Whatever
happened to the
Energy Deal?
The
start made in the matter of a fairer distribution of
economic gains in 2007 culminated, after months of arduous
negotiations, into an agreement between the Government and
the Mauritius Sugar Producers Association. The details of
the “historic deal” have regrettably not been made
public to date. What is of particular concern to us concerns
the renegotiation of the Independent Power
Producers-Power Purchase Agreement (IPP-PPA) with the
Central Electricity Board. It was announced by the Prime
Minister months ago that agreement had been reached with the
MSPA on the appointment of an independent arbitrator to
review the Agreement with the objective of removing any
structural flaws in it that might actually be militating
against the public interest. On this issue as well, no
information has been forthcoming as to whether an agreement
has been reached with the Independent Power Producers on the
terms of reference of the independent arbitrator and whether
an expert has been identified, and accepted by both parties.
We
are informed that discussions are indeed being held on these
questions, but it would appear that the private sector would
be dragging its feet with respect to the terms of reference
of the independent arbitrator. This is totally unacceptable
and cannot be allowed to drag on. We are revisiting this
issue again because electricity is of such strategic
importance to the country and we absolutely refuse to remain
imprisoned in suitably made contracts that serve the long
term private interests of only a few to the detriment of the
many.
We
have earlier in these columns referred to the misguided
advice of the World Bank that prompted Mauritius to grant,
since 1998, contracts for producing electricity to a few
Independent Power Producers. The first contract was handed
out in 1998 on commercially risk-less and over-generous
terms. It was assumed that the cost of electricity would be
cheaper in this context, given that a renewable input,
notably bagasse, would be used by the IPPs to produce
electricity, whereas the CEB was largely a thermal producer
using costly imported oil. None of that. The IPPs have
actually based their production on imported coal, the price
of which moves in tandem with that of oil. The wide-ranging
price indexation to which the IPPs have had recourse in
their contracts with the CEB to insulate themselves fully
from any risks and additional costs, have exposed the public
fully not only to rising input prices but also to such
things as to be compensated for the incidence of changing
bank interest rates on the debts of the IPPs and for any
impact of exchange rate variations on their input costs,
etc. The IPPs have even compensated themselves for any
deviation of the rate of inflation in Mauritius relative to
the rate of inflation in Europe in their sale price of
electricity. Annual increases in the CPI in Mauritius also
add up continuously to the price at which the IPPs sell
electricity to the CEB for distribution on the national
grid.
That’s
not all that there is to these contracts: there is also the
condition that, while keeping all the clauses of the
contract intact, the CEB will be bound over the next 20
years at least to buy all the electricity that the IPPs will
produce. This clause by itself confers on the IPPs the
status of market dominant suppliers and makes of the CEB a
subservient acquirer of all their output. In this manner,
the IPPs have made sure to tilt the scales excessively in
their favour to the detriment of the public just for
securing continuous annual returns of 20% or more on their
investments. The “mark-up” that the IPPs have guaranteed
to themselves over 20 years or so have become an additional
burden for the consumers.
The
government had been well inspired to call into question the
lopsided arrangements that favour a handful of owners at the
expense of the majority of the population. The question was
debated last year as to whether the IPPs should re-structure
their shareholding so that the public is given a wider
participation in the enormous profits made. The view was
also expressed that the IPPs’ one-sided contracts should
instead be rationalized in the pubic interest. We had hoped
that government would make haste in this matter and to have
recourse to the arsenal of measures at its disposal,
including taxes, for things to start moving. We are not
aware whether it is contemplating any such action.
We
missed the boat when the present government adopted the
previous Integrated Resorts Scheme (IRS) lock, stock and
barrel instead of reviewing it radically for a more
equitable sharing of the huge windfall gains arising from
the transformation of the use of land. The question that
arises today is: are we going to miss the boat on the IPP
issue as well? For the longer we sleep on such vital issues
of national interest, the more deep-rooted will the
opposition to change become. We never know what is in our
luck tomorrow – the people can allow themselves to be
misled into electing a government with radically different
views than the Alliance Sociale. It will then be too late!
M.R.
|
