwith government on new rates although contending that the increasewas entitled since the beginning of August.
The following is an extract of Cud's statement.
"CUC agreed with Government in Mayto suspend any rate increase pending completion of an electricrate review. This review was submitted with Final Return and isnow before Government for consideration. It is anticipated thatan agreement on a new electricity rate structure will be reachedwith Government by October 31, 2001.
"The electric rate review was conductedby R.W. Beck and updated its 1994 review. Its objectives wereto ensure that the cost of electrical service associated withCud's rapid growth are fair, properly allocated and developedto eliminate subsidized consumption. The review is interim innature and recommends that CUC make moderate adjustments to itsresidential and commercial rate structure until sufficient supportingdata can be collected to conduct a full and proper allocated costof service study, including the development of a demand rate forlarge consumers. Such studies are traditionally used in NorthAmerica and form the basis of ensuring fair, cost-based electricitypricing. It is projected that this allocated cost of service studywould be completed no later than May 2003.
"CUC has recommended that Governmentaccept the interim adjustments contained in the interim electricrate review, as they will begin to align electric rates for variouscustomers with the costs the serve those customers. CUC recognizesits privileged position as Grand Cayman's electricity providerand is mindful of Government's concerns regarding rates. The Companytherefore proposed a compromise to Government regarding rate increasesuntil the completion of the allocated cost of service study. Detailswill be disclosed subject to Government acceptance of the proposal.
"CUC's Licence agreement with Governmentspecifies that renegotiations may commence five years prior toit's 2011 expiration. CUC, as a public company listed on The TorontoStock Exchange, is of the opinion that to enter renegotiationsor allow a full rate freeze at this point in it's $150 millioncapital investment program would not only jeopardize its credibilitywith investors but also affect its recently awarded 'A' ratingfrom Standard and Poor's. CUC is an independent Cayman Islandscompany that relies on its local and overseas investors and lenders,without whose support it would have become virtually impossibleto deliver the quality and reliability of service its customershave come to expect. Considering these factors and it's stakeholders'interests, CUC has notified Government that it has no plans toenter licence renegotiations before 2006."