FTC-granted power price hike sparks consumer backlash

The Fair Trading Commission’s (FTC) decision to grant temporary rate increases to the Barbados Light & Power Company Limited (BLPC) has drawn strong criticism from consumer advocates.

In a ruling dated last Friday, the FTC approved an application from the utility to recover the rental and operating costs of 11 megawatts of temporary Aggreko generator units through the fuel clause adjustment (FCA)—meaning the costs will be passed on to consumers.

Intervenor Ricky Went argued that his team had recommended the company buy the generators rather than rent them and recover the cost through the rate base.

“There should not have been any increase in rates, temporary or otherwise,” Went told Barbados TODAY on Tuesday.

He noted that the utility had cited the scheduled 2026 retirement of one generator, known as GT03, as a justification for renting the 11 MW Aggreko units. 

“However, the record shows that the company’s capital programme had already accounted for the retirement of GT03 when it acquired the Clean Energy Bridge (CEB). If a capacity shortfall was anticipated, the company would (or should) not have incurred costs to return the 12 MW Aggreko units in May 2022,” Went argued.

“Taking all the foregoing into account, our team still supports the addition of generating capacity, if only out of an abundance of caution to avoid a repeat of the embarrassing island-wide blackout in 2019,” he added.

Went pledged that his team would share further insights after reviewing the decision in detail.

Consumer advocate Maureen Holder described the FTC’s decision as a mixed bag for consumers.

“The FTC’s recent decision brings some elements of consumer protection, but it offers limited relief for Barbadians grappling with rising costs,” said Holder, executive director of the Barbados Consumer Empowerment Network (BCEN), in an interview with Barbados TODAY.

She noted several points she wanted Barbadians to be aware of regarding the commission’s ruling.

“BCEN emphasises that while the FTC’s decision enables BLPC to stabilise service and distribute costs, it also raises concerns about the use of the FCA. Traditionally, the FCA is intended to manage uncontrollable fluctuations in fuel prices rather than covering short-term infrastructure costs associated with specific events,” she explained.

“The decision exposes the reliance on diesel generators, which are known for their high costs and inefficiency, and highlights the problem of passing the expenses for the generators onto consumers. Notably, the rental of the generators was originally meant to accommodate an anticipated temporary surge in demand for an activity such as the Cricket World Cup. This was a major reason stipulated for the BLPC application.”

Holder also questioned the timing of the utility regulator’s ruling, given that it came four months after the Cricket World Cup, raising doubts about whether consumers should shoulder the ongoing rental costs for generators that may no longer be necessary.

“Ideally,” the consumer advocate argued, “decisions regarding consumer costs should occur before or immediately after significant expenses arise, allowing for transparency and understanding. Delayed rulings could contribute to consumer frustrations and a perception that they are being asked to cover unforeseen or poorly planned expenditures.”

The Barbados Renewable Energy Association (BREA) is expected to issue an official response on Friday.

BCEN executive director Maureen Holder. (FP)

The FTC had ruled that the rental of the Aggreko units, with a capacity of 11 MW, is approved for at least 12 consecutive months from the actual commercial operation date of the units.

It stated that a further 12-month approval might be granted if the commission is satisfied that market conditions warrant the need for additional capacity at that time.

“In such circumstances, the BLPC will be required to formally inform the commission of the need for the extension of approval, and any revised contractual details, no later than four months before the expiration of the approved 12 months,” the regulator stipulated.

The commission mandated the annual submission of maintenance reports for all generating units no later than one month after the end of the calendar year. 

It added that costs to be recovered will be contingent on the BLPC’s ability to demonstrate that the 11 MW Aggreko units are utilised and dispatched according to demand, taking into account the impact of fuel prices and fuel efficiency, to provide service to customers in the most cost-effective manner.

“Where the utilisation of the 11 MW of capacity is found to be imprudent – that is, not being used and useful during the period of its operation, the quantum of costs recovered shall be reconciled and returned to customers,” the FTC added.

The unexpected unavailability of one of the BLPC’s gas turbine units, GT04, was a point of serious concern for the FTC.

It noted that BLPC had indicated in an April 30, 2024 submission that some components in the gas turbine required replacement, rendering the unit unavailable for service until late July/early August 2024. 

“The need for replacements was not of a mechanical origin. As a consequence, the average reserve margin declined from 20.1 per cent to 0.1 per cent. The Commission is very concerned about this sudden development and the implication of this on the BLPC’s ability to meet statutory obligations of generation adequacy and security of supply provisions to customers,” the FTC said. “The vacancy in capacity due to GT04’s inoperability further underpins the need for a review of the BLPC’s maintenance practices and schedules….. The impromptu nature of GT04’s exclusion has reinforced the Commission’s view that the BLPC’s maintenance of its generation resources is questionable.”

The FTC said it would be conducting an investigation “immediately” into that gas turbine “being out of commission unexpectedly”.

emmanueljoseph@barbadostoday.bb