Articles

Fri 26th Aug 2011

Vinlec's $13.831 million dollar secret!

Mr Ivan O'Neal, Leader of SVG Green Party, is a university graduate in finance from Oxford Brookes University, England. He also has a Masters Degree in Budgeting and Macro-economics, and a Masters Degree in Business Administration.

SVG Green Party has analysed Vinlec's 2009 financial statement and strongly recommends that Vinlec adopts a price discrimination strategy. For example, customers that use low amounts of electricity (fewer than 150 units) should be charged a reduced rate for electricity, such as 25 cents per KW, rather than the present 50 cents per KW as for all customers.

This price strategy will reduce the number of families being disconnected, help low income families, encourage efficient use of electricity and help stimulate growth in SVG's weak economy.

In Vinlec's 2009 financial statement, income was $102,691,735. However, Vinlec's net profit was was only $2,028,135. This shows that Vinlec's operating costs expenses were 98% of income. This is totally unacceptable and unbelievably inefficient. Vinlec has a monopoly on electricity production, so for it to be operating with expenses at 98% of income, shows that something is seriously wrong at Vinlec.

We are absolutely dumbfounded that Vinlec has been allowed to operate so inefficiently and fund this inefficiency by charging its customers outrageously high prices for electricity. Why has the Minister of Finance - Gonsalves, since 2001 - remained silent and allowed this to happen for so long?

Vinlec's purchasing department uses the term fuel costs, whereas, the auditor used the term diesel generation. This type of difference in description makes it very difficult to track costs. It would be advantageous to Vinlec customers if a different firm of auditors audited Vinlec's annual financial statements.

In 2009, sales went down by $30 million compared to 2008, yet administration costs went up by $3 million in 2009 compared to 2008. Costs are not properly controlled because Vinlec has a monopoly. Vinlec's inefficiency results in astronomically high prices for its customers.

We are very concerned that Vinlec is holding $6,248,145 which it owes to its customers. Vinlec customers are asked to pay for the poles for line extensions if there is no pole where a customer's house is. However, when more, newer customers start to use that same pole, the newer customers are asked to contribute towards the cost of the pole.

This contribution is meant to be paid back to the Vinlec customer who first paid the whole amount of the pole line extension. It seems that Vinlec has collected $6,248,145 of contributions for pole costs, but not paid the money out to the customers who are due this refund. No doubt Vinlec is getting interest on this money.

In Vinlec's 2009 financial statement, there are 'other expenses' totalling $13.831 million. There is no break down shown for these mysterious expenses. Why is there so much secrecy regarding Vinlec's finances? These other expenses are over 13% of Vinlec's income and Vincentians are paying for this. We should reduce everyone's bill by 13% and do away with these mysterious other expenses. Fewer families would be disconnected then.

An SVG Green Party government will phase out oil and turn to renewable energy. This way, electricity will become virtually free and all families, even poor ones, will have access to electricity.

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