Ending Grenlec’s Monopoly

Arley Gill

by Arley Gill

Energy liberalization refers to the liberalization of energy markets, with specific reference to electricity generation markets. Liberalization, in this context, is aimed at bringing greater competition into electricity markets in the interest of creating more competitive markets and reductions in price.

The European Commission in 1996, 2003 and 2009 promulgated some directives favouring liberalization of the energy market. Other countries like Argentina, Chile and the United States have followed similar paths.

The process of liberalization by governments is always controversial. What it does, is to put the government on a collision course with the company enjoying the monopoly in the existing arrangement that liberalization aims to change. Naturally, conflicts arise because there are competing interests.

In Grenada’s case, Grenlec — a subsidiary of the Florida–based WRB Enterprises — is the current monopoly in the local energy sector. Clearly, Grenlec wants to protect their market and, by extension, their guaranteed profit. Grenlec now has no competition and is the only player in the field.

The Grenada Government wants to invite competition with the guaranteed benefit of reduction in prices for the citizenry it represents. Moreover, with energy being a quintessential factor in economic production, the government is seeking to encourage investors. Those arguments aside, and despite the NDC government’s selling Grenlec cheaply to WRB more than two decades ago, it is important to appreciate that the present administration is doing the right thing by liberalizing the energy market.

As a former NDC member, I never defended the charge that it was a bad sale. Scholar, in one of his popular songs, put it succinctly: “NDC sold Grenlec for a snow ice change.”

I read somewhere that the then NDC administration was in a weak bargaining position, with the utility company experiencing frequent power blackouts, having substandard equipment and being heavily indebted. That may well have been so but it’s hardly a justification for the cheap sale of Grenlec.

Any skilled administrator or negotiator knows that you have to strengthen your bargaining position before you could sit across the table from a financially stronger prospective purchaser. In other words, a short to medium–term strategy had to be implemented to remedy some of the deficiencies. That would have required some capital injection and first-class human resource personnel hired on a short-term basis. After all, no one was holding a gun to the head of the NDC leaders of the day. It was a bad deal — pure and simple.

I remember when I was an NDC mouthpiece I avoided that Grenlec issue, never spoke on it because to defend it I fear I would lose political credibility in other arguments; so, I strategically left it alone. I do not want to get sidetracked with that debate, though, because I consider it water under the bridge and we need to look to the future.

Let us consider the merits of liberalizing the energy sector. One may recall before the liberalization of the telecommunications sector, consumers had to pay even when they received a cell phone call. I remember as well, before Courts retail store entered the Grenada market, refrigerators and stoves were less accessible to lower-income families. There is no doubt that liberalization and new investment can benefit the citizenry.

Grenlec is fortunate, in the sense that they are already in the market; this is an advantage they have over prospective new competitors. In my view, WRB and Grenlec should be strategizing on how they can maximize that advantage, which to my mind, Cable and Wireless was tardy in doing in the case of the liberalizing of telecommunications.

I know that a few years ago Grenada and St Lucia received monies to assist in setting up a sub-regional electricity regulatory authority, such as what attains with ECTEL in the telecommunications sector. Liberalization of the energy sector was a long time coming.

Even if there are some emotions involved, to me it is nothing personal between WRB and the New National Party government. Trade Minister Oliver Joseph said it well, “We want Grenlec to remain and compete.” But Grenlec, as a player, cannot write — or seen to be writing — the rules of the game that they will have to compete in.

Opening up the energy sector is the right policy decision. There may be teething problems in its implementation; but, that is to be expected.

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