The Truth about GDP and CUC

| 14/06/2011

Premier Bush said in his budget address that he plans to cut fuel taxes for fuel used by CUC in order to allow a reduction in residential electric bills. This is a move in the right direction but too little to do the big job that government is seeking with respect to increasing revenues through increased public spending. A simple Google search on "electricity costs and GDP" is a real eye-opener.

Study after study reveals clearly that electricity costs are inversely proportional to GDP. As the price of electricity is decreased to the consumer, GDP goes up in all cases. Therefore, with such a large amount of data available to substantiate this, why doesn't the premier extent the reduced electricity rates to business an commercial users as well?

Cayman has 11 public holidays in 2011 along with 52 Sundays. This means that the local supermarkets will be close for about 18% of the year and they have to keep the freezers and air conditioners on even though they are closed and cannot sell the food to earn revenue to pay the electricity used. Therefore, they have to charge more for food to make up for the expense of keeping cold when they are closed, which as I said is about 18% of the possible shopping days in the year.

Cayman observes Sunday closings and we are willing to pay the extra high prices for this observance. So would it not make sense to likewise extend electrical rate cuts to the supermarkets in order to further increase our spending power? The entire content of the budget speech was in reference to GDP and our expected shortfall of 147 million dollars this year. Why not wake up and get with the program and start reducing the cost of living here across the board so that we can begin growing again?

Another consideration to support removing taxes and duties on CUC fuel is that this plant is 100% dependent on oil. Unlike other major economic jurisdictions which have many other forms of energy such as nuclear, wind, solar and ocean, we have failed to prepare for the future in our energy needs and will be held hostage to the price of oil when supplies begin decreasing and prices escalate. Oil experts agree that the current large oil wells in the Middle East have past the halfway mark in oil remaining in the ground. Eventually, the world will suffer oil shortages which will drive the price of oil to levels that even we cannot afford. And then our GDP will be down the drain.

NOW is the time to kick start growth by removing all fees on CUC and getting the cheapest electricity possible. Another side to electricity cost in Cayman is how efficiently the finances of CUC itself are being managed. I'm all for supporting local charities but I don't think we should rely on our electric company to spend a portion of our electric bills on banners, TV advertising and the like. It is a utility and a monopoly as well. No advertising needed. By trimming their excesses and lowering cost to the consumer, the economy will thrive which will allow for the normal support of charities by the public.

Insanity is when you repeat the same mistake over and over and expect a different outcome. So far, the policy of ever higher duties, fees and taxes is making things worse. It is time to remove the noose and let the economy breathe.

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Comments (22)

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  1. Anonymous says:

    We are paying for those generators all over again. Hopefully, this time they will buy them and install them.

  2. The Lone Haranguer says:

    Bean you are wrong about this one brother, now we need money to run the country we have to get it from fees and dutys so we must find a fair and equitable way to raise this money.

    Rich people use proportionatly way more energy than poor people a fuel tax will extract great amounts of money from the people who can best afford it.

    Rich people have big boats big cars big houses big businesses and are not sensitive to price changes in energy, inelastic demand.

    Also the higher the fuel cost the more cost effective renewable energy systems become. And as you said this is where we have to go.

    So Bean in my opinium we should actually be increasing the duties on fuel while simultaneously reducing the duties on small fuel efficent cars scooters and basic food stuffs.

    This plan will fix many problems, the country will have money to run it's business, poorer people will be able to purchase cheap food and get cheap fuel efficient transportation, people will begin to purchase renewable energy systems, and we all know how to cut our electricity bill by 60%, turnoff the AC!!

    Simple yet effective.

     

     

    • Anonymous says:

      WHAT A JOKE, NO ONE GETS OR REMAINS RICH BY SPENDING THEIR MONEY ON WANTS.

      we all must become responsible and identify wants from need regardless of our status. stop spending money on harmful home and personal items and give some of it to your children for their schooling, stay away from social services, in the old days when we "supposedly" had nothing we managed very well.

    • Bean Counter says:

      We have tangled before. Your view of how the world works is truly warped. I have done the research and presented the fact that lower cost of electricity increases GDP in every study done throughout the world. Our governments aim is to increase GDP not to decrease it. They are doing the exact WRONG thing by making electricity more expensive. If you want to tax the rich then put taxes on boats and SUVs which will result in their leaving but don't tell me that taxing the poor is a good thing.

      I dare you to show me just one study that backs up your totally corrupted point of view.

       

      • The Lone Haranguer says:

        Bean I see that you are a republican, nothing wrong with that. I agree that excessive taxation does stiffle ecconomic growth but I believe they are good taxes and bad taxes.

        A good tax is easy to collect taxes everybody but taxes the rich more than the poor and a good tax will encourage people to behave in a way that is benificial to them in the long term.

        I do not need a study to know that rich people use way more energy than poorer people and therefore will contibute way more money to the national purse if taxes are raised on fuel.

        OK I have done a study I did an energy audit on myself and I found out that me my wife with our two expensive gas guzzling luxury cars my boat and jet ski my apartment and my guest apartment power bill  my two company vehicles my company power bill and my scooter use the equivalent 534 gallons of fuel a month.

        My helper who shares a room with another lady and does not own a vehicle uses the equivalent of 5 gallons of fuel a month in electricity, so Bean my helper is through the fuel tax contributing contibuting 5 dollars a month to the national purse and me Mr. Bean I am contributing 534 dollars a month. I can afford it Bean I am loaded.

        We could fiddle and reduce duties on other items to help the middle class and poor people and into the future roll back most import duties while increasing the duty on fuel.

        This will reduce the cost of living for everyone in the Cayman Islands while extracting in a fair proportion the taxes we need to run the country while providing a stimulative effect for all other business activities in the ecconomy. 

        What yer think Bean ? Brilliant ?

         

        • Bean Counter says:

          I think you are missing the main point. Government is trying to increase the GDP and create jobs. The studies I site show definitively that lower electricity cost do exactly that. There is a threshold that exists whereby when taxes rise above a certain level whether on fuel or otherwise, revenue to the public purse shrinks. We are past that threshold. There are noticeably far fewer cars on the road since the most recent increase in gasoline prices. This means less money for government. Although my elecric bill went up substantially over the past year, I was able to take measures to be less wastefull and am now paying 120 dollars less than before the increases took place. I know many others who have done the same. So now government is making less than before.

          Government is wasteful with public money and needs to spend less. Less government spending means less tax required to operate which means a more affordable destination for tourists and more spending power for locals. Remember, money only produces revenue for government when it is used. High cost of living causes money flow to slow down which in turn results in less tax revenue. Again, it is all about GDP and electricity cost, not about taxing the rich. That is nothing more than the Robin Hood scenario or modern day piracy.

          I will close by again asking you to cite one example that shows that increasing the cost of electricity results in more revenue for government. This is what my article is about.

  3. Fed up says:

    This has to be the only country in the world that tightens money supply in one of the worst periods of recession that it has experienced.

    Having said that, CUC charging over 40 cents per KwH is criminal and it is time for government to step in.  CUC no longer pays for its own overheads, but puts it on the utility bills.  Your fuel fact0r makes up more than 100% of the actual electricity charge.  Come on, something is wrong with that.  To add insult to injury, a new line item to show every month what UDPs increase in fuel duty is…..to top it all off, we also have a line item to pay for their license.   Hyperinflation in a recession?  The economists would have a hayday.

     We have installed timers on water heaters, pool pumps etc., done everything we can to conserve, but the bill keeps rising.  Next step is to sell and move on.  Caymanians are the ones who can't afford to live in Cayman anymore.

  4. Lorraine Lord says:

    I am appalled at the price increased levied on customers and are going unchecked.  My own bill has increased from CI $227.78 when I was running my AC 24 hours 7 days a week to CI $360.00 even though I am now only running my AC four hours a day.  I do not sleep with on and I am out at work all day and do not leave it running.

    I am in touch with CUC trying to get them to take ownership of a problem which is causing a great many families on island hardship.  Some family electric bills run into four figures and in some cases is greater then their mortgage.  This is unacceptable and unsustainable on an on-going basis.  Many families are faced with the dilemma of whether to feed their family or pay their electric bill.   I am aware of customers trying to secure a loan to pay their electric bills.

    With prices ½ the cost per gallon in the US, why are we being charged CI $6.00 per gallon?  I believe we are being charged that amount because CUC have no competition on the island and they are only too aware that with no choice, they can pretty much indiscriminately charge whatever they want knowing that no-one is going to challenge them.  Well, it's about time somebody did.  There is a quote which sums up the stance we should be taking.  "Let the person you are waiting for to make a changebe you!". 

    I feel very strongly about this.  So much so, I would like to begin a discussion, initially to see whether I am alone in being outraged at this ever increasing monthly cost to my household bills, or if, as I suspect, I am not alone, I would like to explore what options there may be available to force change.  Perhaps it will take lobbying Government to introduce competition on the island and I am more than prepared to travel door to door to get a petitionsigned to hand into government to display how serious we are, as an island, but I would prefer not to have to do it alone.

    What I do know for certain, is everyone is suffering because of this and one voice cannot make a significant difference.  Everyone needs to join together to bring about a real change.
     

    • Proud to be Caymanian 6 Gen.. says:

      DO  you BELEIVE the buisnesses will pass on the their savings to us.

      NO they will say their CIF went up, they always do. opening 24/7 will not decrease cost to the consumer as all areas of the buisness will be exposed to increased cost, labour, utilities etc, etc. they will have the same sales volume they get now for being open 6 days and pass on the additional expence to us for opening the 7th. day. what about your additional expence to go shopping on a Sunday, gas etc. spend the time with family is better as secure families will benefit all people. reduce your expencies by going shopping 3 times a week instead of 6, shop on your way home instead of coming back out, wednesdays are better as all fresh produce are braught out.

      yes cuc charges are redicolus, but how do you run a buisness if you cannot recover your expences to do so and have a savings for emergencies, pensions and medical for employees etc, etc.

      it's simple spend a couple hundred $ to insulate,  do it yourself, use R35, 40 is better, turn off all lights and appliances you are not using, who needs hot water in Cayman, especially 24/7 even 2hrs is excessive, with proper insulation, 1 ft., a 79* setting is comfertable, @ 77* or lower your unit most likely will not shut off, constantly running up your bill with no additional benifit. when you turn your a/c on and off you are using more energy to reach the temp you want, wasting $$. dont blame cuc change your habbits and keep your $$$, we all hear people cursing cuc, drive by their property, eve and fence lights on all day, doors left open too often.

      YES CUC can do better but we all must take responsibility for THE ACTIONS WE DO.  hope this will help.

  5. Anonymous says:

    CUC bills are mind blowing.  US$700 for one month in a 2-bed condo without any extravagant useage.  We'll all be back to using candles and cooking over open fires if things don't change

    • Anonymous says:

      wow, that's high.  i have a 2500 sq foot home, and my bill hasn't been higher than CI$300.

      • The Lone Haranguer says:

        Impossible.

      • Bean Counter says:

        It will be this month.

      • Anonymous says:

        $300 isn't bad. That means you use about 833 KWH per month at 35 cents per KWH. When the 15% increase hits your bill it will soar to $345. Now if the cost per KWH were say 11 cents (USD) like many other countries, your bill would be $91.00 per month for a savings of $209 per month or $2508 CI per year. And food would be cheaper as well which means you have more to spend and one of the side effects of consumer spending is economic growth.

        Water heaters and pool pumps use by far the most with A/C and clothes dryers close behind. People who do alot of laundry and take hot showers suffer the most. $2500 is very possible in a mulit person home.

         

  6. Anonymous says:

    Bean Counter (not verified) on Wed, 06/15/2011 – 10:25

    I agree that this makes perfect sense and a viable option if it were put into place. I believe that the first order of business for the Gov is to get the cost of doing business and living way down, get crime and criminals under control and overall making this an attractive place to do business and a lot of the rest will take care of itself.

  7. Anonymous says:

    In general if you look at when the cost of doing business is taken down, people spend more on other things. Take for example the phone mafia that we had going here many years ago. We were told that there was no way the cost of phone service could be offered any cheaper then what Cable and Wireless was charging. Then when other firms opened the market up, prices went way down.

    The general cost to most to survive is out priced. We live on an Island, that is while not one of the worse places to live in, it could be far better. It is crime-ridden and getting worse. Electric bills are that of a mortage in some countries. It is not worth what one pays to live here unless they are in an upperbracket income and are not paying the tax or cannot earn the same in their homeland or were born here and are have wealth. Then it is worth it. Anything other then that is a situation that most cannot get away from or out of.  With the current US tax climate, the few folks that are in the upper brackets of the income that it does not matter if you shell out 5000.00 or 9000.00 a month to survive with your family, the amount you earn here or do not get taxed – these people are dwindling in numbers. Also do not think that a person with the means to pay these prices will always do so if another option presents itself elsewhere.

    That is the problem on the front, but when you open the book here is what it reads. If the CI Gov. was to lift the duty on CUC then there would be less income coming into the Budget every year that is for sure at present going to be there. The fuel will be used no matter what for the most part. The whole country will not go out of business. So if that were slashed out then where would the CI Gov collect this guaranteed source of revenue. From duties on other items that we hope will be imported from the cuts in fuel duty in order to grow the economy? WIth the current issue with the mother country I doubt that the CI Gov can give up any revenue source that is repetitive, hence a look at supplementing the cost so someone else pays for it and CUC can keep everyone strangled with high salaries, TV ads, new trucks and not exploring other energy sources such as wind as the people in charge said we need a radar as we were taken by surprise by Ivan and other Hurricanes.

    What I can tell you is that if the cost of living is moderate, taxes or duties are not a burden, the general cost of business is lower then most places, crime is put in down into real submission not Mr. Baines diluted perspective of all is great and get use to the crime as it is here to stay but we are on top of it attitude – you have a place that an economy will grow like a garden on fertile soil.

     

    Good catch Bean Counter.

    • Bean Counter says:

      Here's one way Government could immedeately make up for a shortfall in revenue from CUC fuel duties. Imagine you go to renew your vehicle license. The cashier charges you $180 for one year. She then offers you the choice to renew for 5 years at a 20% discount. You like this savings and have the money so you renew for 5 years and save 20% or $180 which is like getting 1 year free. Government gets $720 instead of 180 (somewhat of an immediate windfall). This discounting plan could creatively be used in other departments to borrow from our own future in order to reduce debt and get our financial house in  order. Instead, Government is proposing a partnership with Dart. In this regard I will leave you with the following definition from Wikipedia.

      Noun

      fascism: (usually uncountable; plural fascisms)
      A political regime, having totalitarian aspirations, ideologically based on a relationship between business and the centralized government, business-and-government control of the market place, repression of criticism or opposition, a leader cult and exalting the state and/or religion above individual rights. Originally only applied (usually capitalized) to Benito Mussolini's Italy.

  8. Anonymous says:

    I just received my latest CUC bill and did a few comparisons.

    My KWH charge was US$42.00 cents for last month. So I went online and found that other countries were listed as follows:

    Please note all prices are in US Cents and that Cayman's calculation was adjusted for that…

    Argentina $5.74

    Belgium $11.43

    Canada $6.18

    Chile $23.11

    France $19.25

    Hong Kong $11.80

    Philippeans $15.80

    South Africa $17.10

    USA $9.28

    So, a big difference indeed!

     

  9. R. U. Kiddin says:

    Mr. Counter, you mention ways to reduce our cost of living, and I'm all for that.  However……. I don't think there is anything that can be done to get the cost of electricity reduced.  I'm not very old, so I can't remember very far back in time, but has the electric company EVER reduced its rates?  I think they have a thing about money…… they want as much as they can get!

    • Bean Counter says:

      True enough about the money. The fact is that in addition to the normal duties levied on CUC fuel, government increased them further recently along with in order to increase revenue. I suspect this idea backfired. People are driving less and conserving electrical consumption to save money. This means less revenue for both CUC & Government. By removing the duties altogether and forcing CUC to lower their rates accordingly, People would use more power and supermarkets could lower their prices as well. The fact is easily researchable in the internet. When electricity costs go down GDP goes up.

       

      • Ransom says:

        CUC is holding the country ransome——there is a reason there are Anti-Trust laws in other countries.  It is time for people to start to protest.

        With this heat, and sun….we need to work toward supplying our own electricity….but wait, CUC controls that too…..you have to sell your power to them, then buy it back.

  10. Anonymous says:

    Keep in mind that the stores are open almost all of the holidays just shorter hours.