~ March 31 loan deadline looms ~

PHILIPSBURG--The Island Government will have to decide on a new tariff structure and concession for utility company GEBE before March 31, for the company to avoid being in default of its loan with Pacific Life and incurring hefty penalty fees.

Managing Director William Brooks and an energy consultant from KEMA briefed the Executive Council Thursday on the proposed new tariff structure that would replace the 50-year-old structure with which GEBE currently operates.

While Brooks outlined the results of intense cooperative work between a government task force and GEBE, the urgency to have the tariffs and concession for GEBE was emphasised to the Executive Council.

By agreement with its lender Pacific Life, GEBE and by extension the Island Government had to ensure that a new concession for the company would be in place by January 31, one year prior to the expiration of the current concession.

Realising that this was not going to be achievable, a delegation led by Commissioner in charge of energy Theo Heyliger travelled to California on December 22 to meet with Pacific Life to request an extension of the January 31 deadline. Heyliger was joined by GEBE board chairman Julius Lambert, interim Managing Director at the time Paul Marshall and a legal representative.

The delegation was successful in securing an extension, but only until March 31. The onus now lies with the Executive Council to grant GEBE its concession before March 31. The new tariffs have to be included in this concession and both will have to go to the Central Committee and ultimately be ratified by the Island Council.

Pacific Life will not maintain an agreement with GEBE without risk protection and, in all likelihood, will start issuing penalty-fees if March 31 passes without a concession in place.

Brooks and the KEMA consultant explained that the basis of the new tariff structure was to make electricity billing less sensitive to fluctuations in the worldwide price of oil, by operating with a fixed base rate. This base rate will also consider GEBE's operational cost, projected investments, etc. A base rate will also negate dramatic swings in the fuel clause if the price of fuel rises or drops. In other words, consumers will be billed much closer to what they actually use per month.

The Executive Council, among other things, also was provided with a history lesson regarding the tariff structure from 1960 and what had happened in 2004 when GEBE started billing the fuel clause based on the use of less-expensive fuel. GEBE believed the message and presentation had been well received by government and hopes to move forward soon with the tariffs and concession.

KEMA is a leading global authority on energy consulting, testing and certification, which is active throughout the entire energy value chain. It plays a major role worldwide in ensuring the availability, reliability, sustainability and profitability of energy and related products and processes. KEMA combines unique expertise and facilities to add value to its customers in the field of risk, performance and quality management.