The letter of HRH Prince Tupouto’a on the subject of the high power costs, is informative and historical but purposely refrains from providing any sensible explanation. It did not address the issues, which have and are causing the public outcry over the costs of electricity nor did it attempt to alleviate the general concerns and plight of people who are so adversely affected.
It is not good enough to say that the cost of diesel fuel has increased and therefore the cost of electricity must also increase. Electricity consumers are not totally ignorant on the subject of price increases and the causes thereof. Such simplistic reasoning, borders on the line of being insensitive to the needs, expectations and aspirations of people.
Instead of referring to historical background on global oil prices, these are some of the local issues which require consideration and attention:
1. It is not the cost of diesel fuel that should be stated for public information but the cost of generation of a unit of electricity and the transparency and the accountability of the Shoreline Management.
2. In 1999 the cost of production by Shoreline of 1 unit of kilowatt was 17 cents based on a diesel price of 78 cents per litre. This price took into account the costs of diesel fuel, labour, machinery and others. Shoreline also agreed to accept a further 4 cents per unit to cover profits.
3. Taxes relating to imports of diesel oil were removed and Shoreline, because of its bulk purchases received a special and lower price than the normal retail price. These concessions (except discount on bulk purchases) were not available to Tonga Electric Power Board during all relevant times it generated, distributed and sold power to the public.
4. If the price of diesel oil increased by 50% or 100%, it does not follow that the production costs will increase by the same percentage. The fuel factor in the production cost per unit will increase proportionately whilst the other cost factors remain constant. A price increase of 50% may mean a production cost increase of 10% only. If you apply the converse argument (for demonstration purposes only) namely a price increase of 100% for diesel to equate a 100% increase in production costs it will only increase the cost of electricity to 34 cents. The increase of the profit margin for Shoreline is unknown but estimated to have increased during 1999-2004 by over 500%.
5. People are staggering from the huge and unreasonable salary figures for the 2 directors and 1 executive officer of Shoreline. It is reported that Sefo Manilala receives $500,000 per annum, Soane Manilala $470,000 and Emeline Tuita $370,000 - a total of $1,340,000 ($1.34 million). Compare this with the salary payment of $96,000 for the 3 top executives of Tonga Electric Power Board and the inevitable words are expressed … .”No wonder the cost of electricity is so high!”… . These are the highest salary payments in the Kingdom. A month…s salary for any one of them is greater than the Prime Minister…s basic salary for a whole year.
6. The operation of Tonga Electric Power Board and its assets (value in excess of $24,000,000) were transferred to Shoreline (subject to payment of T.E.P.B. bank debt of $4 million) on the assurance from Shoreline that it will provide electricity for the people of this country more efficiently and at a cheaper rate. National resources and assets are not transferred to private businesses for the enrichment of a few people.
7. The Government payments of between $3.5 million and $4.5 million from peoples taxes to Shoreline to cover outstanding accounts with the oil companies are regarded as unfair handouts. It is reported that the reason why the oil bills were not paid in the first place was because the funds set aside for oil were diverted for the personal use of two of the directors … refer to reports and investigation by media.
8. The recent application for a 13 cents increase in the price of electricity was not supported by any audited accounts to show the loss or profit position of the company and justification for its request. It is alleged that a meeting between the Chairman of Shoreline and T.E.P.B. was held at Hong Kong in October 2004 and as a result an agreement was reached on the price increase.
9. In November/December the “Kelea” weekly newspaper published a list of non-paying electricity consumers … people who use electricity without having to pay for it. The argument advanced under this article is that the poor are paying for the electricity of the rich. Shoreline is a private company and entitled to make its own decisions but it cannot escape the validity of the argument that the paying consumers are bearing the cost of electricity for the non-paying consumers. It is an unfair situation and creating animosity amongst people.
10. Illegal activities relating to duty free imports under the Development Licence of the Shoreline Group, involving the Manilalas and the Hardware firm on Railway Rd, is causing considerable anger to a lot of people. Appropriate answers and actions should be taken. Public perception of the above issues and others not mentioned here are bad indeed and need to be addressed if Shoreline is to regain any public credibility.
Shoreline is a private company but unfortunately a lot of people perceive it as a public utility and expect accountability from it. They regard HRH Prince Tupouto’a as a public person (properly and rightly so). His involvement in Shoreline renders that company subject to close public scrutiny. It is the price that one pays for being Royal and for dealing with a public resource. HRH should look at the above issues and deal with them rather than talking about the causes for the global increase in oil prices and unethical political candidates.
3rd January 2005.
Footnote: - electric power and its supply to the public is a matter of national importance. Its impact on the economy and homes of people is real and considerable. A long term commitment and investment on the production of electricity power requires urgent action to ensure stability, growth and the development of this country.