Samoa Power Company’s Proposed Fee Hike Shocks Clients

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Samoa Power Company’s Proposed Fee Hike Shocks Clients Businesses feel increases will ‘penalize’ commercial users

By Sophie Budvietas

APIA, Samoa (Samoa Observer, Jan. 12, 2014) – Samoa’s Electric Power Corporation (EPC) is proposing a price increase for electricity, much to the shock of the local business community.

Some of them feel they are being "penalised" by the utility company.

Their unhappiness was voiced during a public meeting held at the Samoa Business Enterprise Centre at Saleufi on Friday.

There, business owners – who make up 46 per cent of EPC’s revenue base – were not afraid to take issue with the State Owned Enterprise.

"The question has to be asked if Samoa wants to progress in its financial development or stifle it by adding more costs to businesses to handle," said Papali’i John Ryan.

"The people who are providing the finance for EPC to operate are the business people, the big business people, people who pay WST$100,000 [US$42,369] a month."

Vailima’s Plant and Technical Manager Sean Hellesoe echoed Papali’i’s sentiments.

"We are talking about large increases here if this goes through," he said. "Are we as efficient as some of our neighbours, are there savings that we can make and are we spending our money wisely?"

Last September, EPC approached the Regulator Donnie de Freitas seeking approval for a new electricity base tariff and rate structure in accordance with the Electricity Act 2010.

According to a report issued by the Office of the Regulator (OOTR), the company asked for the changes to be made to achieve a number of things.

"To reflect present day costs," the report reads. "To cater for the disadvantaged and low income groups who consume little electricity. To encourage efficiency. To reflect EPC commitment to renewable energy efforts and related costs. To be more transparent by separating components of charges i.e. operations, fuel surcharge and debt repayments."

Regulator Donnie de Freitas said the present tariff in place does not reflect the requirements of the Act.

But Papali’i Ryan was not impressed.

"Our concern is that they only took it to a level of $3,000 tala [US$1,271] per month. There are not many businesses that operate at that level. Our group of companies, most of the businesses operate much, much higher and maybe even $200,000 tala [US$84,738] per month," he said.

"Therefore the impact of the increase is not $300 tala [US$127] as is made out in the paper that has been given out, but a much greater figure, which we as a company, and we deal in tourists, have to recover from the tourism figures.

"And if we are looking for an extra WST$30,000 or WST$50,000 [US$12,710 to US$21,184] just to pay electricity for rooms that are not occupied, then it pushes the cost up for each individual each customer that we get into the hotels throughout the year."

He said he was not complaining about the new tariff structure or people who were unable to afford electricity.

"There are the fears that we are being penalised. In most other countries and most developed countries, the bigger businesses the more you use and the less you pay.

"And I would like to pass that thought along in the discussion and also in the future plans that we try and plan our cost of utilities so that it helps government and the improvement of business activities for this country."

He said with the cost of electricity and other utility bills, it was no wonder tourism figures were declining.

"And as a company I would like to feel that we can look forward to some relief on the electricity and utility bills that we pay for this country," he told the meeting. "In that, I would include not only the electricity but there are other things, the water, they are also coming up.

"And those who are dealing in the tourism industry, we are finding it very, very difficult to be able to stay alive."

Mr. Hellesoe said Samoa’s natural business advantages such as low labour costs were completely overshadowed by the cost of utilities.

"Shipping, diesel and electricity are the big ones," he said.

While he loved the concept of the clarity of the tariffs, he said that "at the end of the day, you are talking about a 27 per cent increase by 2016. "Based on the abridged current proposed figures you gave, hopefully there are some changes to that."

He said for Samoa Breweries that equated to hundreds of thousands of dollars added to their yearly electricity bill.

A spokesperson from the Samoa Association of Manufacturers and Exporters (SAME) raised three points on behalf of the group.

"We lend support to what Papali’i has already voiced that the proposed charges will definitely penalise the commercial users in that we bring in 46 per cent of your business," she said.

"SAME would also like to propose after peak hours special rates for commercial users for consideration, as well as an incentive for renewable forms of energy.

"And some would like to see the implementation of such incentives for commercial users that generates its own power and sells it back to the grid."

Both EPC‘s Project Manager Fonoti Perelini S Perelini and Mr. de Freitas addressed her concerns.

Fonoti said the Corporation could only monitor on and off peak times with what he called "smart metres."

"That is what EPC is moving into, smart metres that we can control and measure the power at certain times," he said.

"That is really sophisticated meter reading and we are moving into that."

Mr. de Freitas said on the issue of generating power to sell back to the grid, that it was one of many issues this consultation process hoped to address.

"There is a whole backlog of issues that have to be addressed," he said. "They are extremely urgent but we are very limited and we are working on it.

"Incentives exist but the law has a problem that we will seek to address.

"In that the law will allow you to generate your own electricity but the law as presently worded if interpreted by a lawyer, if interpreted by me it would be different, if interpreted by a lawyer you cannot sell it back to the grid."

He said while EPC’s stance would be typically such that the less customers they have, the less business for them.

The OOTR position is the other way: the less burden they have, the more efficient they can become. Independent Consultant David Wright, who was brought in to facilitate the consultation process, said the decision the Regulator has to make now is, is this expenditure reasonable?

He said one of obligations of the OOTR is to undertake public consultations prior to making a decision on setting and changing tariffs.

"Is it a reasonable cost structure for a utility of its size taking into account what it has got to do," he said.

He said the intention of this round of consultations was to make a provisional determination and allow the time to have a more exhaustive study around the proposed expenditure and is that justified over the next 5 to 10 years.

However, the findings of a study undertaken by the consultant firm economists.com last year showed that first and foremost it’s indicating that it isn’t recovering adequate revenues at the moment, according to Mr. Wright.

"Secondly that capitol improvement projects are a major influence on future tariff requirements," he said.

"And the third major finding coming out of that study is that cost savings from fuel reductions due to development of alternative renewable energy generation will certainly lessen, but not eliminate, the need for tariff adjustments over the next five years."

Mr. de Freitas said the tariff itself needs to be changed for a number of reasons.

"One I am sure if I asked anybody in the room if they understood fuel surcharge I don’t think I would get any takers – not even EPC would be so brave as to fully explain how the fuel surcharge works.

"It is very complicated it is not easy to understand.

"Any tariff must provide for the recovery of reasonable costs of providing services and to earn a reasonable rate of return on investment for the licensee in this case EPC consistent with other investments of comparable risk.

"It is reasonable if its gets the same kind of return on a businesses of this type.

"We are not talking exorbitant returns of investment but reasonable."

He said for the tariff to be compliant with the Act it must have the ability to promote economy and efficiency of electricity services. "Whether the tariff will encourage the efficient use of electricity," he said, "Whether the tariff will avoid price discrimination… [and] whether the tariff is easy to understand and to apply."

He said the ability for low-income households to pay for electricity services is an issue his office also seeks to address.

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