Cost of CORE
CUC introduced the Consumer Owned Renewable Energy (“CORE”) programme in January of 2009 following approval by the Cayman Islands Electricity Regulatory Authority (ERA). The principle feature of the program was to allow connection of renewable generation to CUC’s transmission and Distribution grid and to credit CORE customers for energy produced.
The credit given to the CORE customer is 100 % of CUC’s savings generated from the displacement of its own diesel generated electricity costs. With the current relatively low cost of fuel, this credit is much less than the cost of producing the CORE energy. Simply put, the cost of CORE generation is greater than the cost of CUC generation and for CUC to buy energy from the CORE customer, at their cost, would be to do so at costs which are higher than CUC’s own generation costs.
CUC, the Government and the ERA, recognized the importance of introducing sustainable renewable energy to CUC’s portfolio of generation, understanding that it would likely be more expensive in the short term, but could become cost competitive in the future if diesel fuel prices increased or the cost of renewable energy went down.
Accordingly, clause 32.5 of CUC’s Electricity Transmission & Distribution Licence (which you may read in its entirety on the CUC or the ERA website) specifically states with respect to renewable energy that, “To reduce the dependence on fossil fuels and encourage renewables the Licencee may propose (with justification) that such purchases of power take place at prices at or above those of its most economic short run alternative (the Licencee’s avoided cost), a cost that would be passed on to consumers.”
In keeping with the intent of the License, CUC has made more than one proposal to the ERA which provides greater incentive to the CORE customers than the present CORE rate and would likely attract more CORE participants if implemented. These proposals could achieve results similar to “net metering”. It is our understanding that the ERA is awaiting a policy direction from the Government before it can approve any such rates or incentives and we trust that this will occur in the not to distant future.
In a related initiative, CUC has launched a request for proposals (RFP) process for qualified wind developers to develop, install, commission and operate wind generation of up to 10 MegaWatts. Independent development of this generation source by experienced qualified developers will validate the economic viability of this technology. CUC will not participate as an investor in this project but will purchase resulting generation at an agreed upon rate (approved by the ERA) for distribution through the electricity grid.
CUC recognizes and supports the efforts of those on the island who have taken the initiative to install CORE generation for environmental reasons. We believe that further incentives will expand that group of early adopters for the long term benefit of the island and will recognize the contribution made by those who have already adopted renewable technologies.
Category: Viewpoint
To the Higher Prices Higher writer, what are you applying this economic theory of yours to? What point are you trying to make? Your theory my friend is not applicable to the generation of electricity in this small island of ours.
As I keep saying we should try to understand of what we write before we write. Cayman’s situation is unique in the sense that it is small. We have a lifestyle to which we have become accustomed-airconditioning in our homes, we sleep with it on many a night (this is NOT free)- we have a higher cost of living than many other Caribbean Islands, we own larger homes, fancier cars etc, etc. We have to accept these facts and if this is the lifestyle we want I hate to have to tell you this small fact, we have to pay for it!
Some persons on this blog seem to have a personal beef with the company or they are just negative. What is the problem with a company who provides a reliable electricity service and makes a profit doing so?. Do you pay for telephone service? Does Cable & Wireless and Digicel make money? Do you buy groceries, are the supermarkets making money? Do you buy patties? Is the patty shopmaking money? Yes to all of the above.
Many years ago someone or some group took the risk to come to this island at the time, filled with mosquitoes then, and decided to put invest their money to bring electricty here. They took the risk then and as a result of that risktaking we the people of Cayman were able to go out and invite people to come here and invest. We sold our island based on the infrstructure we could offer. That first group made their money, sold the company and move on. Over the years the owners have invested much more money and developed the infrastructure to where it is today where large hotels, major banks and other business can come here and know that they have a reliable service. And some of us can only think of bad things to say about the CUC. Let’s be fair man, come on. You can quarrel about the rates you pay. If it was another company we would be paying the same thing unless we are drilling oil off the Sound, we have a hydro plant in West Bay or a Wind Farm in East End! Wake up my people. Think for yourselves and don’t let these pretend geniuses try to confuse the facts.
Well done to whoever cut and paste from an economics text book re monopolies. But in such a small market as Cayman – it is small, tiny, in fact – when it comes to electricity supply there is only one effective option which is a regulated monopoly.
Yes, yes we understand basic economic theory about the disadvantages monopolies. What we need is for you to relate this to the electricty industry, CUC and Grand Cayman in particular. Look at both sides of the issue – there are also advantages. Do a little research. Read the CUC Licences. Think about the issue. Don’t just regurgitate. For example, a number of the disadvantages you cite simply do not apply because CUC is regulated.
CUC is a rip off plain and simple. They are a monopoly with a guaranteed profit every year. There is no incentive for them to be more competative as there is no competetion. They buy crappy oil and charge premium prices and we the consumers pay for the repairs on the machines for running this crappy oil. CUC could be much more efficient and we the consumers could save a ton of money. But why bother? RIP OFF.
As a private enterprise with the need to continue to invest in infrastructure CUC must make a profit. The only question is whether the profit is reasonable given the cost of capital, the risk level (hurricane zone etc.), the need to attract investors etc. Under the new licence CUC has to be more efficient since no specific level of return is guaranteed. It is also has to be more efficient to be able to give a lower bid in order to win a solicitation for new generating capacity, i.e. competition. The ERA will impose performance standards to ensure that certain standards of efficiency are met and are improved over time. You mention crappy oil, but if CUC used a higher grade of diesel it would be more expensive to produce electricity. Higher grade=more expensive.
all monopolies (in a developmed nation) are regulated by govn’t that is the only reason they are allowed.
Why Government Tolerates Monopolies
as for the barriers of entry:
Under monopoly, the presence of barriers of entry allow the monopolist to earn abnormal profits in the long run.
As the monopolist faces no competition, there is an incentive to introduce new products, as they will receive all of the industry profit. The introduction of monopoly into a competitive economy results in economic inefficiency because the monopolist sees the marginal benefit of its actions in a different way than consumers do. Monopoly is inefficient because it prevents an economy from producing the mix of products that have the greatest possible value.
The disadvantages far outweight the advantages for the consumer so there is no argument that a monopoly is only benefiting CUC – def. not the bill payers.
The point that I was making regarding regulation of CUC, is that contrary to the list of disadvantages, CUC cannot make supernormal profits or charge whatever rates it likes to consumers for example.
Like you, many consumers in the U.S. thought that de-regulation (removing regulation and allowing competition to determine rates and quality of service) of electric utilities would bring greater efficiency and lower prices like it had in telecom. The opposite happened – prices rose sharply.
I am not against competition, but I am cautioning that it is unlikely to lead to significantly lower prices.
Why is it that if someone has something positive about CUC, one has to work at CUC or be a PR person for the company?We have over 50 thousand people living here. CUC probably hires over 100 people. So it seems to me that no everyone would have a negative view of the Company. As a matter of fact some of us quite like the company and the service we get. What’s wrong with that! To the writer who said he/she gets upset when they pay their bill. You should probably stop using the service. Burn coalpot to cook your food, use a flashlight to find your way around at nights, and keep your windows open and welcome in the mosquitoes. Then you won’t have to pay a bill. Some of us would do well to do some reading and some research about the electricity industry and understand that competition in this industry does not mean that you will pay less, get a more reliable service.
Read my people, read! and don’t let the few naysayers mislead you.
Many have presented logical arguments that make sense you just are not willing to hear it because you are so defensive!
May be I missed them. Please repeat them for me. And please no "CUC is too greedy", "competition will solve all our problems". Those are not logical arguments. Factual, relevant data. Clear reasoning. Relevant comparisons. Think you manage that?
Maybe start by telling us:
1) why is having a monopoly good for the consumer?
2) Why you are happy that CUC recieved 15% guaranteed opertaing profits for years, and they are happy with 9%, as one of you puts it, because 9% is reasonable for the industry. SO we were ripped off for years and now we should be cheering CUC.
3) Why has it taken so long to look at renewables, when so many other countries have been looking and acting on them for years.
4) why it is so great to have foreign owership?
5) why is it so good to have so many barriers to entry for any other supplier?
6) who really paid for the distribution system over all the years until the new agreement? were the people of Cayamn simply paying CUC directly for it in their bills while CUC still got their 15% nest egg
7) Is it true that CUC’s of operating profit were 16 % in 2008 and 17.79% in 2007
8) Did CUC really pay out 77% in 2008, 99% in 2007 and 80% in 2006 of their annual profits out to shareholders the majority of which are overeas. They didn’t leave a great deal for infrastructure investment
Your questions seem to assume that I am somehow representing CUC. I am not. I am not an employee, director or anything else of CUC. My point is therefore not to be an apologist for CUC but to discuss the issue of the costs of electricity rationally and fairly. It makes no sense to have unrealistic expectations from competition; it will only lead to disappointment and more frustration for the consumer.
Many of your questions can be answered simply by going to the CUC website and reading their annual reports.
Who said that I was happy about the 15% return? Forget about what they were entitled to under the old licence. They have a new licence. Move on and discuss that. Incidentally, I don’t think CUC is necessarily happy with a 9% return. My view is that it is reasonable, not that I believe CUC is happy with it.
I don’t think anyone can reasonably suggest that CUC has at any time under-invested in infrastructure.
Obviously the consumers paid for the distribution system in the sense that that is where CUC gets its money.
"So many barriers to entry". I am not sure what you mean. If you wish to generate electricity you place a bid in the competitive process for the next increment of capacity. If you win the bid (generally because you have a lower price) you get a licence and can generate.
The point about the 15% return is that even though it is in the past how are we now meant to trust a company that has fleeced us for so long. Can we really trust them?
You have to look at the 15% in context. As even the Auditor General in his report said this was perhaps justifiable when the agreement was originally made in the 1960s. By the 1980s it was no longer justifiable. But remember this was an agreement made with the Govt. of the day. CUC did not simply hold us up and take it.
As Ronald Reagan once said "trust, but verify". That is what the ERA is there to do: monitor, regulate and verify.
wow…grow up, bullying is a childish tactic…seriously. The more defensive you act the more suspicious it looks
How about some answers. How much does it cost CUC to bring a barrell of fuel to this island? Includung the actual cost of the barrell, bunker and handling charges and delivery to the resevoir – Yes it can be broken down by barrell.
How much are you licensing fees?
How many time have you not checked a meter and charged a customer an average (quite common) in fact the other day customer service confirmed that for 3 months CUC had the exact same Kwh reading and all of a sudden a ridiculous bill followed. Youcuold not have known how much I actually spent.
How much are your SH now guaranteed?
How much to the chief officers take home?
How much do you subsidise Cayman Airways? who else do you subsidise with the $ we give you?
You should read the CUC licencesand read the CUC annual reports. These will answer many of your questions. If you did, for example, you would understand that CUC itself does not bring any fuel to the Island and you would not be posting many of these questions. Any others you have raised should be addressed to CUC, and not to me.
LOL! I see. Ranting and raving and making wild claims = logical arguments that make sense, and reasoned rebuttals supported with hard data = defensive.
At the end of the day the consumers do not appreciate CUC’s stronghold over them. I think it is time for some competition – there are no advantages to the consumer with a monopoly and no company should ever have that much power – its the 20th century.If Cayman wants to be a global player well time to move on from the primitive monopoly CUC has held for decades. Their prices do not add up, their customer support is incompetent and they use dirty diesal which is horrible for the environment. Everytime I pay a CUC bill I get upset that I have to give them anymore of my $$. I am saving every penny I haven for solar and I enourage others to do the same as well as check your meters and start recording your own kwh as you will find CUC’s #’s don’t always add up because they don’t always check you meters. Also speak out and try and get in some competition don’t be discouraged its your right to have a say.
Perhaps your problem is that you are still in the 20th century. Pssst. We are in the 21st century and we’ve been there for a while.
Stop with the corporate bullying. CUC is a rip off end of story. We are all finally coming to the realisation and will encourage others to take action. I don’t care for the corporate BS, I know you are trying to defend the ridiculous profits you make, greed is an obsession. There is not reason Cayman should have a monopoly and consumers should be paying so much. I suggest you start saving because we eill work hard for competition.
Why is it that we can only get emotional outbursts, inaccurate data and banal statements from CUC critics? To date no one has explained the case with accurate information and clear, logical reasoning. Instead we get statements like "CUC is greedy", "monopolies are bad", "competition will solve our problems", "huge profits", "consumers are being raped". This is not reasoning, folks. Can we have an intelligent discussion, please?
While news is on the about the T & C and the British takeover, he is something to ponder about CUC’s monopoly.
At the moment CUC has pretty much the indirect power over Cayman. CUC can if they desire hinder the supply of electricity to the island. Cut the electric to the Financial Industry and the hotels, see how long they can survive on generators before they leave for elsewhere and the 2 pillars of Cayman’s economy disintergrate
So if you wonder why CORE is so poor, it’s obvious, why would CUC let comsumer’s reduce their fatcat profits they flitter overseas. They have no incentive, they can laugh in our faces and the sad thing is there is nothing any of us can do about it.
What do you suggest, make utility companies subject to the Local Companies Control Law? Ban them from being publicly listed? Nationalize CUC? Many Caymanians and residents do of course own shares in CUC. Better than putting your savings in the bank or one of those pension funds.
Bring in another power company, some competition and choice to the consumer?
How does that address your complaint? Any new power company would simply generate electricity and not transmit and distribute electricity so it would not prevent CUC from turning out the lights. You clearly cannot have two T&D companies. New power companies are likely to be entirely foreign-owned.
Incidentally, if CUC were to fundamentally breach its contract in the way you suggest the ERA is empowered to revoke its licence go in and seize control of the operation, or permit another licensee to do so (s.31 of the ERA Law).
I think CUC do a great job and do it well. We live in a country where electricity has to be expensive – an island with no energy resources. I am glad about the CORE charges as otherwise I would be paying to subsidise the electricity costs of those with solar generators who need the grid to have electricity at night or when there is cloud cover. Oil prices are going to go up substantially in the next 12 months. CUC cannot be blamed for oil prices.
Did some Calculations:(all prices in US$)
2 Feb 2008 $0.32 per Kwhr Crude is $88 per barrel
27 Aug 2008 $0.42 per Kwhr Crude is $117 per barrel
26 Nov 2008 $0.37 per Kwhr Crude is $54 per barrel
Hey the price goes up 31% in 7 months, crude goes up 32%
The price goes down after 4 months by 12 %, but crude drops 54%
Unlike gravity, CUC’s price seem to go up, but never come all the way back down.
Now the US average is $0.11 per Kwhr, that less than a third.
in Guernesy it has just bee set at 13.9p or $0.24. Oranges to oranges, we pay over 50% more.
There is a 2 month delay for fuel charges so that January bills reflect November costs of fuel. Why did you stop at November ’08?
"in Guernesy it has just bee set at 13.9p or $0.24. Oranges to oranges, we pay over 50% more".
I am afraid I do not follow yourmath and I don’t see the oranges to oranges. You have not quoted the current CUC kwh charge but have quoted what you say is Guernsey’s current set rate. Are you suggesting that our current kwh charge is more than $0.36? The average cost per kwh (including both rates and fuel factor) varies as the price of oil changes but when I last checked a couple of months ago it was about CI$0.22 (US$0.275).
Unlike Guernsey, Grand Cayman has an isolated system which is 100% dependent upon petroleum. Guernsey has a cable link to France from which it imports about 80% of its power most of which comes from nuclear sources.
Oranges and oranges? I think not.
Interestingly, the articles available online indicate that Guernsey Electricity has suffered an operating loss for the past five years and its Managing Director is quoted as saying "We’re very concerned that we wont have the funds to invest in the future and we are concerned that we’re storing up price increases for future generations which we don’t want to do". A report also shows that because Guernsey Electricity is price regulated and mandated to get power from the cheapest sources this has led to a 37% increase in the company’s carbon emissions.
Considering, the cheaper sources that are not available to us and the increase in pollution wouldn’t you say that Grand Cayman consumers actually have a better deal?
" I am afraid I do not follow your math"
You must be the CUC employee working out my bill then.
It’s easy Cayman was $0.37 per kw/hr
Guensey $0.24 perkw/hr
difference is $0.13. Now ((0.13/0.24) x 100) is 54.17%, I rounded down to make it easier for you to 50% more.
And isn’t deasel one of the worst polluters for generating power, and if Guernsy is getting there electirc from the French, they supply around 50% of their electircal needs from Nuclear Power, so I’m sure their carbon emmisions per kw/hr is far lower than ours.
So no I and other GC consumers don’t think we are getting a better deal from you
So you are comparing the Nov. 08 CUC rate with the current Guernsey rate and claiming a 54.17% difference. Brilliant! The current rate is about $0.25 (before rebate) so you were not comparing oranges to oranges, Bill. Surely you must understand that, or it was it your intention to mislead others?
There are different grades of diesel, Bill. You have completely missed the point that using the cheapest fuels significantly increases pollution. CUC does not use the cheapest fuels but yet delivers at comparable prices (ignoring your attempt to mislead).
It is very telling if that was the only response you could muster.
Another point is that Guernsey Electric is owned by the govt. and does not have shareholders who require a profit on their investment. Do you think a publicly listed company would still attract investors or be able to obtain financing if it had made losses for 5 consecutive years? Even with cheaper sources of power and comparable rates Guernsey Electric still could not turn a profit.
When you quote the wrong figures and make inappropriate comparisons either because you have not done adequate research or you because you wish to mislead and hope no one will check, it damages your credibility. So far the CUC critics have performed pretty poorly.
P.S. I am not a CUC employee, just someone with accurate information, the ability to do basic math and good reasoning ability. You are clearly challenged in each of these respects.
"You are clearly challenged in each of these respects"
LOL, attack the messanger, nice diversion tactic
The reason I haven’t answered all the posts is time, while you CUC employees may have little to do but make up rebuttles after pulling excess fuel surcharges out of the air, but most working people don’t have that much time.
Bill, I have provided substantive answers to each and everyone of your points so there is absolutely no need for any "diversion tactics" on my part. However, on your part you wish to go off on a tangent about how much pollution is caused by CUC’s diesel generators or whether it would be better if CUC was owned locally. Those are "diversion tactics", Bill.
What is it with you? Can you not understand that Guernsey Electric has had no profits, only losses, for the past 5 consecutive years? THERE WERE NO PROFITS TO STAY IN GUERNSEY. That is the whole point – even with cheaper sources of energy they cannot make profits and they have no money to invest in infrastructure at those rates. That situation is untenable with a publicly listed company.
Some of CUC’s profits do stay in Cayman since many shareholders are local. This is the nest egg of many retirees. CUC is also a good corporate citizen and has invested in its Caymanian staff with training and promotions to the highest levels.
Let me get this right, you don’t have time to make meaningful posts based on accurate information but you have time to make irrelevant and misleading posts? Better that you did not post at all, Bill.
Why did you quote Nov. 08 figures when they are clearly out of date and about 50% higher than current rates? What do mean that is when you did the calculation! You posted those figures a couple of days ago saying you had done some research, now you’ve been caught with your pants down. By all means please check the CI$0.25 per kwh figure and report back here please with the appropriate apology for misleading readers.
You were going to check the per kwh charge last night, Bill. We are waiting with baited breath.
Didn’t have a chance, will try tonight
And "Baited breath", either you mean bated breath and your english is poor, or you really do mean baited
I guess the later to your breath is "smelling like bait"? so may be try some breath mints. Do they sell them in the CUC cafeteria?
LOL! Weren’t you the one claiming that I was using "diversion tactics"?
" I don’t have time to say whether or not CI$0.25 per kwh is correct, but I have time to type nonsense".
….and almost 6 days later (including a weekend) there is still no answer from Bill on CUC’s per kwh charge for electricity. Bill, at least have the decency to admit you were wrong and apologize.
You are comparing apples with oranges when you quote the US average cost. This has already been explained in another post (cheap sources, economies of scale). For example, consumers in Kentucky will benefit from cheap coal as the main source of power. If you want something that approaches apples with apples then try a comparison with Hawaii a group of Islands where petroleum is the source of 90% of electricity. The cost is US$0.22 per kwh as at May ’09 (when CUC’s charge was about CI$0.21 per kwh). In May ’08 it was US$0.314. Nearer home (but sticking with a U.S. territory) the USVI’s rate as at 1st July ’09 is US$0.27 per kwh.
See http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_a.html
See http://www.viwapa.vi/pdf/WAPA-New_Electric_Rates_7_09.pdf
Bill seems to have assumed that the $0.37 per kwh cost of Nov. ’08 never went down and then compares it to current charges elsewhere. Actually my last bill reflects a charge (including all costs e.g. licence and regulatory fees which are pass throughs) of CI$0.234 per kwh (after fuel duty rebate) and CI$0.25 before rebate. In other words, it is comparable to the Guernsey rate he quoted, not 50% more, and not more than three times the US average as he believes. Bill needs remedial math. Go to detention, Bill.
Ah – but Guernsey is smaller and population more densely packed therefore far lower distribution and maintenance cost – and does not have hurricanes therefore far lower infrastructure cost. They have elevation above sea level that allows for efficient and almost maintenance free underground transmission. They also do not consume at the North American levels that we do (although I wish we did not) and do not have to deal with the severe demand differentials (central AC is rare and not needed and gas is the standard for cooking and heating). Not oranges to oranges. More like Apples to Pears…
http://centos6-httpd22-php56-mysql55.installer.magneticone.com/o_belozerov/31115drupal622/business/2009/08/13/cuc-claims-fuel-rates-are-competitive, sounds like CUC does a great job! oh what customer satisfaction they have. Greed does come to an end and I am glad people on Island are finally gaining confidence to fight the CUC monoploy and for their hard earned $$. Even with a/c on a bill should NEVER be over US$500 for 2,000 sq ft house. Unbelievable! And not using a/c is not allowed by many landlords or insurance companies due to the risk of mold (which many insurance companies do not even cover). Bring on the competition!!!
"Even with a/c on a bill should NEVER be over US$500 for 2,000 sq ft house".
That’s mostly in your hands. Conserve! There are people with larger houses whose bills are under $500.
Of course no one has any control over oil prices.
Of course no one has any control over oil prices.
OPEC might. But I did a price per kw/hr over the the inflated oil prices and will try and find it for the actual figures, but after oil went down from $150 abarrel to less than $70, the bill per kw/hr dropped but around 7%. Yet when the price went up to $150, price per kw/h went up over 40%
Monopoly is never good
I am certain your figures are incorrect. Between Oct. 08 and Jan. 09 my bill dropped from US$2,000 to US$700. Even allowing for seasonal differences in demand that will be a great deal more than a 7% drop in cost per kwh. Apparently no one notices when there was a dramatic reduction in their bills. They only notice when there is a dramatic increase.
You re certain, even though you have not done the calculations yourself? very trusting of the CUC you are.
Try it yourself and be enlightened take your bill amounts every qtr for the last 3 years and divide by the Kw/hrs you used.
Look at the fluctuations your self and then compare to other small islands
Not a question of trusting CUC. It is obvious on the face of it that those calculations are incorrect. Fuel charges are approximately half of my bill. Why would my bill be down by 2/3 and fuel charges be down by 7%?
A long time ago is not today. Today there is choice and better technologies. Does Cayman want to be a "global" country – well time to update. I don’t buy any justification on behalf of CUCs prices they do not add up. In a so called "first world country" you are damn right a reliable service provider is expected – that isn’t something I would pat a service provider on the back for, its their job. Justification for CUC is exactly why the people on the Island have suffered exorberant costs. Many do cut down their costs even w/out a/c bills can be CI$250 here that is over US$300!! maybe a 4 bedroom home costs that in North Amercia with electricity on all of the time!
Hello?! We are not in North America. There are two principal reasons North America has lower energy costs: (1) it has a variety of less costly sources of energy including coal (49.8%) nuclear power (19.9%), natural gas (17.9%)and hydroelectricity (6.5%) (which costs practically nothing) to name a few. Petroleum only accounts for about 3%. Cayman does not have these sources available and relies 100% upon petroleum (diesel); (2) huge economies of scale with millions of consumers – something we will never have. There are many other items the prices of which are not comparable to the prices you pay in North America, why single this one out?.
Don’t just make a banal statement – show us why you say CUC’s prices just do not add up.
To the person who wrote "the only reason CUC has" you should try to get a better understanding of the electricity business. It is NOT like the telephone business where one can switch to another provider or as you said "jump ship". Any company coming into this island has to sell its power to CUC who will then provide service to you the customer. So you cannot change your electricity provider just like that, that’s not the way it works. Do some research first before you start to write next time. You know, if you just stop and think for a minute, were it not for reliable electricty provider in this island all these years, do you think some of the companies who have come here to invest would come? No way! They have come because of the infrastructure available on the island and that my friends include a reliable electricity service.I am convinced that we need to conserve more. We need to change our lifestyles if we want to pay less and turn off our airconditioning units for a while each day. You will see a difference in what you pay. Try it!
To all the complainers of high electricity bills this is something you have control of by consuming only what you need. There are also options buy your own solar panels or buy your own generator and compare your fuel costs vs your CUC bill.
Our memory is so short,after the aftermath of hurricane Ivan everyone was praising CUC for such a great job in restoring power back to whole Island and most wowed not to complain again after paying $300.00 per week to fuel their generators that could not power all their appliances.
How was CUC able to do this if it wasnt for their proactiveness ? Good reliable service comes with a cost and if we pay for corned beef sandwiches do we expect to get steaks? There are alot of people who make statements that dont know the working of CUC but jumps on the band wagon just to hear themselves. Telecom is totally different from electricity and we got some lower rates on phone bills but did the service improve?
The pass Govt put things in place to lower our bills and the same govt than campaigned on lowering costs is the same one who has increased our bills compare two dollars increase by CUC in June that the UDP cried foul about and most of you did like wise now they have increased your bill by forty five dollars and no one is screaming.
On the topic of insurance, we all know the high cost and it is impossible to insure every asset CUC owns. If this was to happen do you think you would not have to pay for it before the fact, every business adds all these extra costs to their final price. We had hurricane Gilbert in 1988 and then Ivan in 2004 some 16 years we did not pay for insurance but had all these assets been insured we would have paid 16 years of insurance with no claims. We must all remember there is no free lunches. The piper has played and he must be paid.
Thank you for a sensible, well-informed post.
If Andrew Smalls is reading this..please let us know EXACTLY how much your licensing fees are. Charging every consumer even $1 gives CUC appr. CI$50,000 which I am certain is MUCH higher than your licensing fees. The licensing fee is part of your operational costs – which CUC should be paying from the profits they already make from the customer which will be even higher now that a flat fee is charged instead of the rebate which is not pro-rata.
The only reason CUC has attracted customers is because they have no where else to go. I am confident in saying that if another company came on board to which customers could subscribe to for electricity – MANY MANY would, I have yet to hear anything but a complaint about CUC – not in terms of providing reliable electricity – which is expected, but poor customer service and ridiculous prices. Many isolated islands generate electricity at a much lower rate and there is no reason rates should be so ridiculous here in Cayman. There have been many reports of CUC not even checking meters and just charging consumers what they think a house of a certain size should be paying I know I have had bills which are higher during months I have been off Islands (and yes the house is vacant with A/C and boilers off) then when I am at home using my A/C and applicances – which cannot be accurate.
By all means if you want to justify CUC’s charges do so, whether I compain about them or not little will change. It is our hard earned $ and I have a problem spending it on unjust electricity prices, I cannot imagine how many people can afford to pay such rates – there are only a handful who can pay without making sacrifices and for a basic right I agree prices need to be lowered.
I for one will be one of the first to jump ship if and when a new provider comes to the Island.
I agree, the word rape and violation of rights comes to mind when I think of CUC, it is a crime of corruption and greed that leaves many feeling violated and helpless. No other "first world nation" tolerates such exorberant rates to provide a basic human right to its citizens. I hope for the sake of justice in a so called democracy that more competition is introduced and the govn’t stops sleeping with CUC.
"I agree, the word rape and violation of rights comes to mind when I think of CUC, it is a crime of corruption and greed that leaves many feeling violated and helpless".
Don’t be so melodramatic. While I believe that the CORE program is unfair to the consumer and provides little incentive for consumers to generate renewable energy because of the rate at which it is purchased by CUC, overall CUC is not raping and violating the consumer. Their rate of return (currently about 9%) is reasonable for the industry taking account of the costs of capital, the risk profile of a small, isolated system in a hurricane zone, and the need to attract investors.
"Their rate of return (currently about 9%) is reasonable"
and yet up to 2008they got 15%, so unreasonable then?
and 15% of direct costs. Insurance is not a direct cost, so any insurance bought before Ivan would have been out their 15% profits, seems to be a big incentive to underinsure, to maximise profits. Then of course the people can pay for that underinsurance when Ivan hit.
Speaking of which, if as the CUC supporter poster says that some of the infrastructure is uninsurable, and as we the people paid for it in excess of our bills, then surely it belongs to the people so why are we now paying extra for the distribution under CORE?
The 15% return on rate base CUC was entitled to under its old licence was in my view unreasonable.
Return on rate base=. the operating income divided by the net fixed physical assets plus working capital.
Insurance premiums are an expense and would have reduced CUC’s operating income and would therefore have been paid for by the consumer indirectly. The consumers would pay either on the front end or the back end. I do not see any incentive to underinsure.
No, the consumers do not own any of the assets. There are two critical facts that are typically missing in these discussions:
1. In 2005 CUC was entitled to a 9.5% increase under its old licence. This would have been a permanent addition to its rates and would not have given consumers ownership of any of the Company’s assets. Rather than a permanent addition to rates the Govt. negotiated a temporary surcharge of 4.7%. Govt. was only minded to allow this because of damage to the uninsurable* equipment. Unfortunately, the mind of the public has been completely confused by the fact that this was the motivation into believing CUC was given a free gift by govt. because it was too careless to insure its assets. This is false. The surcharge helped CUC on its feet again and it was able to supply power at pre-Ivan levels rapidly. It should be obvious that consumers benefitted from that negotiation.
2. Leaving aside CUC’s contractual entitlement to the 9.5% increase, it is industry practice for disaster surcharges to be added to consumers bills where there is massive damage from hurricanes and other disasters. This happened post-Ivan not only in Cayman but also in Jamaica and South Florida. The consumers in thoses cases did not gain any shares in the utility company or ownership of its assets even though the utility companies did not have a contractual entitlement to a rate increase as did CUC.
CORE is a different issue. CUC can do better. The point is not to be defender of CUC, but instead to ensure that the issue is discussed rationally and fairly.
*"uninsurable" in the sense that the premiums were prohibitively high.
A significant part of the "costs" that CUC consistantly claims they sholder in the distribution of electricity in this Island is associated with actual installation of their distribution grid. This claim of the full replacement cost of light poles, wires and other distribution assets in and of itself is dishonest on th epart of CUC. The truth of the matter is that CUC does not even pay insurance on these assets. ALL customers are aware that after hurricane Ivan, we all collectively paid for the replacement of ALL of the equipment damaged, indeed from looking around the Island at the number of extra concrete poles that CUC ordered under this scheme and still heve not used, it is obvious that they took full advantage of this and over supplied themselves, at the expense of us the customers, and spent excessively on all equipment that was replaced.
They are now, under the terms of their liscence with Government, allowedto make a 15% profit for their shareholders on our money, further raping the consumer. Why is this 15% profit not returned to the customers, in the form of credits on your electricity bill, instead of being doled out to shareholders as dividends?
What is worst is the fact that CUC did not do a simple replacement of the damaged distribution network, they upgraded significantly in every area of their distribution equipment. Just look at the expensive concrete poles, the red lights that these poles then required and even the quality of the wire and transformers that CUC forced the consumer to pay for after the damage from Hurricane Ivan. CUC did this because they could then factor in the 15% mark up that their liscence allows and pay the profit out to their shareholders.
It is my opinion that CUC should not be allowed to carry the part of th edistribution network that was replaced by the customers on their books in order to inflate their costs and therefore their profits. These assets are now owned by the customers and CUC should have to pay to the customers a dividend for using equipment that belong to the customers, not their shareholders, unless they are also customers. They should also not be allowed to charge any customer who, through the CORE agreement are returning electricity to the grid for the cost of this grid, unless it is passed on to the customers in general. Further every one of CUC’s light poles that are situated on privately property should return a small payment to that property owner in the form of rent for the use of their property.
Before anyone jumps on the bandwagon lambasting me because if CUC does not own the distribution grid there wil be no one to maintain it, let me explain. There is adequate incentive for CUC to continue to be responsible for the maintenance of this grid and for them to continue to utilise the infastructure they now have in place to do so. This incentive is written into their liscence under which CUC is allowed to provide the service and are guaranteed a 15% profit on the cost of providing such service. This is no different than what CUC now does with the maintenance costs. A 15% profit margin is, in many cases greater than the profit margin that many high volume suppliers are happy to live with. In this case they have the manopily on providing the maintenance and this should be continued, along with their 15% markup.
One thing that is unclear to me at this time is how CUC calculated the cost of CUC generating their electricity. Is this cost a simple calculation based on the amount they charge the customer per hilowatt hour plus fuel surcharge, less the 15% mark up? If this is the way it is calculated, I am not so sure that the cost to the individual, to produce electricity from renewable sources and return it to the grid, by means of the CORE agreement, would be prohibitive. Properly calculated it should certainly not result in the individual paying CUC to put excess electricity, that is being generated anyway by their renewable sources, onto the grid that now exists.
Would it be possible for CNS to let me know how the cost to produce electricity at CUC is calculated? Thanks for your assistance in this quary.
"The truth of the matter is that CUC does not even pay insurance on these assets. ALL customers are aware that after hurricane Ivan, we all collectively paid for the replacement of ALL of the equipment damaged",
False. Much of CUC’s transmission and distribution system was (and is) indeed insured. Certain portions were in effect uninsurable.
"This incentive is written into their liscence under which CUC is allowed to provide the service and are guaranteed a 15% profit on the cost of providing such service".
False again. Before you write why don’t you take the time to actually read CUC’s licence? It is readily available online at both CUC’s and the ERA’s websites. You will that there is no such guarantee. Under their old licence which terminated in April, 2008 CUC was entitled to a 15% return on rate base. Under its new licence, there is no guarantee at all but a 9-11% return is targeted.
When you do not take the time to ascertain your facts before writing you undermine your credibility with respect to your entire contribution. When you do, you may be able to make meaningful contributions that are factually based. It is remarkable that those who are most critical are those with the least factual information.
See <a href=http://www.cuc-cayman.com/Our%20License.htm/”>CUC licences</a>
Nice more BS from CUC – truth is CUC is scared stiff about people independently stepping up to the plate and generating their own power. Why can this not be done without CUC – everyone on this Island can acheive this, the initial costs will be made up before you know it and then you can be free of the corporate corruption. CUC should not have a role to play in people choosing to generate their own power – if the gov’t wants to truly encourage this they can subsidise the cost of setting up renewable energy. There are solar companies on this island why are the gov’t not encouraging them to be used? Come on people don’t believe the hype!! this is your life being messed with don’t be taken advantage off – CUC have been violating the people of this island for decades.
Insurance?
Does CUC have insurance on those poles etcetera that the people paid for after huricane Ivan?