The Government and Caribbean Utilities Company both responded to comments made by West Bay MLA Cline Glidden by stating no deal had been reached with regard to a new licence for CUC.
Leader of Government Business and Minster of Planning, Communications, District Administration and Information Technology Kurt Tibbetts responded with a press release on Wednesday afternoon.
‘No negotiations with CUC have taken place and therefore no agreement has been reached regarding any new licence or licences that may be issued to CUC on or before expiry of (its) current licence in January 2011,’ Mr. Tibbetts stated.
CUC made a similar statement.
‘Mr. Glidden has speculated that a deal may have been struck between the Cayman Islands Government and CUC,’ the company stated. ‘CUC categorically denies that this is so.’
CUC explained that the meeting it had with the Government on 25 May was the ‘customary meeting held in May each year at which CUC presents it interim financial results for the year ending 30 April as prescribed by its licence.’
No discussion about the new licence took place at that meeting, CUC stated.
Mr. Glidden suggested that the recent announcement that CUC was investing in new generators might have indicated that they had been guaranteed a new licence.
CUC responded by saying it had decided at a board of directors meeting in February 2005 to replace the 12.6 MW of generation written off because of damage caused by Hurricane Ivan.
‘It should be noted that the lead time to install such generation ranges from 18 to 24 months and CUC did not have the luxury of time on its side,’ the company stated.
No guarantee
‘CUC does not have any guarantee of a licence renewal beyond 2011,’ the statement continued. ‘However, for CUC to stop investing in the infrastructure required to meet its obligation to serve would be tantamount to a breach of its licence.
‘Mr. Glidden posed the question as to how CUC could justify replacing generators with only six years left on its licence. The answer is both simple and obvious. A failure to replace lost generation as a matter of urgency would be irresponsible given CUC’s current and projected load requirements.’
Mr. Glidden said there were other ways for CUC to fulfil its licence requirements without making such large investments.
‘CUC said in their interim return that they were leasing generation equipment to get them through the peak summer demand time,’ he said. ‘So they could have rented other generation equipment and waited until the licence negotiations were complete before buy new generators.’
In his comments made to the Caymanian Compass on Tuesday, Mr. Glidden said a meeting of the board of directors of the Electricity Regulatory Authority (ERA), of which he is chairman, called for 1 June was postponed until further notice by Mr. Tibbetts.
An earlier meeting scheduled for 25 May had been postponed because the release of CUC’s interim return was delayed until that date. The meeting was then rescheduled for 1 June.
ERA director Rolston Anglin said he received a reminder for that meeting on 30 May, but then later that same day received an urgent e-mail from ERA managing director Philip Thomas saying the minister had instructed the meeting be postponed until further notice.
Mr. Tibbetts indicated in his statement the reason for cancelling the meeting was for two reasons, firstly because Mr. Glidden had indicated in a 20 May e-mail to Mr. Thomas that he and Mr. Aglin would ‘probably’ resign at the ERA’s next meeting and, secondly, because Mr. Thomas needed more time to review CUC’s interim report and request additional information if necessary.
More information
Mr. Tibbetts stated Mr. Thomas did in fact request more information on 3 June, which CUC has been asked to supply by 14 June.
Mr. Glidden said he was glad to have Mr. Tibbetts and CUC respond to his statements.
‘That’s good,’ he said. ‘At least we’re getting some information now.
‘But technically, the minister did not have any authority to cancel that meeting,’ he said. ‘Legally, the minister does not have any authority (over the ERA) except through me as chairman. This is the kind of influence by a minister (the People’s Progressive Movement) always complained about.’
Mr. Glidden said he does understand the politics of the situation and that the new government might not want him as chairman of the ERA, but the fact remains that he currently still has that position.
‘I got a letter just today from Mr. Thomas asking me to approve a day’s vacation for him, and I approved it for him,’ he said on Wednesday.
In Mr. Tibbett’s statement, he said the ERA is currently reviewing CUC’s interim return and that it will make its recommendation to Government prior to 31 July.
‘It’s not the ERA that’s doing that,’ said Mr. Glidden. ‘It’s one member of the ERA (Mr. Thomas) that’s doing it.
Mr. Glidden pointed out that, by law, Mr. Thomas was supposed to report to the Authority.
‘I understand the ticklish situation he’s in, and that ultimately, the minister is his boss,’ said Mr. Glidden.
‘But I don’t want it to appear that I’m derelict in my duties. I don’t want people to come back to me and say I was involved in this when something happened that I wasn’t even aware of.’
Mr. Glidden said in his interview this week that he feels it would be a mistake for Government to negotiate CUC’s Hurricane Ivan cost recovery surcharge – or any other rate increase – separate from the licence renewal negotiations.
If government were to do so, in Mr. Glidden’s opinion, it would be to lose any leverage it had to fight any electricity rate increases.
In his statement on Wednesday, Mr. Tibbetts indicated Government would in fact negotiate the two issues separately.
‘Once the present application for cost recovery surcharge has been investigated, discussed and negotiated with CUC, Government will be willing to come back to the table to re-commence negotiations with CUC regarding the terms and conditions of any new licence or licences that may be issued to replace the existing licence,’ he stated.
Mr. Glidden and Mr. Tibbetts both recognize that CUC will have to raise rates to some extent.
‘CUC is entitled to an increase. You can’t question that,’ said Mr. Glidden. ‘But it can’t be an open chequebook increase without any regard to the people of the Cayman Islands, especially when CUC is issuing dividends to shareholders.’
Mr. Tibbetts said Government would do its best to keep the rate increase down.
‘Government is fully aware of the financial implications that any increase in billing rates will have on Grand Cayman residents and will do all within its power to keep any future increase as low as possible,’ he stated.
Mr. Tibbetts also stated that Government ‘is very much committed to looking at the possibility of introducing competition within the electricity generating industry if that would mean lower prices to the consumer’.
Mr. Glidden warned, however, that unless any new entity wishing to compete in electricity generation on Grand Cayman is offered a significant size of generating capacity, it would not be feasible for them to compete.
‘When we asked for expressions of interest on 32 megawatts of capacity, we had two responses,’ he said. ”We thought with a 32 megawatt chunk, people might be interested in investing. But if it’s only a generator size of four to 12 megawatts, no one is going to come and make that investment.
‘If Government allows CUC to expand too much, it would not allow for competition,’ Mr. Glidden said.
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