Parliament has approved the controversial Electricity Supply Bill (2016) which government says will reduce high energy costs in the country and bring an end to stifling growth in the economy.
The new bill, which replaces the Electricity Supply Act of 1994, is intended to regulate the energy sector and to provide a platform for local and foreign investments particularly in renewable energy.
The bill was passed in the Upper House (Senate) last week Tuesday after more than four hours of heated debate between the two sides.
The main elements of the bill is to bring an end to the 80-year monopoly of the United States-based company WRB enterprises, which is the majority shareholder of the island’s lone electricity provider, the Grenada Electricity Services Ltd. (Grenlec).
In introducing the new bill to the Upper House, Leader of Government Business, Senator Simon Stiell, noted that provisions are made for several key areas that are not provided for under the previous Act, which is structured in such a way as to give the majority shareholders significant advantage to the extent that it is affecting the performance of the economy and electricity consumers.
“It is recognised worldwide that in order to bring energy cost down, in order to achieve fuel security (and) to protect yourself against the vulnerabilities of high oil prices that we have seen historically, we need to move to renewable energy…but under the terms of the current agreement, renewables aren’t even mentioned. Again the absurdity of an 80-year agreement,” Sen. Stiell told the House.
“Aruba is leading the way in the adoption of renewable energy. Their goal is to move 100% renewable, removing their dependency on fossil fuels”, he said.
Sen. Stiell noted that Grenada is barely at one 1% and has “one of the highest electricity costs (while) Aruba has one of the lowest.”
He directed the House to a study recently conducted by International Renewable Energy Agency (IRENA), which shows that “the average cost of electricity in the Caribbean is .32 United States cents per kilowatt hour.”
Sen. Stiell said, “While in the US its 12 cents a kilowatt hour, in Grenada 41cents per kilowatt hour…one of the highest rates in the world…”.
“So when we look at these rates we know something is wrong…how are we going to bring down the cost of energy if we don’t have an agreement that specifically identify the transmission from fossil fuel to renewable in an accelerating manner…under the current terms we will not get there,” he added.
Expressing shock that “we have one of the most profitable electricity companies operating here in Grenada (and yet still) we have one of the highest electricity rates,” the Leader of Government Business pointed out that the new bill also makes provisions for increased profit sharing.
He said, “The average returns on equity for a Caribbean electricity utility provider is 13%,” noting that “on every dollar invested they (the investors) receive a return of 13 cents.
“Grenlec here in Grenada is (receiving) 17.1%…Antigua is 6.8%…If you actually look through the figures a couple years ago the return on equity at that time was in an excess of 20%…
“That means that every six (6) years Grenlec makes back its investment. They (WRB) have been operating in Grenada for 22 years and that means that they have made back their investment four times,” Sen. Stiell told the House.
Opposition Senator, Nazim Burke who rose to speak on the bill said he was “convinced that this bill was ill-conceived, clumsily constructed (and) destined to erode the safety, security and reliability of our electricity supply….”
Sen. Burke, who initially called on the ruling New National Party (NNP) government to withdraw the bill, voiced support for its objectives, however, he condemned government’s approach in the matter.
He expressed concern about possible legal implications and rate increases “in the short to medium term,” stating that “the bill will expose the country to a significant lawsuit that might involve hundreds of millions of dollars and possibly undermine the job security and investments of some Grenlec employees.”
Sen. Burke, who is also the Political Leader of the main Opposition National Democratic Congress (NDC), was on several occasions ordered by the President of the Senate, Chester Humphrey, to withdraw statements regarding his opinion about the real motives of the bill as objected to by Senators on the government side, including expelled Congress member, Sen. Peter David.
The government senators argued that Sen. Burke’s statements were not relevant to the bill at hand.
Sen. Burke had directed the House to what he described as “a track record of misuse of resources and bad decision” making by previous NNP governments especially Works Minister, Gregory Bowen.
He pointed to a number of instances where previous NNP governments entered into contracts with foreign investors only to see the initiatives ended up in costly lawsuits against the State.
He specifically mentioned a “10-year contract” that the 1995-98 former Keith Mitchell-led government had broke with the Trinidad-based Company, “DIPCON Engineering Services Ltd.
The company took court action against Bowen when the contract was prematurely terminated in November 1995.
Sen. Burke told the House that“…The judgment of EC$11.2M, (which) was left unpaid for years, has gotten to as much as EC$21.2M (as of) last year (and that he) understand that some EC$4M may have been paid over the last 12 months, but presently, still outstanding (is) EC$17M owed to DIPCON Engineering because of an act of recklessness, moving the company out, throwing them out on the spot and costing the government EC$21.4.”
The Congress leader also pointed to the granting of a license for oil exploration rights to “RSM Corporation to explore all of Grenada’s maritime waters in which the country was being paid” only $19, 000 a year…
“When Mr. (Jack) Grynberg, who was the principal of that company realised what was going on, he decided to exercise his rights…government decided to walk away from the contract and Mr. Grynberg took them to court.
“As a result of that decision Grenada ended up spending over US$3.8M in legal fees because of bad choices and bad decision making,” Sen. Burke recalled.
He pointed out further that “before the matter was finished with Mr Grynberg an agreement was signed with another oil company Global Petroleum Group (GPG), (which was) given the same rights over the same waters to do exploration…That company (GPG) agreed to pay to indemnify the government for the case that Mr. Grynberg has brought against us.”
Sen. Burke contended that based on the record of those who are now presenting the bill and their misuse of state resources in the past, the new electricity bill could result potentially in another lawsuit.
“My point is Mr. Speaker, before we make these decisions it is extremely important for us to evaluate the likely consequences because they will cost the country.
“What we are seeing here is a reaction to bad relationships between the two leaders of the New National Party and WRB…
“It is clear to me that this is one of the objectives of the Bill, if not an objective then surely a manifestation of a problem in the relationship.
Over the years, PM Mitchell and Bowen have blasted NDC for the agreement it signed in 1994 with WRB Enterprises to become the majority shareholder in Grenlec.
The two have often dropped strong hints of wanting to end the arrangement.
Research recently conducted by the Caribbean Statistics and Data Services, shows that Grenada, which is almost completely dependent on fossil fuel (diesel) imports for its energy needs was ranked 10th in the Caribbean Community (CARICOM) for high prices, followed by St. Lucia 11th, Dominica 12th, and St. Vincent and the Grenadines 13th.
Research also conducted two years ago by the Economic Commission of Latin America and the Caribbean (ECLAC) provided data which suggest that the average electricity rates among residential customers using 100 kilowatt of electricity or less per month was .38cents.
According to the ECLAC report, Grenada recorded the highest with .42 cents, while St. Lucia had the lowest with 32cents.
Oil prices have since fallen between 30% and 40% resulting in reduced rates.
The study concluded that the Virgin Islands Water and Power Authority charges 52.5cents per kilowatt hour for residential customers and 55.5cents for commercial customers, the highest in the Caribbean.