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Power company goes to FTC to secure rate increase

by Marlon Madden
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Barbadians will have to pay as much as 20 per cent more on their electricity bills if the Barbados Light & Power Company Ltd. (BLPC) is granted the rate increase it is seeking.

The island’s sole electricity provider announced in a statement on Thursday that it has applied to the Fair Trading Commission (FTC) for a review of electricity rates.

However, it sought to assure that it has taken into consideration the rise in the cost of living and has therefore “designed rates to contain the impact to customers’ bills”.

“For example, we have proposed that increases should be no more than $6 for those customers using less than 150 kWh in a month. These customers account for 35 per cent of the domestic service tariff group, assumed to consist mostly of low-income customers,” the company said.

“The typical bill increase resulting from the proposed rates is estimated to range from 5 per cent to 20 per cent depending on the tariff on which customers receive their service,” it added.

The current base rate is around $0.15 to $0.30 cents per kilowatt hour (kWh).

BLPC said the application submitted to the FTC on Monday was only the second one filed by the company in nearly 40 years requesting an adjustment to its electricity base rates.

It said it was aware there was no ideal time for a rate adjustment, while acknowledging that customers were experiencing economic challenges due to the impacts of the COVID-19 pandemic.

“While the cost of living has increased almost 40 per cent since we last set rates, BLPC has invested in efficiencies and managed costs such that we are able to make application for an 11.9 per cent increase, substantially lower than the increase experienced by our customers for other goods and services in the same period,” the utility company said.

“The last increase in base rates occurred in 2010 – over eleven years ago. Light & Power has been able to defer a request for general rate review through careful cost management and process innovations.”

However, it added, “the significant increase in costs and necessary investments, like the new 33MW Clean Energy Bridge plant at Trents, St Lucy, compels us to seek an adjustment in electricity prices”.

The BLPC said those expenditures were needed to maintain a safe, reliable and resilient electricity service that meets customers’ needs for continued high quality service.

The company added that with an estimated 10 per cent reduction in fuel costs anticipated from the commissioning of the new 33MW Clean Energy Bridge by the end of 2021, it was expected to substantially mitigate the impact of the proposed rate increase.

Back in 2019, the power company stated its intention to apply for a rate increase by the middle of that year.

However, by November, BLPC had instead made an application to the FTC to implement a fuel hedging programme that would see customers either paying slightly more for electricity in some months or benefitting from lower oil prices.

In that application, the BLPC, which is owned by the Canadian-based firm Emera, said it would apply the results and costs of hedging to the calculation of the Fuel Clause Adjustment (FCA).

Fuel hedging is a mechanism used by companies to manage risks and reduce exposure to volatility and increases in fuel prices.

The FCA is a mechanism used to recover the cost of fuel oil used in the generation of electricity. It adjusts the price that customers pay for each kWh of electricity, as the cost of the fuel used to generate the electricity rises and falls. The FCA, therefore, reflects the changes in the price of fuel on the international market.

The FCA rate for September 2021 was 32.8251 cents per kWh, up from 22.5850 cents per kWh in September last year, which means that customers are paying more for electricity than they did a year prior, due to the continued increase in international fuel prices.

In mid-2020, BLPC also submitted an application to the FTC for a Clean Energy Transition Rider (CETR) so it could recover millions of dollars in investment associated with its five-year Clean Energy Transition Programme (CTEP) that began in December 2019.

At the time, the company was estimating an average investment of just over $165 million per year to facilitate infrastructure replacement and modernization, and was also forecasting millions of dollars in revenue shortfall.

In that application, the BLPC said the CTEP costs exceeded what it could absorb under existing tariffs, adding that without some form of rate relief it would “undermine the financial viability of the BLPC”.

Light & Power said it welcomed the engagement of its customers and other stakeholders on the proposals contained in its latest application.

(marlonmadden@barbadostoday.bb)

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