I refer to the letter ‘Deferred Tax was not included in GPL’s rate computation’ (SN, June 13) written by Mr Nizam Ali of Nizam Ali & Company, the firm which audited the 2012 financial statements of Guyana Power and Light and which signed the Final Return Certificate (FRC) for GPL’s proposed tariff increase of 26.7%.
Perhaps Mr Ali did not see press release No 33 issued by GPL and dated May 8, 2013, so I quote for his benefit the last sentence of paragraph 2 of the release which states:
“The GPL Final Return Certificate (FRC) was accompanied by a Notice of Compliance issued by an independent firm of accountants and GPL’s 2012 audited accounts that show GPL losing $7.6 billion in 2012” (emphasis mine).
My letter clearly stated that GPL did not lose $7.6 billion but $4.872 billion – almost the entire difference between the two figures being the movement on the Deferred Tax Account of $2.746 billion in the financial statements.
Unfortunately, Mr Ali, with whom I have enjoyed a professional relationship going back to 1974, did not address the inconsistency of a write-off of deferred tax on losses simultaneous with a proposal for a tariff increase to which GPL claims it is automatically entitled and which will return it to profitability.
Among the points I made in my letter is that if the increase is ‘approved’ by the PUC then the deferred tax asset that was de-recognised in 2012 would have to be re-recognised in 2013 as profits start to flow and tax losses recovered!
Mr Ali condescendingly asserts that the proposed tariff increase has moved from the announced 17% in April to 26.7% in June because “simple maths would show that the required increase of 17.8 % for the year when applied to the shortened period of eight months would amount to 26.7% (12/8 x 17.8%).”
The application of this “simple maths” were the increase to be implemented ‒ to use GPL’s words ‒ at the end of September, would require either that rates go up by 68%, or GPL back-bill the difference, the possibility of both of which has to be immediately discounted.
The “simple maths” concept ignores too that using the formula and everything else being equal, come January 2014, rates would go back down! Mr Ali’s effort to explain his firm’s role in the tariff issue is understandable if not complete. But more importantly, it does not relieve GPL from its duty to be accountable, transparent and efficient. Sadly, the evidence is that that is too tall an order for a Brassington-Dindyal led GPL to do voluntarily.
Only the PUC, exercising its regulatory powers and duties can force public hearings not only into the costly and poor decisions and execution by GPL’s board and management at places like Vreed-en-Hoop and Canefield, but also to address the relevance, interpretation and operation of an investor model licence where the licensor is the government and the licensee is a wholly owned and directed government company.
Electricity is central to the economy, social well-being and the country as a whole for the scale of waste that GPL represents.