P.U.C. explains electricity rate reduction
On Wednesday, the Public Utilities Commission announced that they had made an amendment to the June 2008 annual review proceeding final decision. The big news coming out of the amendment was that the there will be a twelve percent reduction in rates for consumers for the first six months of this change. At a press conference today, P.U.C. Chairman John Avery explained that the decreases were as a result of a new rate setting methodology instituted in September which requires that the reference price of power be set twice a year. The effect of this is that B.E.L. is able to collect the funds it spends in a faster time and that what consumers pay will better reflect variations in the economy. A big contributor, however, was the dramatic reduction in the cost of fuel which undermined the revenue forecast set in that 2008 final decision. As such B.E.L. now owes the public seventeen million dollars, which the P.U.C. has decided to recover through the rate reduction… and if prices continue along this same route, Avery says another decrease is not out of the question.
John Avery, Chairman, P.U.C.
“The price of power is a pass through cost item. In other words, B.E.L. is not allowed to make any mark-up or suffer any losses as a result of the cost of power. And so if we set a reference price for power and it turns our that B.E.L. pays a higher average than the price we set, the rate setting methodology requires that we make an adjustment for B.E.L. to recover. Conversely, if the average price that B.E.L. pays becomes less than the reference price of power that we set, then B.E.L. has to rebate that difference to consumers through rates.”
“Starting from January we have a lower forecast sale of power than we do for the forecast cost of power. That is a result of the rebate from the seventeen million so those differences month to month are expected to eat down that seventeen million by the end of 2009. We could have done it for it to be recovered by the end of June, which would have resulted in even lower rates. However, there is much uncertainty with respect to the price of fuel, where it is going and so we decided to be prudent and let us look at it over a whole year period. We wouldn’t want to be adjusting rates every other month. We would like to see these things hold, that we don’t have to touch the rates until July, but we will review it month to month and if conditions stay how they are right now—price of oil stay around say forty dollars a barrel—then perhaps around March we will seriously consider making a further adjustment to bring down the cost of power just a little more.”
And while B.E.L. did not comment on the amendment, because they are challenging the 2008 final decision in court, Avery says he can’t see why they wouldn’t be pleased with the P.U.C.’s latest decisions. And on the issue of whether the P.U.C. can make changes while the matter is before the courts, Avery says they were not given any indication that they could not.
John Avery
“The Supreme Court has the prerogative to stay the decision based on whatever conditions they determine, but that was never done… B.E.L. never requested that the decision by stayed to the Supreme Court and until the court rules otherwise, that decision is enforceable. We her at the P.U.C., we have a serious responsibility to this entire country. We cannot sit back and wait on what implications anything will have on any court case. Our decision—we make decisions to benefit everybody in this country and really what impact it has on that court case is of no significance or interest to us. As far as we are concerned, we made a reasonable final decision, we will defend that to the death if we have to and we will do our best to make sure that decision stays.”
Victor Louis, Director of Electricity
“The law gives us a requirement to get things done. The court has their authority, but the P.U.C. is not in a position to do nothing, we cannot.”
John Avery
“We’ve increased the portion of the rates that accrue to B.E.L., we’ve increased the return. I can’t see why B.E.L. would have anything against this amendment. The cost of power has gone done, it is only reasonable that we reflect that in the rates. We’ve increased the value added of delivery, that is the portion of the rates that accrue to B.E.L., so I can’t see why B.E.L. would object.”
In addition to increasing B.E.L.’s rate of return by two percent, other amendments were made to the way that utility handles the funds it uses for expansion and maintenance services.
