Minister of Communications, Works and Infrastructure, the Hon. Arden McLean, JP, signing the new CUC licence agreement.

After lengthy negotiations, the new licence for Caribbean Utilities Company Ltd (CUC) to provide power to Grand Cayman was officially unveiled last Thursday, at the weekly Post-Cabinet press briefing.

Describing it as an “historic day,” Minister for Communications, Works and Infrastructure Hon Arden McLean gave details of the finalised agreement, which runs for 20 years plus an additional 18 months to cover the installation of a new 16 megawatt generator for North Side in 2009.

The major change is the ending of CUC’s generating monopoly, opening up the island to possible competition in the generation of electricity.

In the new licensing agreement, the generation of power is separated from transmission and distribution (T&D), a field in which CUC still has exclusive rights for the next 20 years.

Explaining the latter move, Mr McLean pointed out that having more than one T&D provider would cause many problems, with the potential for the landscape to be blighted by the presence of duplicated systems of power lines.

As part of the new licensing agreement, a new Electricity Regulatory Authority (ERA) will soon be created. This will have extensive responsibilities as the new arrangements come into force, including setting targets for emissions.

Within CUC, the posts of the three government-nominated directors will be abolished and the guaranteed 15% rate of return (ROR) has been reduced to a figure between nine and 11 percent, with an average of 10 percent.

Mr Mclean opened his remarks by saying, “Consumer rates for power have already come down substantially as of January of this year and the hurricane recovery surcharge was removed completely. Working with CUC, we have provided in these documents for a solid long-term framework for the further benefit of consumers, in which we will control rate increases; maintain reliability; introduce competition in generation; require performance standards; strongly encourage renewables; ensure proper regulatory oversight; enhance environmental protection; and encourage efficiency. This will all be done while also providing for CUC’s continued financial health. I would like to express my appreciation for the continued support of the Leader of Government Business, the Cabinet and the hard work of the negotiating teams that have brought us to this point.”

He then outlined moves, made by the government at the beginning of 2008 during the negotiations, which had reduced the cost of electricity to the consumer, referring to the reduction in the basic billing rate, removing the Hurricane Ivan surcharge and giving a 20c rebate on the 50c per gallon duty charged to CUC for their diesel fuel.

Mr McLean, backed by CUC President and CEO Richard Hew, then gave full support to plans that would promote the use of solar and wind energy to generate electricity. Included in these moves are the potential for consumers to contribute power, and reduce their bills, by selling surplus electricity back to CUC, using a system known in the USA as “grid-tie.”

However, during a question and answer session he said there were no plans to provide financial incentives, such as reduced import duty on equipment such as solar panels, citing fear that importers would take the savings and not pass them on to customers.

Despite this, he did explain that there was a process for private individuals to apply for exemption from duty on renewable energy sources.

Mr Hew and Mr McLean responded to a query about plans to generate power by Ocean Thermal Energy Conversion (OTEC) indicating that, following their visit to a potential supplier in Baltimore during July 2006, there had been no further progress on the project, although it was still a possibility.

Mr Hew also said they were looking at the possibility of running CUC’s generators on biodiesel but said liquid petroleum gas (LPG) was currently ruled out by the storage costs.

Summing up the new agreement, Mr Hew said, “I am pleased to be a part of the achievement of this important milestone in CUC and Grand Cayman’s history. The new licences and regulatory structure provide the level of certainty required for CUC to execute the long-term plans and make financial commitments necessary to ensure that residents and businesses in Grand Cayman can continue to look forward to a highly reliable and efficient electricity service. I would like to thank our resigning directors, Philip Barnes, Sheree Ebanks and Anna Rose Washburn, for their dedication and input throughout their tenure as company directors. Finally, I would like to thank the many persons who have contributed significant time and effort to realize the positive outcome of the negotiations.”