Rationale of bid shelving revealed

Falling tourist numbers, customers conserving power and dropping gross domestic product figures all factored into a decision to shelve the generation of new electricity in Cayman.

The rationale behind the Caribbean Utilities Company’s recommendation to the Electricity Regulatory Authority to abandon a bidding process that would have led to an additional 32 megawatts of power was laid out in correspondence sent to the regulatory body on 20 September, 10 days before a winning bid was to be chosen.

In the document, CUC stated it estimated there would be zero growth in power usage by 2010 and just a 1 per cent average growth in peak electricity demand between 2010 and 2014.

The ERA unanimously agreed to cancel the solicitation of bids last Thursday. Two companies – CUC and Jamaica Energy Partners – had submitted bids to generate 32MW of electricity by 2013.

Under the terms of its licence agreement, CUC is tasked with determining the need for future generation based on load growth, generation retirements, and operating reserve requirements.

Reports from the government’s Economic and Statistics Department on the level of economic activity in the country indicated that Cayman’s projected gross domestic product would drop to $39,600 in 2010 – down from 2008’s $40,253.

CUC estimated its sales would grow by a mere 20 megawatts from 548MW in 2008 to 550 in both 2009 and 2010. This compares to a 3 per cent growth in sales last year from 534MW in 2007 to 548MW in 2008.

Building permits

CUC also took into account the Economic and Statistics Office’s first quarter report for 2009 which stated that building permits in the government, commercial and industrial sectors fell from $27.6 million in 2008 to $2.5 million in 2009.

It also looked at a drop in air arrivals, which impacts electricity usage of stay-over visitors in hotels, and also a drop in cruise arrivals, which the company said had an indirect impact as they affected the opening hours of businesses operating for that market.

The company also looked at the Central Planning Authority minutes and developers’ schedule updates. From these, CUC ascertained that the Government Administration Building was due for completion in July 2011 and would lead to vacated commercial space, and that the two government schools were due to open in September 2010. However, construction at the John Gray High School has been halted and there is currently a work dispute brewing at the site of Clifton Hunter High School.

Other construction works, such as on the Water Colours and Island Residences projects, would not contribute to the company’s peak load for 2011-2012, CUC told the ERA.

Only 21 new users

The letter, signed by Letitia Lawrence, vice president of finance and chief financial officer, justifying CUC’s decision to recommend the expansion of generation be shelved also stated: ‘CUC has begun to see a significant slowdown in the numbers of customer connections with an average of 67 customers added for the January to August 2009 period. Only 21 customers were added in August 2009.’

She concluded: ‘We remain of the view that a commitment to new generation is not in the best interests of consumers at this time, but should be deferred until there are clear signs of an economic recovery.’

In the event of a rapid economic recovery within 12 months, Ms Lawrence stated that an immediate retendering on a two-year delivery period or postponing retirement of certain CUC generating units could suffice.

CUC is scheduled to retire three of its generators by 2012 – one a year over the next three years. These generate a total of 16.55MW.

CUC corporate secretary Doug Murray said the company only ran its older generators when it was getting close to full capacity, or when one of the newer generators were offline for repairs or maintenance.

The company recently began operating a new 16MW generator. This brought its total generating capacity to 152.6MW. According to its 2008 transitional annual report, its highest peak load was 93.8MW, experienced in September last year.

The company, under its transmission and distribution Licence, is obliged to maintain a generating capacity between 135 per cent and 155 per cent of forecast peak generation.