PHILIPSBURG: --- A detailed evaluation has delivered a stark warning to St Maarten: proposals to lower the fuel component of GEBE's electricity tariffs could trigger a "crippling effect" on the utility's financial stability and future operations. The comprehensive report, conducted by Reporting, Controlling and Regulatory Consulting B.V. (RCRC), was commissioned by GEBE's management to analyze a prior evaluation by the Regulatory Authority of Curaçao (RAC) that suggested tariffs could be reduced.
The RCRC analysis methodically dismantles the basis for a tariff reduction, cautioning that such a move would be premature, risky, and based on flawed assumptions. It calls for a complete and integrated overhaul of the entire tariff structure rather than a piecemeal adjustment that could jeopardize the island's essential services.
A Biased Approach and a Cautionary Tale
A primary concern raised by the RCRC report is the "biassed approach" of the initial RAC investigation. RCRC argues that the RAC's objective was narrowly defined "to determine whether the fuel component can be reduced," which inherently steered the research toward a predetermined outcome. This mindset, the report states, disregards the critical need for a balanced approach that protects both consumer interests and the utility company's sustainability.
To underscore the potential danger, the report draws a direct parallel to a similar event in Curaçao in 2011. There, a government-backed decision to lower the fuel component pushed the local utility to the brink of bankruptcy, necessitating a government bailout, a subsequent tariff increase, and a long-term recovery charge for consumers. The report grimly notes, "Each time history repeats itself; the price goes up."
Cross-Subsidies Mask Deeper Financial Issues
A central finding of the RCRC evaluation is the existence of a significant "cross subsidy" within GEBE's current tariff system. The report reveals that GEBE's ability to achieve a reasonable profit in 2023 was not due to its base tariff components, which are meant to cover operational costs, investments, and a reasonable return. Instead, the profits were generated almost entirely through the fuel component.
This indicates that the base rates for electricity and water are fundamentally insufficient. Lowering the fuel component without a simultaneous, carefully calculated increase in the base rates would, according to the report, "unquestionably have a perilous effect on the company’s sustainability." The analysis quantifies the risk, estimating that one proposed adjustment—omitting the cost of electricity used for water production from the electricity tariff—would slash GEBE's annual revenues by approximately XCG 9.2 million.
Outdated Decree and Flawed Assumptions
The investigation uncovered that GEBE's fuel clause for water production is governed by an outdated Ministerial Decree from 1979. RCRC asserts that the RAC's analysis misinterpreted this decree, leading to the incorrect conclusion that certain costs were being charged twice to consumers.
Based on this erroneous assumption, the RAC recommended eliminating a component of the electricity tariff. RCRC rejects this recommendation, concluding it is based on a misunderstanding of the legal and financial framework GEBE operates under. RCRC strongly recommends that the outdated 1979 decree be formally rescinded and replaced with a modern, transparent calculation model that accurately reflects GEBE's current operational realities.
How Sint Maarten's Rates to provide context, the RCRC report includes a benchmarking analysis comparing GEBE's utility rates with those of Curaçao, Aruba, and Bonaire.
- Electricity: The comparison shows GEBE's electricity tariffs are competitive. For residential, commercial, and large industrial users, Sint Maarten's prices are in line with Curaçao's and generally lower than Bonaire's, despite Sint Maarten's smaller population and reduced economies of scale. The report concludes that GEBE is not overcharging customers for electricity.
- Water: The water tariff comparison reveals a significant imbalance. While residential water rates in Sint Maarten are substantially lower than on the other islands, commercial and industrial customers face dramatically higher charges. This disparity, the report argues, highlights the urgent need for a holistic review of the tariff structure.
The Path Forward: A Call for Comprehensive Reform
The RCRC report's ultimate conclusion is a call for caution and comprehensive reform. It strongly advises against any immediate, isolated reduction in the fuel tariff. Instead, it puts forth several key recommendations:
- Conduct an Integral Cost of Services Study: GEBE must perform a profound analysis of all its tariff components for both electricity and water to establish correct, balanced, and sustainable rates.
- Revamp the Tariff Structure: The entire tariff system, including both base and fuel components, should be restructured simultaneously to eliminate cross-subsidies and ensure all costs are correctly allocated.
- Replace the Outdated Decree: A new, ministerially approved framework for calculating the fuel components for electricity and water must be created to replace the 1979 decree.
- Incorporate Efficiency Norms: While agreeing with the RAC on the need for efficiency norms, RCRC recommends that these be constant and predictable to avoid volatile fluctuations in consumer bills.
The report serves as a critical advisory, urging policymakers to look beyond a superficial tariff cut and instead commit to a foundational restructuring that will secure the long-term financial health of GEBE and guarantee reliable utility services for Sint Maarten.
