Hooked on power
When the scientists of the seventeen and eighteen hundreds first discovered that an electric current could be generated and sent along a wire to produce light, heat and energy they could never have dreamed how almost the entire world would become dependent on their inventions. Or how much power those doing the generating and legislating of it would come to have over consumers of it.
These past couple of weeks have seen some remarkable electricity related power plays both overseas and here in Vanuatu whose losers are, or will be, the consumer.
In India 680 million people were affected over a two-day period by the largest blackout of all time. While the outage is considered to have been caused by manipulation of the national grid to provide some provinces more electricity than they were entitled to, the root cause of the failure of supply, some say, is a result of a lack of political will by the Government to develop a “longing for disciplining and empowering India’s ailing power sector”.
In Australia, where by comparison regulation and regulators are strong, Macquarie Generation, the biggest wholesale supplier of electricity in the country, has been accused of manipulating prices in an attempt to offset the effect of the carbon tax. The Australian Energy Regulator noticed unusual pricing activity in the Victorian, South Australian and Tasmanian markets as well as Macquarie’s activities in New South Wales and is monitoring the situation as is the Australian Competition and Consumer Commission. The Major Energy Users Association (EUAA) though, has been more forthright. ‘’For a few days Macquarie Generation pulled out at the peak generation time,’’ said spokesperson David Headingly. ‘’It reduced output, and the price went up. I find it improbable generators - on consecutive days - have a technical reason for withholding capacity at a time of peak demand.” And as to whether it was indeed manipulation: “If it looks like a duck, and sounds like a duck, then it is a duck.”
In Vanuatu the duck would seem to be alive and well with attempts being made without due consultation with either the public or the regulator to alter both the existing Concession Agreements between Unelco and the Government and change the legislation under which the Utilities Regulatory Authority (URA) exists thus limiting its powers to protect the long-term interests of consumers throughout Vanuatu.
The URA has publicly made its position quite clear regarding the changes to its legislation via a media release on July 23, 2012. It says that Unelco and Kuth Energy have attempted to change the law which created the Authority by submitting a set of amendments to the government in June without consulting consumers or the regulator, and without taking into consideration the laws and policies of the country.
Many of the proposed amendments transfer a large measure of regulatory and contractual administration powers away from the Authority and back to the Government whose ineffectiveness in controlling the energy and water sectors were the raison d’etre for the creation of the URA in the first place.
“The proposed amendments secure for UNELCO several critical protections from regulatory influence and impose upon the Authority a variety of critical administrative and operational burdens.
“Already in November 2011 the Authority raised its concerns with the government, specifically the Ministry of Lands, when attempts were being made to amend the Utilities Regulatory Authority Act. UNELCO had been organizing a meeting with some government officials in secrecy and without any consultation with consumers or the regulator.
“No one could provide the actual amendments so the Authority could only assume that the outcome of the proposed amendments would be to the detriment of the people of Vanuatu.”
Following a review of UNELCO’s and KUTH’S latest proposed amendments the Authority once again expressed its grave concern that there has been no proper consultation and no transparency by the proponents to the amendments.
The URA’s advice to the government on how the proposed amendments would impact on Vanuatu’s electricity and water customers can be found on its website: www.ura.gov.vu.
The regulator is obviously very much aware of its rights, obligations and the affect both attempted amendments will have and is dealing with them in its own way.
However, Vanuatu’s electricity consumers may not be as aware of how, due to the convoluted, even draconian, method by which the price consumers pay per kilowatt hour for electricity is derived, the attempted amending of the Concession Agreements with UNELCO will not only see UNELCO being able to charge 20% for low voltage and 100% for high voltage (which must come before low voltage connection is possible) for new connections but ALL consumers paying more for their electricity through an increased tariff.
The problem lies with the inclusion of the supplier’s (UNELCO’s) “regulated asset base” for the purposes of all tariff reviews” in the formula. If UNELCO extends its network connections anywhere and no matter what the new customers pay for their connection the overall tariff will rise.
This writer was surprised when, researching for an article decrying the practice by unscrupulous landlords of using their one UNELCO connection to supply multiple rental houses on their land with electricity at a far higher cost than would be the case if every dwelling had its own connection to find that if the practice were to be stopped and individual connections made it would necessarily trigger a rise in the tariff overall due to UNELCO’s thus expanded asset base.
UNELCO is not prevented under the present Port Vila concession agreement from investing in extensions outside the concession area as long as the extensions don’t compromise the existing concession area supply. Nor is UNELCO prevented from seeking approval for investments under their investment plans that include extensions that would otherwise not be affordable to customers. Even though new customers qualify for a subsidization of low voltage connections, they may be liable for a portion or all of the high voltage connection that supplies it. Neither may not be to the benefit of all customers and it may have the opposite affect of including projects that if they had undergone the scrutiny of an investment plan review, would not have been approved to be included in the tariff – for example a developer at the edge of the concession, with the amendment now 25 km further, substantially increasing his subdivision value at the subsidized 20% extension rate.
In the end all customers pay through the tariff. The poor will again suffer from potentially higher tariffs and although the poles and wires may be constructed and pass by their properties not all can afford access to the network.
The URA’s press statement regarding the changes to its Act concludes: “The proposed amendments do not reflect any Government policy of which the Authority is aware. Many of the proposed amendments are poorly drawn; being uncertain in effect, duplicating, redundant and generally inconsistent with both the style and arrangement of the Act, and legislative style in Vanuatu.
The reason for the proposed amendments is based on contentious representations by UNELCO and KUTH, with which the Authority disagrees.
The proposed amendments will NOT further the purposes of the URA Act or provide any ascertainable benefit to the public in Vanuatu. They will, in fact, do just the opposite and have an anti-developmental effect. They represent a substantial return to the pre-2007 past.”
The same can be said of the proposed changes to the Concession Agreements and particularly the planned extension of time for UNELCO to hold the Port Vila Concession for a further 10 years up until 2041. No justification is provided within the amendment for such a move but when read in conjunction with the proposed amendments to the URA Act it too simply means a return to the under regulated system that existed prior to 2007 for longer. The lack of transparency with which both the proposed amendments were prepared and almost fait accompli without any consultation with relevant stakeholders, or even their awareness that any changes were in the wind, does not auger well for the best interests of consumers in the future as they say ‘going forward’. Rather, consumers’ interests will be well and truly going backward, a worrying scenario in these days of global financial, and therefore investment, uncertainty.
>>The ideas and opinions expressed in this article are those of the writer and are not necessarily those of the Vanuatu Daily Post.