FTC – No control over rising international fuel costs

Even if the Fair Trading Commission (FTC) were to reject the Barbados Light & Power Company’s (BL&P) current request for a rate increase, local consumers could still have to bear the cost of rising fuel prices originating on the world market.

Chief Executive Officer of the Fair Trading Commission (FTC) Marsha Atherley-Ikechi told Barbados TODAYthat the BL&P’s application does not require the utility regulator to make a determination on fuel costs to customers.

However, Atherley-Ikechi gave the assurance that the FTC can ensure that the power company is using its fuel in such a way that would avoid consumers having to pay excessive bills.

“What we have done is to ensure or seek to ensure that they are using the fuel efficiently. So what we did a couple years ago was to introduce a sheet rate determinant where, where it goes beyond a certain threshold, they would have to retain some of those costs associated with that,” the CEO said.

She made the point that it would benefit the power company to have an efficiently operating plant so it could keep the use of its fuel as low as possible.

Atherley-Ikechi explained that apart from an application for a basic rate increase, the Barbados Light & Power (BL&P) had also sought the FTC’s approval to employ fuel-hedging.

“What they have before us as well was a fuel-hedging application which sought to address the issue of volatility in the price of fuel. We made a determination on that. We allowed it with certain constraints.

“What has happened there is that they had asked for a motion to review that particular application [hedging] and that is also under consideration at this time. The general rate application has no bearing on the direct fuel costs,” the CEO declared.

Hedging in this case seeks to lock in a price for fuel for a specified period to reduce the risks associated with possible rapid and unpredictable increasing prices.

“What we are doing, we are addressing the application as is. The speed with which we make a determination, will impact the overall rate. But fuel as it stands, which is the critical thing, regardless as to whether we make a determination now, we are not required under this application to make any determinations relative to fuel costs,” Atherley-Ikechi told Barbados TODAY.

The CEO stressed that fuel right now is a “complete” pass-through to customers.

“So whether it is $70 per barrel or $80 per barrel, that will continue to be passed through to customers. The commission has no remit in terms of setting fuel prices. That is set on the international market, outside of the complete ambit of the commission. That is a negotiated position between the BNOC [Barbados National Oil Company] which is the importer of gas and the Light & Power; and Light & Power has little control over the actual pricing as well,” the regulator declared.

She argued that the FTC is a small player in the global scheme of things and does not have the economies of scale to leverage “anything” on that scale.

“What obtains on the international market would pass through, just as it is with bottled gas and kerosene and gasoline. The application that is before us, does not contemplate any pronouncement or determination relative to fossil fuel costs in the electricity bill,” Atherley-Ikechi stated.

The chief executive officer explained that because the fuel costs are directly passed on to the consumer, that explains why the BL& P did not apply for rate hikes between previous requests 24 years ago and 10 years ago.

“Because most of the volatility happens relative to fuel costs…and because there is a pass-through, there is no need for them to come and have an adjustment in the rate. This is not unusual relative to any other electricity entity,” she added.

The chief executive officer said the FTC is still examining the Light & Power Company’s application for a general rate increase, but because other players are involved in the process such as intervenors, she could not confirm a timeline for a ruling to be made on the request.

“We have no full control of the process. We have had applicationsfor late intervenor status and that is what has compounded the time frame and we have to deal with those first as well,” the regulator disclosed.

Atherley-Ikechi said the commission is doing its utmost to address the various issues recognising that this is also a legal matter and must therefore follow all the procedures as best they can.

“Unfortunately the issues with the war [in Ukraine] have not allowed us to get any more resources. So we are still moving ahead as best we can,” she stated.

The BL&P is seeking rate hikes ranging from $2 to $6 more per month for domestic customers and between $4 and $10 more for general service users.

It is proposed that the energy bill for large power customers would move from $1,287.00 per month for each service to $1,587 per month and that secondary voltage customers’ rate should move from $149 to $169 per month.
emmanueljoseph@barbadostoday.bb