From the Parliament Wrote:In the process of discussing the Electricity Bill which was passed by Parliament on Monday and is to be known as the Electricity Act 2007, Ministers also responded to some of the issues raised by some of the people’s representatives regarding the electricity sector.
In general, the people’s representatives were supportive of the Bill and the proposed return of electricity generation and distribution to Government but a few concerns were raised.
‘Akilisi Pōhiva, Number 1 People's Representative (PR) for Tongatapu, told Parliament he was thankful for the impending return of electricity to Government but expressed concern with
i) the valuation of Shoreline and
ii) the mutual agreement between Government and some People’s Representatives during their meeting with the Prime Minister that an independent body review and report on the financial status of Shoreline as well as Shoreline’s other assets.
The Minister of Finance responded by saying that Price Waterhouse Coopers did a valuation last year prior to November 16th... The Minister of Finance also indicated that Government is now awaiting the valuation of Shoreline by the International Accountancy Firm Deilotte and the report is expected within the next week or so..
It appears that the minister may be evading or circumventing the truth here.
Yes a Price Waterhouse Coopers actually did a valuation-
BUT the valuation was NOT based on the actual value of the assets.
The Scope of the contract that PWC was given advised that they were to review and audit the invoices and expenses that were provided from Shoreline Group.
Although this is not open to the public, the essence of the "Valuation" was to review the costs that Shoreline has SPENT according to invoices provided to PWC, then PWC was to determine the value of the Generation.
So what the minister is saying is only a half truth.
The valuation was not done in accordance with international standards that determine the value of infrastructure or electrical assets.
PWC although being auditors and accountants are not the correct chioce to detemine the value of infrastructure. Generally independant consulting engineers are those that perform this type of work, as they are the ones that have the understanding of the costs and items that go with the infrastructure.
For all we know, Shoreline may have submitted invoices for their Tonfon system which has nothing to do with its generation.
This would have artificially inflated the "value" of the generators.
So the most obvious and accurate method of valuing the assets is to have an accredited valuation expert or consultant to provide a valuation of the generators themselves.
The reason for this is as follows:
Say that you purchased an old car (10 years old) for $1000.00 it has rust, damaged engine, bald tyres and poor breaks.
You spend $2000.00 fixing the rust, $400.00 on new tyres, $500.00 on new breaks and $800 on fixing the engine.
You still have a car that is 10 years old. It cannot be valued at the cost of $4,600.00 (Being the cost you purchaed it for and all the additional repairs that you made to it) You car is still only worth marginally more than what you paid for it.
Open and Transparent Appointment Process
From the Parliament Wrote:...‘Uliti Uata was supportive of the Bill but was not supportive of Clause 6 which sets out those who has the authority to appoint the Commissioners.
“In Clause 6, the Hon. Minister appoints the members of the Commission then is passed to the King to approve. I propose that we give this responsibility to some who are more independent. I propose that this responsibility be given to Parliament.” Uata also raised the issue that it was not necessary to spend money on using services of those who are currently doing the valuation.
Taumoepeau told the House that the appointment of the Commissioners is the responsibility of the Executive Government and the King is the Head of the Executive Government and is in accordance with the Constitution. The involvement of Parliament will require changes to be made to the Constitution. She also said that International firms were being tasked with the valuation as they are independent and have international expertise and experience in this area of work.
Things never change in the Kingdom-The king will appoint a number of commissioners to regulate the power industry.
In the TEPB he appointed a coffee grower, a minister, a former Scottish Lawyer, and a few other close...urr friends to regulate the power industry and to pass on price increases to the public. What does a coffee grower, a retired laywer and a government minister know about power generation?
Conflict of interest here? The king owns the power and appoints the commissioners to pass on price rises to the public? ‘Uliti Uata I give you 10/10 for challenging this.
The commissioners should be independant and have a sound background in the power distribution and generation industry to understand all the costs and affects.
So when Mr Shoreline comes crying to the commissioners saying
''The price of fuel has gone up...I want to pass on the cost to the consumer.." The commissioners can say..."
What have you done to mitigate that increase yourself? Have you cut costs, improved productivity, reduced your number of employees, reduced overheads?? In reality the ownus of the regulator is to protect the interests of the public and ensure due dilligence from the power operator...but this has never happened, and unless power is given to the new commission and the commissioners are experienced in this field....it will fail again and Tonga will see the cost of power increase yet again....or the operator will go broke and walk away leaving no power for Tonga.
An experienced commissioner cannot have the wool pulled over his eyes and will prevent these things from happening.
Then there is the appointment of those commissioners. It appears from what Taumoepeau is saying, that the king will appoint them.
Here we go again.. Appointments without due process and transparency!!
When will the government learn to do things the correct way? Looks like we are headed for another Public Service Commssion all over again.
I wonder if Miska Taufa, Taiatu Cocker and Mr Palangi OE will also be commissioners of the power industry too?
More on Valuation of assets
Like I said above Taumoepeau, it is you who are saying that a valuation is independant. That does not mean the valuation of the assets is
accurate. here is a huge difference
What you Taumoepeau have not yet told us is that the valuation is not independant as its either the government or Shoreline that
has give the Scope to the valuer. This is not independant!
The devil is in the details as you would say. That scope defines
HOW the assets will be valued. If the scope says to review the cost of the generators based on the number of coconut treess sourounding the generators, then that becomes the basis for the valuation.
If the scope is to review a list of expenses and invoices that are in the posession of Shoreline and from those, then provide the valuation, then so the valuation shall be done!
Mr Vaipulu's comments regarding the new act:
Mr Vaipulu Wrote:Vaipulu regarded the new Act as appropriate as it provides regulations for regulating the operation of the company that would be generating and distributing electricity. It also provides an avenue through which the people’s concerns can be heard, that is people can convey their concerns to the Commission via the Minister hence something can be done to address the problem. Vaipulu said that this is not the case in the private sector.
Ahh Mr Vaipulu from Vava'u...
If the new act allows for things the old act does not, why do you need a new act? You could have just amended the previous TEPB act to include this avenue that you are now advocating.
In any case, does the new act allow for those that have grievances to have a case heard? Or does the new act just allow someone to write an angy letter to a minister, only to be used as scrap paper?
Are the commissioners going to be independent? What are the roles of the commissioners. What avenues can the public take for unjustified power price increases? Will there be a code of conduct that specifies for a maximum number of "Customer Minutes" that the power can be interupted for over a year? Or does the operator just decide when the power is turned on or off? Who determines the costs for getting a new power connection to a house that has no power lines in the street? Are there any cost sharing facilities with the following person that benefits from a newly installed power line to a neighbours house? Or does the second customer not have to pay anything and the first customer pays the total cost?
Deregulation works well where there is approrpiate controls in place Mr Vaipulu. The problem is that under the current act of the TEPB, the act fails to protect the consumers against the unjust machinations of never ending price rises by Shoreline.
Each time the cost of fuel goes up, Shoreline write a letter to the TEPB and request the cost of power to also increase.
This is not the case in any other business. The cost of a product is based on materials, wages, efficiency, maintenance of the system fixed costs and variable costs.
It is
NOT sufficient to increase your product cost (in this case the cost of power) on the basis that just one single fixed cost has increased. THIS IS ABSURD! And no other industry is doing it.
The act should stop this activity, not promote it. And it should provide a fair system whereby the cost of power connections to new developments is equitable and fair...and of course to promote the development of business.
Taumoepeau Wrote:... but North Power was given the opportunity to make their own valuation, and in the interim agreement (now void) between Shoreline and North Power prior to November 16th, the unofficial value was US$25 million
Ms Taumoepeau - Not totally true.
The
government was going to buy Shoreline generation from Shoreline for US 25 million and
on sell it to North Power for much less, leaving the balance to be paid by the tax payers.
The reason this failed has nothing to do with 16/11.
North Power had a contract of sale. The contract stated that this
ShorelineSell-GovernmentBuy-GovernmentSell to NorthPower arrangement had to be passed in parliament before 16/11.
This was not passed prior to 16/11 and as such the contract was then not legal, as such North Power withdrew its offer. In reality, the government did not pass the legislation to buy the power from SL...nor did it have the money!
The interesting point of this is that the 2 people responsible for getting the agreement togther were the King and his Indian Prince, Mr Manilala.
But I suppose this raises an important issue.
What is the true valuation of Shorelines Generators?