APUA Says Opposition Energy Reduction Plan Unrealistic

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Tuesday 6th March, 2018 –Less than 24 hours after the Opposition United Progressive Party rolled out its seven key pillars under which it intends to govern Antigua and Barbuda, the general manager of a major statutory corporation in the country is finding fault with at least one of the measures being proposed by the party.

Among the measures announced by UPP leader Harold Lovell during the party’s campaign launch on Sunday evening was the reduction of all energy prices within two weeks of their assumption to office, should they win the upcoming general election.

That will include a reduction in gasoline and diesel, a 25% reduction in fuel variation and the intention to permanently peg energy prices to world oil prices.

But APUA’s General Manager, Esworth Martin in a two-page letter to the prime minister dated March 5th, 2018, penned that an immediate decision by the Government to reduce the fuel variation by 25% would have far reaching adverse implications. He wrote that the Electricity Business Unit’s revenue would decline by EC$37.5 Million per year if that proposal was effected. Martin outlined that for an organization that experiences persistent cash flow challenges because of its obligations to Central Government, its remittances of at minimum EC$1 Million in subsidy (monthly) to the Water Business Unit, it would be detrimental, APUA would not be able to meet its recurrent expenditure or execute critical feeder maintenance, resulting in increased outages and losses. Debt servicing would be rendered impossible, and wages and salaries would not be paid timely. The Management of APUA would not recommend a reduction in the fuel variation.

The APUA General Manager also warned that the reduction in water rates would pose a more dire proposition for the Authority. The Water Business Unit he said has been a perpetual loss leader over the years, even during period of high levels of surface and ground water resources. At present, the Authority employs the most expensive production methods with Reverse Osmosis (R. O.) as its primary source. Its existing tariff structure is inadequate and below production costs; hence the need for subsidy. It is APUA’s reality Esworth Martin wrote that the Water Business Unit’s budgetary projections are approved annually with the comprehension that expenses exceed revenues by 20%. Its current tariff is not structured to realize the desired revenues that would ensure profitability and self-sustainability.

Without subsidies from the Electricity and Telecoms Business Units, the Water Business Unit would not exist. It cannot, at current rates, meet its operational expenses. The challenge is further compounded by the fact that Central Government, some Statutory Institutions, other Government Agencies and Officers do not pay water bills. This negative cash flow position has impacted the Unit’s ability to execute the capital projects necessary for the Business Unit to ensure a sustainably reliable service.

The APUA General Manager stated that APUA cannot absorb the impact of reduction in its tariff.