Many of you have expressed concerns over the Interim Government’s proposed Carbon Tax, and rightly so. Many persons are concerned about (1) the efficacy of this new tax, (2) what it will do to the price of electricity, (3) the future generally of the utility industry in these Islands.
PPC became aware of the proposed Carbon Tax on Tuesday of this week (5th April 2011) through the Government Information Service’s Press Release. There were no prior consultations or advanced notice from the Interim Government, even though the Chairman and the CEO of PPC paid a courtesy call on the Governor and senior staff as recently as the 25th March 2011. Consequently, we are still assessing the likely impact of such a Tax on our customers, on the Company, and on the Country, if it is to be implemented. As far as we can tell, a Carbon Tax does not exist anywhere in the Caribbean, and we know as a fact that it does not exist in the United States and Canada.
What we can say at this stage is that the Interim Government’s proposal to impose a Carbon Tax on electricity generators is based on the false presumption that doing so will “encourage the generating companies to review their generating efficiency and mix of sources, including from renewable technologies, over time.”
The Carbon Tax according to this proposal is to be paid directly by PPC and its shareholders, to finance a waste management program. This is grossly unfair, violates basic and long-established regulatory principles, and will, in fact, discourage improved generating efficiency and renewable energy investments.
The Interim Government’s assertions run counter to basic principles of both economics and finance. Apparently, the Interim Government does not realize that the funds needed for investments in renewable energy resources and improved operating efficiency come directly from PPC’s earnings and its ability to raise capital. Arbitrarily reducing PPC’s earnings is not only grossly unfair to PPC’s investors, but it will reduce the funds available to PPC for further capital investment. Since acquiring PPC in 2006, our parent company, Fortis Inc., has reinvested all of PPC’s profits (plus tens of millions of dollars more) back into PPC, in its commitment to build a modern, reliable, and environmentally responsible utility company in the Turks and Caicos Islands.
By effectively expropriating millions of dollars from PPC, the Interim Government will raise concerns from future investors, thus raising the costs of borrowing funds and reducing access to capital markets, not only for PPC, but for all TCI businesses. Such an outcome will lead to higher electric rates and lower overall economic growth, hardly a recipe for economic recovery.
We understand the dire straits Government has gotten itself into financially. However, this Tax is not the way to solve Government’s financial difficulties. We hope to work with the Interim Government and persuade them to this effect.
We will keep you apprised.
PPC Ltd
