Who makes more on electricity: CUC or government?

Who really profits from the sale of electricity in the Cayman Islands?

Keep that question in mind for now, while we consider the sound and fury reverberating through our local airwaves and websites this week.

The subject of the public’s ire: Reports that electricity had been cut off to “hundreds” of Cayman Islands households and businesses, with more than 640 living in the dark, so to speak, for three months or longer.

The target of their wrath: Grand Cayman’s sole energy provider Caribbean Utilities Company.

It appears that in this instance — because of ignorance, bias (utility companies have never been on anyone’s “most loved list”), or misinformation — their anger has been misguided, both in terms of its source and its object.

Here are the facts: Yes, according to the Electricity Regulatory Authority, as of Nov. 24 there were 641 “non-voluntary disconnections” — meaning, customers whose electricity had been disconnected by CUC for “non-payment, safety or other reasons.”

That’s a wide net to cast, one that captures people who genuinely couldn’t pay the light bill, but also many other households, businesses and, for that matter, vacant units.

The truth is, no one knows how many people in Cayman are living without electricity because of poverty. Certainly not 640 families; but clearly there are many — and many more who just manage to scrape by from month to month.

Precise numbers aside, however, one entity that should not be blamed for these “non-voluntary disconnections” is CUC — which can, should and must be able to exercise the ability to refuse to provide service to customers who aren’t paying for it.

Although in our experience CUC is generally quite flexible and responsive to people who are experiencing cash-flow issues, the responsibility for keeping a family’s ceiling fan and refrigerator running does not fall at the feet of Cayman’s private energy provider. On an individual basis, CUC’s cutting off a household’s power should trigger an immediate response from the government’s social services agencies, who probably should have already stepped in to assess the situation to determine whether or not assistance is called for.

But that is a limited short-term fix, not a comprehensive long-term solution.

It’s not just the unknown scores of people in darkened households who feel the burden of electricity bills — it’s every man, woman and child on this island.

The most efficient and effective way to reduce energy costs in Cayman, today, is not for people to harangue CUC, but for the government to abolish the 75 cents per gallon tax on diesel fuel imports, nearly all of which is consumed by CUC’s power plant. Doing away with the diesel duty would, according to government’s figures, reduce the average household’s monthly power bill by about 13 percent.

We’ll note that, in January, the government will take almost a half-step in that direction, reducing the 75-cent tax to 50 cents per gallon. It’s a good start, and one that will instantly put cash back in people’s pockets and potentially decrease the cost of retail goods, but it doesn’t go far enough.

But let us return to the question we posed at the beginning of this editorial: Who really profits from the sale of electricity in the Cayman Islands?

The answer is twofold.

First, CUC and its shareholders do. After all, it is a profit-making entity. According to the company’s annual report, in 2013 CUC realized earnings of $20.4 million, an increase over the $17.7 million reported for 2012.

That’s not small change. But it’s less than the roughly $25 million that (guess who?) the Cayman Islands government collects each year in diesel tax revenue, under the rate of 75 cents per gallon.

Finance Minister Marco Archer estimated that the upcoming diesel tax cut will “cost” the government some $4 million (over the six month budget period from January through June), leaving it with $20 million or so in revenue from diesel imports.

A final question: Who do you think would put that $20 million to better use — the sprawling bureaucratic apparatus of the Cayman Islands government, or ordinary people who gulp when the monthly CUC bill arrives? (That is, of course, all of us.)

1 COMMENT

  1. Well What a revelation?……I never knew that the government was getting this much, so that is one of the reasons why poor people live from hand to mouth.
    Besides, will CUC explain to the public what is the true reason that they charge a person 200.00 for a reconnection if that person has been a faithful customer for more than 30 years. Also tell the public what is the reason that a person who has been disconnected for more than six months cannot get re connected unless they have to go through one mile of beaurocracy pile of crap. Who is responsible for all of this? The government too? People have be Getting an electrician, which they cannot afford, paying fees for this and fee for that to planning department. This is what the government should LOOK INTO and see that it is HIGHWAY ROBBERY OF THE PEOPLE. Why do you think those 640 something people are out of electricity for so long? It is because they cannot afford to pay the 200.00 for reconnection, pay an electrician to make approvals, and pay planning another fee for what ever. It makes one wonder what or who do we really believe in. How can we be so thoughtless against the needs of our people and still have the audacity to call Cayman a Christian country?.

  2. This was an eye opening editorial that may not be well received by government as the cost of living and government size are seen as sore points by many.
    Government makes more money than CUC on power consumption in the Cayman Islands, who would have thought?

  3. Cayman does not have a cost of living crisis. It has a cost of government crisis.

    Sadly, given the voting power of the civil service and the inherently selfish and short-term nature of politicians’ priorities, this will not change.

    In the meantime, the cost of feeding this insatiable beast will continue to fall on Cayman’s people and businesses, and these islands will continue to lose market share to less rapacious financial jurisdictions elsewhere in the world.

  4. There has long been a joke that when you get burgled, the Government makes more in duty on the imported replacement goods than the thief can get from selling his ill gotten gains…

    If a fridge uses about 1-2 units a day, Lights a couple of units a week and a Microwave the same – this could be considered as a basic standard of living.

    Maybe it would be more socially appropriate if the first say 50 or 60 units were supplied at or below cost, to allow those on low income to have the basics.

    What’s with the ‘standing charge’ – seems an odd thing…

    You have to pay for the meter which allows us to sell you our product.

    It would be like having a cash register fee when you buy goods at the supermarket?

  5. Here’s another example for you Andy. It’s just like the tax you have to pay the government on the insurance that you purchase for your house. You spend your hard earned money to buy a home then you buy expensive insurance to protect that home. However you have to pay the CIG for the privilege of having the insurance policy that you paid for, same as paying them to have the electric that you already pay for.

    Bottom Line is that this is just another factor in what what it costs the people to maintain their super expensive civil service.

  6. Good article and agree 100% with comments!

    We the public are being taxed to pay for a civil service that includes the legal department, police and prison service, teachers, where the majority are not Caymanian. So ask yourself, how happy are you with these services and the apparent recruitment preferences and process? Have you ever heard MLAs make a national issue and call for resignation of heads of departments when the person is not British? After they get the person to resign what nationality is the replacement?

    CUC = One of the CIG tax collectors is CUC; yet the politicians want to keep ignoring this fact or maybe I should say allowed the public to be misinformed. As I told one of my WB MLAs they should have been working on this from day one. How can you talk about cutting cost and not address the civil service? There are many contracted workers that be replaced by locals in the future and efficiency has to be addressed by more than having large numbers of employees (the reason for that could be another article). But check the campaign speeches and promises, how many said they would cut the civil service? If this is not an option, getting a break from CUC will be more difficult.

    CIG = The greatest number of civil service employees are Caymanian which includes ALL status holders and in most departments (police, prison, education) employees are mainly of one nationality. So all residents (including the elderly in this country) are being taxed to ensure that certain nationals are employed because as it stands now that’s the make-up of the civil service.

    I accept that the CIG statistics include Caymanians as defined by the Immigration law but I am referring to the national origin of the majority. In the private sector partners and lawyers who have received status should be legally treated the same as any civil servant with status. If the majority of civil servants were from the UK then I would say that but they’re not, although as a BOT there is argument for having more British in the civil service, especially in the prison, police and education system.

    It’s time for us to realise the source of our problems, starting with the people elected because until we do that it will become more difficult for the Caymanians who only have these islands as an option of residence.

    All residents are being taxed to pay for a civil service that is in dire need of people willing to be objective and address the real issues without fear or favour and importantly with the boldness necessary to demand the best practices from all employees. To use the phrase of many of the current MLAs;

    Cayman, we are paying for the MLAs and civil servants, are we getting value for our money, i.e. the taxes collected by CUC?

    I’m being taxed quite a lot and as such using my right and obligation as a citizen to express these views, and I encourage others to do the same.

  7. Doesn’t that net profit exclude the infrastructure? So yes Government appears to makes more money but CUC’s profit is after all it’s costs, which include infrastructure. CUC is repaying loans and building capital, so at the end of each year they have 20mio cash profit and maybe 20mio of ‘things’ and what about the dividends paid out to shareholders, where does that fit in? I don’t think you can take two disparate numbers and compare them.

Comments are closed.