(CNS): In the face of considerable criticism from consumers and more recently government, Caribbean Utilities Company (CUC) says that a regional survey of electrical rates places Cayman’s power generator in a competitive position. However CUC rates are 8th from a list of 13 firms surveyed and consumers here will be feeling the power pinch even more when government cuts the current fuel rebate. Some of Cayman’s greener residents have also been criticizing the firm’s CORE programme.
The survey carried out by the industry umbrella body for regional utilities, CARILEC, CUC said, indicated its rates were competitive while its service is arguably one of the best. CUC claimed that a number of the companies which have lower rates have more than 100,000 customers offering relative economies of scale. However, there were a number of power suppliers in the region that have lower customer bases and lower rates.
“The results of this survey demonstrate that the investments CUC has made over the years have not only delivered one of the most reliable electricity services in the region, but also resulted in efficiencies which have brought regionally competitive rates to our customers,” said President and CEO of CUC Richard Hew.
The survey also revealed that Cayman has a comparatively large residential consumption level of around 1000 kWh compared to a Caribbean average of around 400kWh.Cayman’s lack of environmental awareness when it comes to fuel consumption is not helped a number of critics say by the firm’s CORE programme. Last month the new government passed a law in the Legislative Assembly to amend make-up of the Electricity Regulatory Authority (ERA) and CNS understands that government now intends to amend the CORE agreement that requires homeowners to pay CUC for electricity privately created by alternative energy sources.
CUC is also facing competition for the first time as it goes head to head with Jamaica Energy Partners for a multi-million-dollar project to install 32 megawatts of new generating capacity for 2011. The amendment to the ERA board is significant as the decision for this lucrative contract will be made by that body and not the Central Tenders Committee.
Hew insisted that CUC is a good corporate citizen, having invested millions of dollars in developing its people, its physical assets and the Cayman community over the years.
A recently released but very dated report (2003) from the Auditor General’s office about CUC however, accused the power company of excessive capital investment or gold platting. Many of the AG’s other concerns were addressed in the new license agreement which was negotiated with CUC under the previous administration.
The Real Truth u clearly work for CUS – don’t care if you claim u don’t because I wouldn’t believe anyone would stand up for CUC who is the average bill payer.
Corporate brainwashinghas been around a longtime, its an old trade. Might as well stop wasting your time we’re not buying it. CUC is a rip off all there is to it and eventually we will have options – there is a reason why in many countries monopolies are illegal – CUC is a prime example of why. Here is why a monopoly cannot and should not work:
"A company with a monopoly does not undergo price pressure from competitors, although it may face pricing pressure from potential competition. If a company raises prices too high, then others may enter the market if they are able to provide the same good, or a substitute, at a lower price. A pure monopoly can – unlike a competitive firm- alter the market price for her own convenience: a decrease in the level of production results in a higher price. Monopolies tend to become less efficient and innovative over time, becoming "complacent giants", because they do not have to be efficient or innovative to compete in the marketplace.
Monopolies have a lot of disadvantages such as reducing the qualities of the product, reducing satisfaction of the customers, increasing the prices and increasing disadvantages for the employees in the companies that have a monopoly.
According to www. bellevuelinux. org (2005) in a monopoly there are “lower levels of output than would exist if the product were produced by competitive companies” (para. 43). In fact, the company that has a monopoly will buy cheap primary materials to reduce the total cost of the products. In addition, the company that has monopoly usually does not have good services for their products therefore a monopoly reduces the quality of the product. Also a monopoly causes a reduction in satisfaction of the customers. Because there is only one provider or producer, the customers have no choices and they are coerced to buy this product when they need it. Lastly, because there is only one company that can provide or produce the product, the company can increase its prices to make the highest profit. According to the Stigler (n.d) “successful monopolist earn extralarge (sic) profits by raising prices above what they would be with competition, … the monopolists ( and perhaps the employees ) gain” (para. 5). In fact, this policy will only directly hurt the customers.
There is nothing positive for the customer in a monopoly situation – stop justifying your position please.
Comments like the one made by Anonymous- "I have lived many" makes one wonder if they are uneducated, ignorant or just full of malice. All in know about CUC is that they provide electricity on this island. I apprecaite the fact that when I hit my switch, my light comes on. I can tell you I have had other experiences where this was not the case. People who take the time to blog and who want to be taken seriously should aim to be factual so when this writer claims it is a fact that this company makes 50% profit from the people who live here I immediately started to shake my head thinking it was untrue. What I did next was to go on the website of the Regulator and check the licenses -there are all there for us to see. If the writer would check the website he would see that the CUC has a guaranteed rate of return of 9%-11%. Far stretch from 50% eh? Responsible people should not make callous unfounded statements like these. One loses respect for you. One should know that there is a regulator for industries such as these and their job is to ensure that the utilities run effeciently and that they are not doing anything to disadvantage the customer. If this is not the case well they are not doing their job and that’s where your anger should be directed. Just last week I was listening to the radio and a young man called and described the CUC license as a joke. He was having a go at the former Minister- A little inappropriate for my taste, but I guess that is island politics. He described the said license as a joke- I am assuming he was making a joke. I have a legal background and I had read bits of the said license and I am not sure what the caller was expecting from such a document. Maybe he should get hold of a few other licenses and compare them. I travel quite a bit. Businesses are trying hard to survive and would be investors are looking closely at where they put their money. I can tell you if some of them were to read some of the comments we make up here, Cayman would not be an inviting place to invest. We suggest that the people of the island are unable to negotiate a decent contract. We don’t want to honour the agreements we make. We do not want companies to make money if they invest! But we keep saying we want people to come here and invest. I have a few companies myself and when I invest my hard earned money in a venture then I do expect to make a profit. That my friends is why one gets into business. It is clear that some persons here have some negative feelings about the Utility company and that’s OK. My only concern is that one does not misrepresent the facts just to make the company look bad. How fair and decent is that? Maybe we should read a little more so we can better understand of what we speak before we do so. We will all then learn from each other. Is that too much to ask of yourselves and each other?
You know what? After reading that self indulgant piece of crap, all that I want to do is to plan my exit strategy off of this island. I don’t think that I wish to write nor read anything further here.
What a mature, intelligent response.
"What we should be talking about is how we can use less electricity so we can control how much money we pay to CUC" – Damn that’s some corporate brainwashing there
AND
"the competition may increase costs" – how dumb do you think we are!
CUC board of directors must sit around deciding how to make us believe they care for our interests – hmmm "lets tell them the competition is bad, its gonna make your bills go up – you should stand up to the competition"
NOT I will pray for the competition so I can finally be free of CUC and its never ending BS.
"the competition may increase costs" – how dumb do you think we are!
It’s not just CUC saying that. Anyone who knows anything at all about the electricity industry will tell you that you cannot have competition in transmission and distribution here or it will increase costs to the consumer. You are pretty dumb if you think otherwise. Haven’t you noticed that are no informed people on here trying to make that argument? There is just a lot of wild charges unsupported by any facts.
"What we should be talking about is how we can use less electricity so we can control how much money we pay to CUC" – Damn that’s some corporate brainwashing there"
The basic problem is that you want someone else to pay for what you consume. Perish the thought that you should actually conserve! That would simply be too responsible. You would prefer to blame CUC.
Well I guess you have a handfull of shares in CUC as well (Mon 16:21).
Explain this to me. If you have an infastructure in place to produce electricity already like CUC have in place, surely more consumption by the customers will result in less cost per kilowatt hour. Any fool besides you knows this, therefore the cost to the small consumer will go down not up………….. STOP repeating this CUC garbage that we need to conserve in order to reduce our bills ……. many poor people in Cayman already use the minimum amount of electricity in their homes yet have problems finding money to pay for education for their children and food for their children after paying CUC their rip off rates.
This same PR garbage is what we have heard from CUC for years and years. It is the same garbage that we were fed from Cable and Wireless for the same period of time. It is the standard garbage that any manopoly try to feed to the public in order to maintain their manopoly.
You forgot th efoolishness about guarenteed brownouts if competition is allowed against CUC ….. we have heard it all before. It is still a big lie spread by manopolies.
Cable and Wireless fed us the same garbage. They swore that service would be worse and that they were charging the minimum that they could possibly charge us for telephone services when they had the manopoly. Lo and behold they were sued by their competition once competition was introduced because they dropped the rate so low that it was against the law. Whe could they and CUC do this when they have the manopoly.
I for one will switch electricity providers as soom as there is competition. Let us hope that Big( or is that little now) Mac opens up the competition.
"If you have an infastructure in place to produce electricity already like CUC have in place, surely more consumption by the customers will result in less cost per kilowatt hour. Any fool besides you knows this, therefore the cost to the small consumer will go down not up".
It is not just a question of having some infrastructure in place. Over time an increase in demand requires an increase in capacity, i.e. new generators which cost tens of millions of dollars and must be paid for. If the increase means that there is a new development it may also require investment in an extension to the transmission and distribution network. Your understanding is too simplistic.
You have totally confused the point about economies of scale. Economies of scale are lost where there is more than one company providing transmission and distribution. Instead there is duplication of costs.
Again, this is not telecom. Comparisons with Cable & Wireless are entirely inappropriate for the reasons I have already explained. Why don’t you ask Mr. Cline Glidden, Jr. about this. I am sure he will be honest enough to disabuse you of this notion.
Infastructure improvements do not cost CUC anything in the long run. CUC is allowed to make a profit on every doller it spends under the terms of the agreement with Government.
Even if the y have to borrow money instead of utilising some of their profits they already have made, they are allowed to make their guarenteed profit on ALL the cost associated with the cost to improve infastructure, including interest charged on loans.
Perhaps you think my explanation is too simplistic because you are afraidthat the common man (your customer) will understand the advantage CUC makes off the terms of their liscence.
I only compared CUC to the telecommunications giant Cable and Wireless to try to open your eyes to the fact that greed will eventually run CUC out of buisness as it did Cable and Wireless. I at no time compared the provision of the two essential services.
To simplify my point so that even you can understand it. As a manopoly, you now have ALL the customers, give the customers a good service at a reasonable price and you will avoid competition and have ALL the customers ALL the time.
Continue to profiteer on the backs of Caymanians and you will find that other competitors will continue to push for changes in the Law that allow competion, simply because of the tremendous profits published each year. No one will want to horn in on your buisness if the profits are only reasonable, considering that a newcomer will have to invest heavily in the start up costs, something that CUC already has in place.
But then again, I am not hopefull that CUC will change anything as monoplies just seem to wear blinkers and just push ahead with scraping in outlandish profits no matter what the economic climate is. Monopolies, like State owner entities, don’t seem to have the common sence to react to the wishes of their customers.
I say again, bring on the competition as this is the only thing that will get CUC to pay attention.
anon1, you clearly not understand the pertinent issues.
"Infastructure improvements do not cost CUC anything in the long run. CUC is allowed to make a profit on every doller it spends under the terms of the agreement with Government".
You are missing the point. Unless CUC is able to get a reasonable return onits investment it will not have the means to make these investments. Why would anyone invest in a company that is not making a profit? Would you lend money to a company at reasonable interest rates if it is doubtful that it will be able to repay because it is not making a profit? The idea that the company is not supposed to make a profit is ridiculous. That’s why any company goes into business.
"Even if the y have to borrow money instead of utilising some of their profits they already have made, they are allowed to make their guarenteed profit on ALL the cost associated with the cost to improve infastructure, including interest charged on loans".
You are confusing the present licence with CUC’s old licence. CUC is not "guaranteed" any particular level of profit under the new licence. Instead, there is a targeted return of 9-11%. Right now CUC’s return is around 9%. This constrasts to the 15% return on rate base that it was entitled to under its previous licence and is a reasonable return by industry standards. Had we still been under the old licence CUC’s increase this year would have been about 6% (not 2.4%). They are not making "tremendous profits".
What I don’t understand is why are you not protesting against the local merchants who do make "tremendous profits" – literally hundreds of percent profit on some items? What abou tthe shipping companies that make it more expensive to ship goods from Miami to Cayman that from Miami to Europe? What about the insurance companies who have raised premiums by some 300% since Hurricane Ivan? Do you understand that these have a far greater inflationary impact? Instead, you are all bent out of shape because of 9% that is reasonably justified. For you because it is a monopoly the price MUST be unfair, and because the insurance companies etc. are not monopolies their premiums and prices MUST be fair. I hope you are beginning to see that your positionis irrational.
You continue to inappropriate comparisons with C&W. Even under the old licence CUC did not make the obscene profits that C&W did prior to competition although I agree that 15% was excessive. Because you do not understand the nature of the industry you have unrealistic expectations from competition.
I have lived in many countries in which many have higher consumption rates. There is no justification for the corruption and exploitation of CUC – who cares if Caymanians work for CUC or not – that doesn’t make it more rational for them to rip off the Caymanian people and those who live here. None of their so called costs add up – seriously calculate the actual cost of fuel, handling, shipping, bunker charges and you will see they are making over 50% profit on every single one of us – thats the real truth! and that is a fact, they are violating the people of this island (and I am not Caymanian) because they can – I haven’t quite seen anything like it. Anyone who believes otherwise is disillusioned. I am shocked there haven’t been protests against CUC and I am equally shocked no one has fought to get rid of the monopoly. On principal this a corporation taking full advantage of people to line the pockets and the only reason they have been able to is because the gov’t has been profiting from the arrangement.
Crime rates are on the increase because more and more people cannot afford things – its called relative deprivation. Increasing costs will lead to more crime.
"None of their so called costs add up – seriously calculate the actual cost of fuel, handling, shipping, bunker charges and you will see they are making over 50% profit on every single one of us – thats the real truth!"
That is absolutely false. Present your evidence.
Why don’t you present your evidence that this statement is false?
Another CUC public relations plant!!!!!!!!!!!!!!!!!!!!!!!!!!!1
The evidence would be their audited financial statements, dumb dumb.
You can’t just make wild, ridiculous claims and then demand that others disapprove them. What a warped mentality. It is rather like saying "you are a rapist!", and in answer to the response "I am not, show me what evidence you have for saying so" you say "you disprove it". You are practically accusing CUC of accounting fraud.
Incidentally, your credibility is not established by the number of exclamation marks that you place after your unfounded statements. Quite the opposite, they suggest a highly excitable person who is prone to exaggeration.
I agree that all of us want lower electricity bills, lower waterbills, we want to pay less at the supermarket, cheaper interest rates etc. Before we get all emotional and start calling for protests, let check a fact here. The increase in our electricity bills will come as a result of an action taken by the government of the Cayman Islands NOT CUC! CUC is NOT increasing your electricity bills. We cannot blame them this time. Not fair!
CUC, like any business you rum or I run that is not a charity will make money, that my friends is why we get into a business. If CUC is ioerating at a loss you and I will not have the priviledge of burning our electricity for long periods of time, leaving our children on the computer for ever, nor will we be able to run our airconditioning as long as we like. Have we travelled to other islands in this Caribbean where there is no guarantee that your power will be on throughout a whole week. We have demanded and become accustomed to a certain lifestyle, we use the product and then we complain. What’s with that?
I know many of the young Caymanians who work for CUC. Most of them are probably related to some of us. They work hard and they are bright people. We should support them rather than try to bring them down. They need to survive too.
What we should be talking about is how we can use less electricity so we can control how much money we pay to CUC. That is within in our control. A slight change in our lifestyes may just do it! We need to stop blaming other people for whatever wrong happens to us and take some responsibility for our actions. Come on Caymanians, we can do it! Can we, will we?
People, there are so many ugly things going on in our little island today. What about a march to stamp out crime? We need to be putting our heads together to deal with that problem! Let’s focus on the priorities here and what those headlines can do to our island. In the near future we won’t have to worry about electricity rates or supermarket prices. It will all be wrought iron windows and doors and an island where the criminals have taken over.
OK, so CUC were recently talking of increasing prices due to ‘increase in demand in the hot summer months’… I mean what kinda….. we are charged by the unit. Increased useage means more units used means more profit for CUC based on their tariffs… but they still want to increase prices…. and then we read how their profits are down because of cooler months…. something not adding up there.
It all adds up. You just need to read and digest the material properly. The CNS Article said "CUC explained that the reduction in earnings was down to lower than average temperatures throughout the first half of 2009 which pushed down electricity sales", i.e. not the summer months. Electricity bills increase for the summer months every year. Nothing new there.
CUC It’s a conspriracy against us poor people! I swear that you all are tripling our bills each and every month If CUC continue the rate they are going they are all going to make us HOMELESS!!! So with that being said CUC we are alll going to not only be cleaning up the Police Dept/Immigration/Northward Prison we all are going to be PROTESTING AGAINST YOU ALL TOO!!!!!
PLACE DATE & TIME COMING SOON! WE ARE GOING TO MARCH ALL THE WAY TO THE COURTHOUSE/GOVERMENT OFFICE THIS WEEK!!! CLEANUP COMING SOON!!! I AM CALLING ALL CAYMANIANS TO TAKE A DAY OFF WORK FOR THIS IMPORTANT PROTEST!
With what UDP was saying earlier this week in the paper is going to make the electricity rates for residential customers higher!!!!!!!
Of course, much, much more than the 2.4% increase in rates implemented in June. But that doesn’t matter because it is the wonderful UDP who have come to the aid of the people. Boy, they must have some powerful Kool Aid!
What a setta complacent people some of you are.
Its hilarious seeing how some of you feel this is a good deal. As a prevous poster has pointed out – other electricity companies should be allowed to trade here – there should be fair competition – watch how the costs slide downwards then – inevitable. CUC have the monopoly – they have no competition so they feel they can charge whatever they like, because we don’t have the choice to go anywhere else and we dont want to be stuck without any electricity at all.
I guarantee you if fair competition was allowed none of us would be moaning at the ever-escalating costs of electricity.
Hilarious – you simply have no knowledge or understanding of the issues.
1. CUCcannot charge whatever they like. The rates are being regulated by a rate cap and adjustment mechanism. Depending on its rate of return, electricity of rates may (1) increase (2) remain the same; or (3) DECREASE. If it does increase, such increase will be related to the rate of inflation and thus increases in its costs. E.g. the rate increase in June was 80% of CPI.
2. Introducing more than one company to transmit and distribute electricity would have the effect of INCREASING (not decreasing) rates because there would be duplication of infrastructure and say half of the consumers to pay for the same infrastructure. Do the math.
3. The new regime permits competition in generation. A solicitation process is currently underway for the next increment in generating capacity. However, it will be very difficult for a new entrant to generate electricity cheaper than CUC since it will have to build in costs to cover the personnel, land and infrastructure that CUC already possesses. Over time this may change with technological advancements that may allow firm energy to be supplied by renewable sources. In any event the prospect of competition forces CUC to offer competitive prices to ensure it wins the bid.
4. Forcing competition, for example by making it more expensive for CUC to produce electricity so as to allow competition in would have the effect of increasing, not reducing, prices.
5. CUC’s Financial Statements (and its share price which is down almost 30% from a year ago) do not reflect that it is making exorbitant profits.
6. You are thinking the production of electricity is comparable to telecom. It is not. It costs Digicel very little to erect a few cell towers and provide cellular service. It costs nothing more to transmit 3000 calls over fibre optic cable than it does to transmit 1000 calls.(By contrast increases in the demand for electricity costs tens of millions of dollars). Technology is rapidly advancing in this area.
Hilarious Understands the Concept of Anti-Trust Perfectly
You however are just another overpaid spin doctor/ henchman of Hew. What are CUC’s profits- 8%? More? And you think that poor CUC is just so misunderstood.
The whole anti-CUC campaign is driven by partisan politics and sheer ignorance.
Incidentally, the ERA Law has a whole Part dealing with anti-competitive practises.
Baseless and incorrect assumptions, by the way. Try grappling with the real issues instead.
You neglected to answer. How much profit did you make last year?
Let me get this right – you have been making all sorts of charges about CUC profiteering because of its monopoly position but have not even made the effort to review its financial statements which are readily available online?! Why let the facts get in the way of a good rant, eh? Why do I get the feeling that whatever the answer is it is going to be too much for you?
You CUC hanger ons really make me sick. You are obviously being paid to counter argue every post that is critical of CUC instead of CUC saving the money they pay to you and passing it on to the consumers.
I hope that as soon as we get competition you greedy CUC fools go out of buisness just like Cable and Wireless did.
Fools like you spout the same garbage that teh paid PR people did for Cable and Wireless. Now they are gone and we have better and cheaper phone service.
Your turn soon come.
Maybe I am just an honest broker pointing out the truth that’s getting lost in all the emotional rants. I am certainly not paid by CUC or anyone else for this.
Joke is not a suitable description of CUC.
The word to describe them has not yet been invented.
CUC generates electricity using expensive distillate fuel in Machinery that is designed to operate on the much cheaper fossil fuels. Not only does this cause unnecessary Machinery damage , but it also costs the consumer an extraordinary amount of money that they should not have to Pay.
This continues to fall on deaf ears and the only relief the consumers may get from this high cost may come whenever the Government allows fair competition.
Lets see if the Minister in charge of Electricity is going to sweep this under the carpet like everyone else.
CUC always seems to be able to place someone in our Politics who looks after their interest.
Meanwhile they have all kinds of protectionist agreements that only protect them and abuse the consumers.
CUC do a great job in difficult circumstances. If you don’t want to pay the real price for the luxury of AC then switch it off and sweat a bit.
LOL what a joke…CUC like most service providers on this Island mint money at our expense…we need alternative power solutions now!
SMOKE AND MIRRORS?
Did the PPM really pay six million dollars to CUC to bring down costs on a short-term basis to deceive the public into believing that they had negotiated a good deal as suggested in the CNS public forum? I think that I prefer being victimized dictatorship-style…
It is a good deal. You seem to forget that for the five months prior to the escalation of oil prices consumers had not seen lower electricity bills since 2000. Where was the deception? The PPM Govt. made a very clear public statement of how it would subsidize residential consumer’s bills. It was welcomed by all at the time. Were you asleep? You prefer being victimized dictatorship-style? Well that identifies your political affiliation as well as your double digit IQ level.
I have no political affiliation and am not an idiot. I just have a problem playing the part of a duped victim. Watch out when you bend over to pick up that bar of soap in the shower…
THE SIX MILLION DOLLAR PLAN
I’ve been waiting with baited breath for a representative of CUC to comment about the 6 million dollar "donation" made by the PPM to artificially keep the consumer costs low on the short term. If it is true this kind of duplicity is contemptable. Mind you, UDP certainly hasn’t demonstrated any sterling qualities since May. I’m not sure which I prefer; smoke and mirrors or communism.
Ask CUC.
Ask CUC if it ever intends to repay the millions of dollars it took from the taxpayers of the Cayman Islands – with the help of the PPM – after Hurricane Ivan?
Ask CUC if a hurricane struck today if all of its poles are insured?
Ask CUC what is has to say about the claimed of "gold plating" alleged by the Auditor General in his report.
Thank you.
Whoever said the electrictity service is most reliable must never have been to my part of BT!
There was an uproar when it was announced that CUC’s rates would increase by 2.4% in June although the impact on the average consumer’s bill was only $2.40. Where is the uproar now that Mr. Bush is proposing dropping the fuel rebate that may increase the average consumer’s bill by $45? Fuel prices have been creeping up and there is no guarantee that we won’t see triple digit prices per barrel of oil again. Summertime is absolutely the worst time to do this. Was the uproar all politically driven?
Intersting…you’d rather people lose their jobs
That obviously does not follow. I am simply pointing out the hypocrisy of some.
What else will this government do to destroy this country!
In less than 3 months they have decided to kill Pirates Week, build an unnecessary dock in EE, delay the sorely needed education law, suspend pension payments, and now hike our power bills!!!!! Ugh!!!!