P.U.C. blacks out B.E.L.’s price hike request; int’l expert to review findings
Belize Electricity Limited and the Public Utilities Commission continue to buck heads tonight over the power company’s request for an increase in rates. On Friday, the P.U.C. announced that even though certain figures were adjusted during the Annual Review Proceeding of B.E.L., in the end, no changes would be made in the prices paid by customers. During an explanation of its initial decision this morning, P.U.C. Chairman John Avery maintained that the Commission’s finding was made according to the Public Utilities Act, the Electricity Act and the Rate Setting Methodology. Most shocking, however, is that the P.U.C. has announced that it has “significantly reduced” the balance of the Cost of Power Rate Stabilization Account from eighteen point nine five million dollars to a mere seven hundred and forty thousand. The CPRSA is the account that holds the difference between what customers pay B.E.L. and what B.E.L. pays its suppliers. During proceedings earlier this year, B.E.L. maintained that it needed to offset that account because of the rising costs of power. But today Avery says all the P.U.C. did to bring down the balance was apply depreciation and return corrections as allowed by the Rate Setting Methodology. The Commission says bottom line, B.E.L. needs to get a handle on its financial operations.
John Avery, Chairman P.U.C.
“What we are saying to B.E.L. is: you’re getting over fifty-five million dollars to handle your business. That can cover B.E.L.’s expense. What B.E.L. needs to do is to see if where they can effect certain savings that might actually leave them with a bigger surplus. Then after that then they can start seeing how they can distribute their profits. But we believe that B.E.L. can meet their expenses and should still end up with a surplus. It just might not be as big as they have realised over the last few years. B.E.L., there is a concern about cash flow. Again, the P.U.C. is of the opinion that B.E.L. can better manage its cash flow. One just needs to look at B.E.L.’s annual reports annually to realise that B.E.L. can do a better job in managing its cash flow. We are not telling them how to run their business. We’re telling them what we think is a reasonable rate to deliver a specific service to their customers. B.E.L. undertakes certain obligations and other commitments within the scope of their business that we see have absolutely no bearing on providing the service. A good example is the one-fifteen KV transmission line from Mollejon to Belize City. B.E.L., at some point—when that thing was set up B.E.L. got that thing for a dollar. It was transferred to Belize for a dollar, one dollar U.S. and the cost of the land was to be recovered through the rates. B.E.L., after Fortis took over, I would say, volunteered to transfer that line into a loan at the original value of the line and then pay it off to BECOL. Now, there can be technical arguments for doing something like that. For example, because the rate setting methodology—and this is something that I think we will continue further—allows the pass through of power. Then having line in the rates you’re paying for power is kinda distorting the true cost of power. So in a sense we do not fully object to moving that line out of the cost of power. However, B.E.L. took on this thing as a loan but we have not seen any corresponding decrease in the rates being charged to B.E.L. As far as we understand, that line took up, basically accounted for twenty-five percent of the initial investment in Mollejon on that line. It would only be reasonable to expect if you’re going to take out twenty-five percent of the investment, we should see something close to twenty-fiver percent being reduced in the rates. Some of the problems B.E.L. is currently facing, to put it in common phrase, they have to spread their own bed. We cannot penalize customers for that; it’s as simple as that. We have to balance the interest of the country with the interest of B.E.L. There are certain obligations that B.E.L. made that as far we’re concerned, has not had one impact on the delivery of their service and in fact has actually hurt B.E.L. in terms of their financial obligations. We’re saying until they adjust those, then you really have no case to put before us.”
In responding to the initial decision, B.E.L. maintained that quote “the P.U.C.’s refusal to increase the R.S.A. recovery fails to recognize the investments required to deliver power to customers and will seriously undermine the company’s ability to deliver quality service.” B.E.L.’s Chief Executive Officer, Lynn Young, is out of the country but he is quoted as saying “the reality is that the cost of providing service to our customers has increased for the same reasons that the cost of fuel at the pumps and the cost of many other goods and services has increased. Our request in the rates reflects this reality”. Young goes on to assert, “if the decision stands, the decision will put the company in an unsustainable position. We had to defer dividend payments, and will be at serious risk of defaulting on our financial obligations, some of which are guaranteed by the Government when the Company was majority owned by the Government”.
When questioned today, P.U.C. Chairman John Avery denied the existence of any “Government-guaranteed loan” referred to by Young. Since B.E.L. has already indicated its intentions to object to the decision, the P.U.C. will now appoint an international independent expert to review the regulated values, the Mean Electricity Rates and tariffs. The expert’s report to the Commission is due by the eleventh of June, with the P.U.C. announcing the final decision on June twenty-sixth.
And while the P.U.C. stood its ground on the Commission’s initial decision, this morning Chairman Avery also cautioned the public that factors influencing their findings now could change by the end of June.
John Avery, P.U.C. Chairman
“The point is the cost of energy keeps going up. People will need to understand that a lot of these things are outside of our control and so conservation becomes a very serious issue. The P.U.C. cannot stand by and see B.E.L. suffer as such and if the rate, the cost of power continues to increase then we will have to respond. And so people need to understand that although we did not allow for an increase in rates in the initial decision, that is absolutely no guarantee that there may not be an increase yet to come. As well, maybe there’s a reduction. We are not promising any way but people need to understand that the cost of power currently is escalating.”
Viewers should also note that any dramatic changes in the cost of power could trigger a Threshold Event Review Proceeding which would also involve a review of rates.
