Electricity prices on the rise, entity to be corporatized by April 2011

The announcement was made on 14th December 2010 by Prime Minister and Minister of Finance, Dr. Denzil Douglas during his presentation of the Budget Address 2011, which he made before parliamentarians, member of the consular corps, other invited guests and the nation.

According to Dr. Douglas’ address, under the present tariff system, “Government subsidizes the cost of electricity to the tune of $48 million annually. I am sure that we would all agree that there is no justification for government to continue to provide broad based subsidies on the cost of any utility especially for those who can afford to pay for these services, especially in the midst of a global economic crisis that is adversely affecting tax revenues.

“Government will therefore take the approach for electricity, as well as for other services, that the cost of providing the services must be recouped and that the Social Safety Net Programme will assist those who cannot afford to pay the true cost.”

Dr. Douglas explained that a new tariff system will be implemented on 1st January 2011 which “will bring the base tariff closer to the cost of producing electricity”. Under the new pricing scheme, he further explained, “The tariff will increase by 27c, 30c and 31c respectively for the three KWH ranges for domestic rates and will increase by 30c, 33c, 35c, 37crespectively in the four KWH Ranges for Commercial Consumption.”

The Finance Minister described as “important”, the need to abolish electricity subsidies before corporatization takes place “in order to ensure the success of the corporatized entity. We are determined that this new entity must at least break even. We do not expect to provide any subvention to the Electricity Corporation hence we are proposing that the subsidy must be eliminated now.”

To assist in the transitional process, Dr. Douglas informed that a Transition Committee has been established and will oversee the process which will transform the Electricity Department in a corporatized entity.

He indicated that the corporatization of the Electricity Department is one of the measures which his government is undertaking as part of its multi-pronged Reform Agenda “which consists of comprehensive Fiscal Reform, reorganization of the debt portfolio and Public Sector Reform to set the stage for sustained growth. This virtuous circle of reform, management and growth is the strategy that we intend to employ as we persevere with the transformation of our economy.”

The Prime Minister explained his government’s commitment and expectation that, during 2011, the expansion and improvement of the reliability of the electricity supply will be a focal point and, “To this end, the Ministry has already purchased four (4) 4 MW Holeby MAN Diesel engines at a cost of around US$22.0 million. At the completion of this project the power station would have the capacity to meet the demand for electricity well into the foreseeable future,” Douglas said.

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