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NGC’s missing $10.6+ billion

Thursday, February 1, 2018

The National Gas Company (NGC) lost a whopping $10.6 billion on gas sales from 2012-2016. (Data taken from Energy Efficiency in the Power Generation Sector in T&T by Dr Thackwray Driver, president and CEO of Energy Chamber of Trinidad and Tobago). This is due to selling gas at submarket rates to the Trinidad and Tobago Electricity Commission (T&TEC).

All electricity in T&T is generated from natural gas. T&TEC sells among the cheapest, most subsidised, electricity in the world. This is only possible because of ultra cheap gas. At some point in the past there was a contract between NGC and T&TEC for NGC to sell gas to T&TEC at a price of around US$1.35 per million Btu (MMBtu). Compare this to the Henry Hub natural gas price of US$2.81/MMBtu or the more than US$4/MMBtu that Caribbean Nitrogen Company (CNC) CEO Jerome Dookie says his company is “willing and able” to pay for gas from NGC at current ammonia prices.

This contract ran out but NGC continues to supply gas to T&TEC at that price. By convention T&TEC gets all of the gas that they need to supply Powergen/TGU and Trinity Power. While Point Lisas plants are shorted and forced to close down, T&TEC gets full supply.

Legally NGC could just refuse to supply this gas, but then there would be massive power cuts, the Government would be blamed and the NGC board and management would be fired.
It’s clear that NGC’s contracts should be open to public scrutiny as the lack of transparency benefits no one.

The opportunity cost of the lost revenue: $10.6 billion could have paid five times over for the installation costs of the Government’s target of 195 MW utility scale renewable energy by 2021. This could take place while the revIfenue generating petrochemical industry continues to hum. With limited and declining oil and gas reserves the nimble must choose wisely.

Energy subsidies were introduced to spread oil and gas wealth among the population but evidence-based proof shows that energy subsidies increase inequality and harm the overall economy.

Electricity subsidies transfer wealth from the poor to the rich. The wealthy have large, energy intensive homes with multiple air-conditioning units, clothes dryers, hot tubs and so on. The poor have a light bulb and, if they are lucky, a fridge. The top 20 per cent income earners get six times as much subsidy as the bottom 20 per cent. The Government must protect society’s vulnerable. This can be better done through targeted subsidies and pursuing policies that result in sustainable economic and job growth.

Energy subsidies deprive the treasury of funds and must be financed through extra taxation, higher national debt or cutting productive public spending on infrastructure, education and health. There is a direct link between Finance Minister Imbert’s taxation drive, foreign exchange shortage, potholes, unpaid teachers, medicine shortages and the electricity subsidy.

Energy subsidies discourage investments in energy efficiency, renewables and energy transmission. T&T has a commitment to generate 10 per cent of its electricity from renewable sources by 2021 but great savings can be made immediately by incentivising consumers to use less electricity. The best way to do this is to introduce market forces. In the United States the cheapest electricity rates are approximately three times as much (US$ 0,12 per KwH as the rate that T&TEC (US$ 0,04 per KwH) charges customers. This is be an indication of what the unsubsidised price of electricity could be.

T&TEC customers will groan at increased electricity prices but they will also do like consumers do all over the world: economise, reduce waste and adjust their habits. In the short to medium term they and the country will benefit. Scrapping electricity subsidies is an investment, not a burden.

Trinidad and Tobago has the world’s second highest per capita greenhouse gas footprint. As a Small Island Developing State (note the “D” for developing is still there after 150 years of oil exploitation) T&T is vulnerable to climate change and sea level rise. Less electricity from natural gas means less carbon dioxide emissions. Good economic theory and good environmental practice both have the same principle: the abhorrence of waste.

@Marc de Verteuil is the founder of environmental advocacy group Papa Bois Conservation and a freelance writer on environmental matters and climate change


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