The cause most central to triggering the Anguilla Revolution was the many years of neglect Anguillians endured at the hands of the Central Government situated some seventy miles away in Basseterre, St Kitts. That neglect manifested itself in the lack of proper roads; potable water; telephones; and electricity. Today Anguillians can boast of having one of the best road networks in our region; island wide access to potable water; a modern “state of the art” telecommunications system; and one of the most reliable and efficient electricity providers in these neighbouring islands. For all intents and purposes, we have in great measure, achieved most of these stated national goals and aspirations since 1967.
However, in recent times, the increasing number of consumers being disconnected because of their inability to meet their monthly obligations to our electricity provider, ANGLEC, has become the subject of island wide conversation. High electricity bills and the lack of employment and business opportunities have been the root causes of this challenge to consumers. And the fact that ANGLEC has the monopoly on the provision of electricity services, has resulted in the company being vilified by a number of persons who support the viewpoint, promulgated during the past election campaign, that we are being “ripped off” by the Board and Management of the Company. It has been my intention for sometime now to attempt to sensitize the public to the challenges facing ANGLEC in this regard; the initiatives being pursued; and the solutions being considered to address them.
It is important at the outset that I make it extremely clear that neither I, nor anyone in my immediate family own any shares in ANGLEC. In this context, I have absolutely no pecuniary benefit to derive from promoting the Utility other than the fact that its success will result in more efficient electricity services for all residents of Anguilla. It is also worth mentioning that even in these difficult times the incidence of “unplanned outages” is probably the lowest in the region and the occurrence of damage to household equipment a similarly small number. Understandably though, as customers when we are the ones affected it is very difficult to find comfort in these impressive statistics.
My decision to make ANGLEC the topic of my column was sparked by two issues: 1) The increasing number of persons who have been complaining to me that their electricity bills have doubled and the Government needs to do something about it. 2) The response by the Minister of Utilities, the Hon. Evan Gumbs to a question posed to him by the Elected Member for Island Harbour, the Hon. Othlyn Vanterpool in the House of Assembly. The question was: “You continue to promise the people of Anguilla that you will reduce the rate of electricity. When will the reduction take place and by how much?” I will deal with the two issues in order, but there will of necessity be some overlap in the discussion.
High Electricity Bills. The base rate of 63 cents per kilowatt hour for electricity charges, has not changed since 1997. This is an important factor in understanding the fuel surcharge in the breakdown, which appears on our bills. It means that if the price of diesel were to return to the levels of 1997 we would not be paying any additional charges for the electricity we consume. In 1991, the Government of Anguilla through the Ministry of Utilities, the regulator of the newly established Utility Company (ANGLEC), put in place a number of mechanisms to deal with periodical tariff adjustments. Such adjustments could become necessary if any costs for producing electricity increase, for example the cost of fuel. This was done to establish fixed arrangements ahead of time and thereby exclude any subjective considerations in determining tariff levels when any such need arises. The Company would therefore have more certainty in putting together its budgets and making its projections with the knowledge that certain critical fluctuations in its operational costs would be dealt with by a system already established for that purpose.
The mechanism for determining the fuel surcharge in particular is based on a price level set in 1991. The agreement with the Ministry allows that every time the cost of fuel increases over that level by 10 cents the surcharge per “kilowatt hour” is adjusted by 1 cent. However, ANGLEC has never charged the full amount since the first time the surcharge was put on in 2003. As an example that the adjustment can go in either direction based on the price of fuel, it is to be noted that in May 2004 the surcharge was reduced to zero. And to demonstrate consideration for its customers, in 2010 alone, ANGLEC absorbed $4.85 million of the fuel surcharge. The actual costs for that year being $22.35 million and the amount charged to the consumer only $17.5 million. It clearly shows that the Utility has been extremely generous by not passing on the entire costs to its customers.
The fuel surcharge is not unique to consumers in Anguilla alone. An authoritative monthly electricity price survey data matrix is published in the Anguillian periodically, which compares ANGLEC’s adjusted rates with those of other Utilities in the OECS including St. Maarten and St Thomas. It shows clearly that the adjustment in all the territories are within a similar range and that ANGLEC is by no means the highest. Since this adjustment reflects the increasing cost of diesel a good statistic/fact for the consumer to note is that at present fuel makes up for almost ninety percent of the cost of electricity production in the Anguilla context. Put simply, for every dollar spent to produce electricity almost 90 cents goes to the fuel suppliers. And if one were to go a step further, this is as compared to 30 to 40 cents for the same costs out of that same dollar nine years ago. Reality must now step in! It is all about the price of fuel!
I am making the point that there is no magic to the pricing mechanism of ANGLEC. And it is impossible for us to expect any radical reduction in our electricity bills if the price of fuel remains at present levels. ANGLEC is a public company with shareholders who bought their shares on the basis of a prospectus, which assured them that the company would be managed along commercial lines to produce a return on that investment. In fact, a twelve percent return on the investment is actually legislated. Obviously, any decision by the Management of ANGLEC, which impacts shareholders dividends, may be questioned. And it would therefore not be unreasonable for a shareholder to demand: “Why should I have to forego my dividends to subsidize the consumer?”
What this mechanism, which passes on such production costs to the consumer has afforded ANGLEC, is the ability to maintain an efficient service. And any profits forthcoming are used to further enhance ANGLEC’s transmission and distribution capacity. Were that not the case, every individual or company, which relies on a constant and steady supply of electricity to survive would experience many obstacles and setbacks to its own development as well as to the other quality of services it offers or expects. It would be most irresponsible of any leader in the community to propagate the idea that ANGLEC should not be allowed to recover the reasonable costs of producing and delivering electricity to its consumers. Equally, we (the consumers) are entitled to expect efficient services from ANGLEC at reasonable rates.
The Minister’s Response. It was a pleasant surprise to hear the Minister of Utilities, the Hon. Evan Gumbs’s written response in the House of Assembly to the question posed by the Hon. Othlyn Vanterpool. It seemed that at last he had come to understand that his sweeping promises in the election campaign to drastically and unconditionally reduce electricity rates in the short term are both impractical and foolish. Furthermore, they were seemingly based on a strategy that included a “hostile takeover” of ANGLEC, which along with the Chairman of Social Security he orchestrated very early upon his ascendance to office. It was obvious that the Minister was a believer in the AUM conspiracy theory that electricity rates were artificially high because the wicked AUF Government was conspiring with the Board and Management of ANGLEC to “rip off” the Anguillian consumer. And it appeared that his mission and promise when elected was to fire the entire Board; replace it with AUM supporters; and reduce the rates. Unfortunately, there are a number of Anguillians including a few who have been placed on the Board, who have bought into this theory “hook line and sinker!” Fortunately, those plans were thwarted and I am proud to have in some way contributed to that eventuality by my article: “Comments on a hostile takeover of ANGLEC!” on May 21st 2010.
While I certainly do not recommend it, because the Government needs valuable revenue, the Minister could have considered other options open to him over which he had more control --- than planning to take over a publicly owned company and slash its prices. In 2010, the Government of Anguilla derived some $7.5 million in direct revenues from ANGLEC comprising some $300,000 from the business licence; $465,500 in dividends; $4.1 million from the environmental levy; and $2.6 from duties on diesel alone. It would not be a good idea to slash these Government revenues to pass them on to the consumer --- but since the Minister seemed bent on fulfilling his promise maybe he could have found a way to replace them. Again, I repeat: “Not a good idea!”
But if it is to be believed that the Minister meant what he read and read what he meant, we will be looking at a very sustainable approach to bringing “renewable energy into the energy mix of Anguilla”. This would be a most commendable strategy for the Minister and the Government to pursue --- as they seek to address the need for more affordable electricity prices for their citizens. I must quote a section of the Minister’s response that brings great comfort as follows: “Our exclusive reliance on conventional energy sources, i.e., diesel fuel, is the primary reason for the high prices we pay for electricity. If our dependence on diesel fuel is reduced then we will see a correspondent decrease in the price of electricity. It must be remembered that Anguilla has no control over the price of diesel fuel in the world market and thus has no control over its imported price. It therefore follows to a large extent that we in Anguilla have little or no control over the price we pay for electricity, unless and until we reduce our reliance on it."
When I heard the Minister plodding through this written response --- it was as if a light went on in the room. (No pun intended!) This is precisely why the AUF Government put in place the Alternative Energy Committee; passed the Alternative Energy Bill; established, funded and staffed the Anguilla Renewable Energy Office; began the dialogue with international agencies like the Clinton Global Initiative; and brought ANGLEC into the equation. Eureka! He has finally got it!
What the Minister said, seemed, at last, to be in recognition of the need to move beyond vacuous politics in dealing with such issues of national importance. He must now see ANGLEC as his partner, not his adversary, in the quest to provide long term solutions to our energy needs. The General Manager of ANGLEC is a full member of the Alternative Energy Committee. And every member of the Committee is a volunteer. Anguilla is making great strides because of the efforts of that Committee and ANGLEC is fully engaged in facilitating the process to rationalize the use of alternate energy sources by the wider community. This will necessitate revising the Electricity Act and drafting new legislation and policies to allow private producers using renewable energy systems to become a viable part of an island wide initiative. In fact, these ideas, including making the efficient use of energy a cultural phenomenon will have global and indeed planetary impacts.
However, in recent times, the increasing number of consumers being disconnected because of their inability to meet their monthly obligations to our electricity provider, ANGLEC, has become the subject of island wide conversation. High electricity bills and the lack of employment and business opportunities have been the root causes of this challenge to consumers. And the fact that ANGLEC has the monopoly on the provision of electricity services, has resulted in the company being vilified by a number of persons who support the viewpoint, promulgated during the past election campaign, that we are being “ripped off” by the Board and Management of the Company. It has been my intention for sometime now to attempt to sensitize the public to the challenges facing ANGLEC in this regard; the initiatives being pursued; and the solutions being considered to address them.
It is important at the outset that I make it extremely clear that neither I, nor anyone in my immediate family own any shares in ANGLEC. In this context, I have absolutely no pecuniary benefit to derive from promoting the Utility other than the fact that its success will result in more efficient electricity services for all residents of Anguilla. It is also worth mentioning that even in these difficult times the incidence of “unplanned outages” is probably the lowest in the region and the occurrence of damage to household equipment a similarly small number. Understandably though, as customers when we are the ones affected it is very difficult to find comfort in these impressive statistics.
My decision to make ANGLEC the topic of my column was sparked by two issues: 1) The increasing number of persons who have been complaining to me that their electricity bills have doubled and the Government needs to do something about it. 2) The response by the Minister of Utilities, the Hon. Evan Gumbs to a question posed to him by the Elected Member for Island Harbour, the Hon. Othlyn Vanterpool in the House of Assembly. The question was: “You continue to promise the people of Anguilla that you will reduce the rate of electricity. When will the reduction take place and by how much?” I will deal with the two issues in order, but there will of necessity be some overlap in the discussion.
High Electricity Bills. The base rate of 63 cents per kilowatt hour for electricity charges, has not changed since 1997. This is an important factor in understanding the fuel surcharge in the breakdown, which appears on our bills. It means that if the price of diesel were to return to the levels of 1997 we would not be paying any additional charges for the electricity we consume. In 1991, the Government of Anguilla through the Ministry of Utilities, the regulator of the newly established Utility Company (ANGLEC), put in place a number of mechanisms to deal with periodical tariff adjustments. Such adjustments could become necessary if any costs for producing electricity increase, for example the cost of fuel. This was done to establish fixed arrangements ahead of time and thereby exclude any subjective considerations in determining tariff levels when any such need arises. The Company would therefore have more certainty in putting together its budgets and making its projections with the knowledge that certain critical fluctuations in its operational costs would be dealt with by a system already established for that purpose.
The mechanism for determining the fuel surcharge in particular is based on a price level set in 1991. The agreement with the Ministry allows that every time the cost of fuel increases over that level by 10 cents the surcharge per “kilowatt hour” is adjusted by 1 cent. However, ANGLEC has never charged the full amount since the first time the surcharge was put on in 2003. As an example that the adjustment can go in either direction based on the price of fuel, it is to be noted that in May 2004 the surcharge was reduced to zero. And to demonstrate consideration for its customers, in 2010 alone, ANGLEC absorbed $4.85 million of the fuel surcharge. The actual costs for that year being $22.35 million and the amount charged to the consumer only $17.5 million. It clearly shows that the Utility has been extremely generous by not passing on the entire costs to its customers.
The fuel surcharge is not unique to consumers in Anguilla alone. An authoritative monthly electricity price survey data matrix is published in the Anguillian periodically, which compares ANGLEC’s adjusted rates with those of other Utilities in the OECS including St. Maarten and St Thomas. It shows clearly that the adjustment in all the territories are within a similar range and that ANGLEC is by no means the highest. Since this adjustment reflects the increasing cost of diesel a good statistic/fact for the consumer to note is that at present fuel makes up for almost ninety percent of the cost of electricity production in the Anguilla context. Put simply, for every dollar spent to produce electricity almost 90 cents goes to the fuel suppliers. And if one were to go a step further, this is as compared to 30 to 40 cents for the same costs out of that same dollar nine years ago. Reality must now step in! It is all about the price of fuel!
I am making the point that there is no magic to the pricing mechanism of ANGLEC. And it is impossible for us to expect any radical reduction in our electricity bills if the price of fuel remains at present levels. ANGLEC is a public company with shareholders who bought their shares on the basis of a prospectus, which assured them that the company would be managed along commercial lines to produce a return on that investment. In fact, a twelve percent return on the investment is actually legislated. Obviously, any decision by the Management of ANGLEC, which impacts shareholders dividends, may be questioned. And it would therefore not be unreasonable for a shareholder to demand: “Why should I have to forego my dividends to subsidize the consumer?”
What this mechanism, which passes on such production costs to the consumer has afforded ANGLEC, is the ability to maintain an efficient service. And any profits forthcoming are used to further enhance ANGLEC’s transmission and distribution capacity. Were that not the case, every individual or company, which relies on a constant and steady supply of electricity to survive would experience many obstacles and setbacks to its own development as well as to the other quality of services it offers or expects. It would be most irresponsible of any leader in the community to propagate the idea that ANGLEC should not be allowed to recover the reasonable costs of producing and delivering electricity to its consumers. Equally, we (the consumers) are entitled to expect efficient services from ANGLEC at reasonable rates.
The Minister’s Response. It was a pleasant surprise to hear the Minister of Utilities, the Hon. Evan Gumbs’s written response in the House of Assembly to the question posed by the Hon. Othlyn Vanterpool. It seemed that at last he had come to understand that his sweeping promises in the election campaign to drastically and unconditionally reduce electricity rates in the short term are both impractical and foolish. Furthermore, they were seemingly based on a strategy that included a “hostile takeover” of ANGLEC, which along with the Chairman of Social Security he orchestrated very early upon his ascendance to office. It was obvious that the Minister was a believer in the AUM conspiracy theory that electricity rates were artificially high because the wicked AUF Government was conspiring with the Board and Management of ANGLEC to “rip off” the Anguillian consumer. And it appeared that his mission and promise when elected was to fire the entire Board; replace it with AUM supporters; and reduce the rates. Unfortunately, there are a number of Anguillians including a few who have been placed on the Board, who have bought into this theory “hook line and sinker!” Fortunately, those plans were thwarted and I am proud to have in some way contributed to that eventuality by my article: “Comments on a hostile takeover of ANGLEC!” on May 21st 2010.
While I certainly do not recommend it, because the Government needs valuable revenue, the Minister could have considered other options open to him over which he had more control --- than planning to take over a publicly owned company and slash its prices. In 2010, the Government of Anguilla derived some $7.5 million in direct revenues from ANGLEC comprising some $300,000 from the business licence; $465,500 in dividends; $4.1 million from the environmental levy; and $2.6 from duties on diesel alone. It would not be a good idea to slash these Government revenues to pass them on to the consumer --- but since the Minister seemed bent on fulfilling his promise maybe he could have found a way to replace them. Again, I repeat: “Not a good idea!”
But if it is to be believed that the Minister meant what he read and read what he meant, we will be looking at a very sustainable approach to bringing “renewable energy into the energy mix of Anguilla”. This would be a most commendable strategy for the Minister and the Government to pursue --- as they seek to address the need for more affordable electricity prices for their citizens. I must quote a section of the Minister’s response that brings great comfort as follows: “Our exclusive reliance on conventional energy sources, i.e., diesel fuel, is the primary reason for the high prices we pay for electricity. If our dependence on diesel fuel is reduced then we will see a correspondent decrease in the price of electricity. It must be remembered that Anguilla has no control over the price of diesel fuel in the world market and thus has no control over its imported price. It therefore follows to a large extent that we in Anguilla have little or no control over the price we pay for electricity, unless and until we reduce our reliance on it."
When I heard the Minister plodding through this written response --- it was as if a light went on in the room. (No pun intended!) This is precisely why the AUF Government put in place the Alternative Energy Committee; passed the Alternative Energy Bill; established, funded and staffed the Anguilla Renewable Energy Office; began the dialogue with international agencies like the Clinton Global Initiative; and brought ANGLEC into the equation. Eureka! He has finally got it!
What the Minister said, seemed, at last, to be in recognition of the need to move beyond vacuous politics in dealing with such issues of national importance. He must now see ANGLEC as his partner, not his adversary, in the quest to provide long term solutions to our energy needs. The General Manager of ANGLEC is a full member of the Alternative Energy Committee. And every member of the Committee is a volunteer. Anguilla is making great strides because of the efforts of that Committee and ANGLEC is fully engaged in facilitating the process to rationalize the use of alternate energy sources by the wider community. This will necessitate revising the Electricity Act and drafting new legislation and policies to allow private producers using renewable energy systems to become a viable part of an island wide initiative. In fact, these ideas, including making the efficient use of energy a cultural phenomenon will have global and indeed planetary impacts.
Maybe, the Member for Island Harbour’s question really “hit a switch” because something seemed to have “clicked” with the Minister. It would be remiss of me not to quote a part of his closing paragraph as follows: “We must be mindful that the current financial and economic crisis gripping the entire world, including Anguilla, does not help the situation”. What a difference twenty months make! By Jove! I think he’s got it!
By: Victor F. Banks
Victor Banks is a former Finance, Economics, Commerce and Tourism Minister on Anguilla. He is presently the leader of the Oposition Anguilla United Front Party, writer and author of a weekly political article for the Anguillian News Paper, lyricist, and a self-employed entrepreneur.
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