The signing of two new licence agreements between the Cayman Islands Government and Caribbean Utilities Company last week mandates the production of more environmentally-friendly electricity.
Minister of Works Arden McLean said the new agreements would, among other things, strongly encourage the generation of renewable energy, enhance environmental protection and encourage efficiency.
In an acknowledgement of the need to look beyond diesel generation to meet future capacity, Mr. McLean said CUC’s new 21.5-year electricity generation licence contains specific targets for renewable energy sources.
‘Within six months, CUC will need to identify its capacity for absorbing renewables,’ he said.
He also said that while efficiency improvements in new equipment technologies significantly contribute to better, cleaner, generation, the utility will be held to new standards for performance and efficiency in an effort to reduce its emissions,
‘While we are asking CUC to come up with the standards on their own, they will be subject to the approval of the ERA,’ he said. ‘It is important for the CUC to meet these new standards, and we envision there will be rewards and penalties with regard to abiding by them.’
Under the recently amended Electricity Regulatory Authority Law (2005 Revision) the competitive bid process will be managed by the Electricity Regulatory Authority for new generating capacity and for the replacement of retired generating capacity.
Mr. McLean said in its enhanced role, the ERA will need to be prepared to tackle complex issues and stay abreast of the many developments that are happening in the energy generation field spurred on by the fight against climate change.
He said consumers interested in investing in green technologies can also expect concessions in the form of import duty breaks, on a case-by-case basis. The new licence agreement also makes provisions for individual homeowners to sell their excess generated power back to CUC.
Homeowners are not the only ones who will be able to generate their own power under the terms of the new licence agreement.
Although CUC will have exclusive rights for electricity transmission for the next 20 years, its non-exclusive generating licence will permit other companies to bid on generation beginning as soon as this year with the filing of the Certificate of Need by CUC for the calendar years 2011 and 2012.
Mr. McLean said government has already been approached by companies interested in electricity generation.
Better for consumers too
The new licence agreement will benefit consumers as well. The new Rate Cap Adjustment Mechanism is intended to shift CUC’s previous guaranteed 15 per cent return to the 9 to 11 per cent range. Under the RCAM, base rate adjustments will be considered annually based on a Price Level Index that is a combination of Cayman Islands and US consumer price index movements.
Chairman of the government’s negotiating team Olivaire Watler said new the licence is also intended to prevent massive rate spikes in the year following a natural disaster such as a hurricane, provided the Governor has declared a state of emergency and the Cayman Islands CPI doubles.
He said in such a case CUC’s base rate adjustments will be limited to 60 per cent of the Price Level Index. Any residual base rate adjustment for that year that would otherwise be permitted by the full application of RCAM would be carried over and applied in addition to the normal RCAM adjustment in either of the next two years if CUC’s return is below the target return range.
‘It’s a way of smoothing out the payment process over a longer term,’ he said.
Regular rates are to be revisited by the ERA every five years.
CUC President and CEO Richard Hew said there was also a base rate freeze for the next year, a further boon for consumers. Rates have been cut, including removal of the hurricane Ivan surcharge, by 15 per cent since January.
Mr. Hew encouraged residents to continue their energy conservation efforts, which can be facilitated by free energy audits CUC conducts.
‘The end of cheap energy is here – we will likely see oil bottoming out at $70 a barrel, and fuel and equipment costs are rising,’ said Mr. Hew.
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