Readers will recall that Plainly Business noted last week that the country has had no energy policy since 2004. In fact I had quite a surprise when the response I received from a top level political operative about Guyana’s current energy policy was “you all just killed the policy”, in reference no doubt to the Amaila Falls Hydroelectricity Project. Had the comment not been made by a very high-ranking official it would have been easy to think it came from someone unfamiliar or unconnected with the energy. At the time, given the authority and responsibility of the individual, I thought the comment was tragically uninformed. On reflection the person was right since, as has now been established, there is no policy.
Before proceeding into the post-1994-2004 era it might be useful to note that in a document Strategic Plan 2012–2016, the Guyana Energy Agency as it is called admitted that while Guyana’s energy policy is to ensure that reliable energy is provided to all in Guyana within an economically, environmentally and socially sustainable framework, many of the Policy’s objectives set out in the 1994-2004 National Energy Policy have not yet been fulfilled.
That Policy had projected that by 2004 energy supply would be provided 61.5% by indigenous resources and imported petroleum products 38.5%, compared with 53.7% and 46.3% in 1988. In relation to imported petroleum products, the Policy had projected that despite an overall increase in energy demand of 9.4% between 1992 and 2004, the use of imported petroleum products was projected to decline by 26% during this period.
While comparable numbers and data are not accessible to the general public to assess directly the achievements against the Strategy, the GEA in a report on its 2012 activities confirms that the country’s dependence on imported petroleum products has significantly increased over the years. The Table below is taken from that report.
TOTAL IMPORTS OF PETROLEUM PRODUCTS FOR PERIOD 1994-2012
The report also revealed that in 2012 the electric power sector consumed about 33% of total petroleum products followed by the Transportation (28%); Residential/Commercial sectors (16%); Agriculture, Fishing and Mining (12%); and Industry/Manufacturing (6%). Further, that seventy-four (74%) percent (6,738 GWh) of primary energy supplied in 2011 was sourced from petroleum-based products while the remaining twenty-six percent (2,417 GWh) was derived from renewable energy sources.
It must come as a surprise to many that transportation is as high as 28% while industry and manufacturing is as low as 6%, particularly given that many operators in these sectors self-generate. The data confirm the absence of a policy and a strategy on the promotion of energy saving vehicles and the increasing number of vehicles being imported in Guyana with little concern for energy efficiency.
So just who is responsible for energy and the absence of an energy policy? The short and simple response would be that it is the Prime Minister since he holds ministerial responsibility both for the sector and for the Guyana Energy Agency. The Act setting up that Agency seems to impose on the Agency some specific responsibilities in this regard by establishing as principal functions of the Agency: (1) to advise and make recommendations to the Minister regarding any measures necessary to secure the efficient management of energy and the source of energy in the public interest; and (2) to develop and encourage the development and utilisation of sources of energy other than sources presently in use.
In seeking to expand on the GEA’s broad mandate, the Act includes the development of a national energy policy and securing its implementation as activities which the GEA shall do “upon the request of the Minister”. Maybe the absence of a successor to the 1994-2004 Energy Policy is due to an assumption by the GEA that it needs a request from the Minister to before it can initiate work on a national energy policy. I think that such an assumption is most unfortunate given the fact that the importation of petroleum products is by the GEA’s reckoning, roughly 25% of the country’s GDP. At the very least, the GEA should have recommended the development of a successor energy policy with measurable goals and targets.
Other functions specified in the original Act include:
– carrying out research into – (i) all sources of energy including those sources presently used in Guyana for the generation of energy, and (ii) securing more efficient utilisation of energy and sources of energy;
– monitoring the performance of the energy sector in Guyana, including the production, importation, distribution and utilisation of petroleum and petroleum products;
– disseminate information relating to energy management, including energy conservation and the development and utilisation of alternative sources of energy; and
– Responsibility for the exercise of the functions of the Chief Works Officer and the Engineer by the Hydro-Electric Power Act.
By subsequent amendments the Agency was also assigned responsibility for issuing licences, marking petroleum products and prosecuting cases involving the illegal importation or dealing with illegally imported petroleum products.
Notwithstanding the Act’s ambiguity with regard to the GEA’s obligation to develop an energy policy, its failure to advocate and advance one is regrettable. And recent events have added further questions about the effectiveness of the entity. Given that the Chief Executive Officer of GEA (Dr. Mahendra Sharma) has been vested with responsibility for the functions of the Chief Works Officer and the Engineer under the Hydro-Electric Power Act, his silence on the Amaila project was at best surprising. It is hardly to the credit of the GEA that its CEO ceded its professional and statutory responsibility under the Hydro-Electric Power Act to Mr. Winston Brassington.
Over the past week I tried obtaining copies of the annual reports and financial statements of the GEA and the names of the directors from the Legal Officer of the GEA. The CEO, to whom my mail was referred, would only say in relation to the directors that “[w]e are awaiting the finalization of one more director from private sector. When we have the complete list, the name can be made available to you.”
Because nothing about governance shocks anyone or any more in Guyana, it would not be strange to learn that the GEA has been operating without directors for any length of time. After all, the term “directors” is used only once in the GEA’s 2012-2016 Strategic Plan while the term “governance” is missing completely. The same is true of the document titled 2012 Activities where the term “directors” is used once – in a narrative on the law.
The GEA Act requires both an annual report and financial statements of the Agency to be tabled in the National Assembly. However, no report has ever been tabled.
Key elements of an energy strategy
The following is a summary of the energy strategy identified by the GEA for the five years 2012 – 2013.
1. The Low Carbon Development Strategy incorporating the development of the Amaila Falls Hydro-Electric Project as a key strategic component.
2. Development of other hydropower sites under an MOU between Guyana and Brazil for assistance in reviewing and updating Guyana’s remaining hydropower potential to meet future demand for energy and to explore options for the export of energy.
3. Reviewing the opportunities for mini and micro hydropower applications where feasible.
With respect to 3 and 4 the GEA planned to prepare an investment portfolio for hydropower development in 2012-2013. The GEA has not indicated the status of this initiative.
4. Pursuing options for bagasse-based cogeneration.
5. Power generation options from rice husk and woodwaste.
6. Wind farms to supply energy to the national grid and wind energy at the residential and commercial levels.
7. Increased biofuels production (biodiesel and ethanol) for export and local consumption. The GEA plans to work closely with small farmers to encourage the use of small bio-digesters to reduce waste and produce biogas.
8. Energy efficient and renewable energy cook stoves to provide sustainable energy solutions where appropriate.
9. Using the tax system to encourage the efficient and least-cost use of renewable energy.
The document, like the 2013-2017 Strategic Plan now in preparation, suffers from a number of defects: it is no more than a narrative of what appears to be an internal non-binding document; the targets are loose making any attempt at measurement, control and management virtually impossible. The elements are the standard wish list in any energy policy but most of all it is not an Energy Policy which is what is being called for.
But in addition to addressing the need for such a policy, Prime Minister Samuel Hinds and whoever advises the Government on effective administration of public entities need to address organizational weaknesses in the GEA. A look at its own gap analysis suggests that many of the performance indicators identified in 2008 had not been achieved by 2011. Critically the area with the lowest achievement is that of hydroelectricity while in relation to the development of an energy policy it does appear from the document that sometime between 2008 and 2011 such a policy might have been started.
The GEA came into existence in late 1997 and commenced operations in 1998. Yet it was more than twelve years before any accounts were tabled in the National Assembly on June 27, in 2013. This is no inconsequential oversight. The GEA by its own calculation is responsible for a sector which in 2011 was the equivalent of 25% of GDP. It is the agency that has been assigned responsibility for the contractual arrangements with the Venezuelan entity PDVSA Petrolia, S.A (PDVSA) to supply Guyana with crude oil, refined oil products and LPG. In 2012 the payments for fuel purchased under the arrangements amounted to close to sixty billion dollars!
The records indicate that audited financial statements – but not annual reports – were only tabled in the National Assembly for years up to 2009. According to the 2012 Activities the audits for the years 2010 and 2011 have been completed but these have not been tabled. The financial statements are a real cause for concern. You would think that an entity that handles such sums will not only have a good accountant but also be subject to a decent quality audit. It appears that both of these are missing.
Perhaps half-thinking it is a trading entity, the GEA’s income statement shows as income the moneys it receives from the oil companies, $30.6 billion in 2008 and $14.3 billion in 2009), and then shows the related payments to PDVSA and the Ministry of Finance as Office and Administration Cost! The accounts bear no signature of any director and for each year from 1998 – 2009, one of the signatories on the balance sheet is Dr. Mahendra Sharma. Mr. Deodat Sharma, the Auditor General, who signed off the audit report for the years 2003 – 2009 claims that the accounts have been prepared in accordance with International Financial Reporting Standards! Those accounts would have been rejected by any self-respecting accounting technician. Mr. Deodat Sharma should be thankful that he is not qualified to be a member of the Institute of Chartered Accountants.
The problems with the GEA are much more than the absence of an Energy Policy. It seems that as a natural hangover from Jagdeo, little coherent directions came from above. There are clearly severe gaps in the Agency’s governance arrangements with the identities of the directors a matter of secrecy. Our National Assembly seems to have no idea of what should be tabled or does anything about the inadequacies of what is tabled. The Assembly for fifteen years voted subventions for this body without once asking about how those subventions were being spent. The Public Accounts Committee was equally not alert to the omission.
And of course, one cannot help but worry not only about the accounting capabilities in the GEA but also about the amateur quality of the external audits.