Power company says rate hike is only option left to get money for urgent projects

The island’s sole electricity provider has defended its decision to ask for a rate increase, insisting that it urgently needs the money to execute projects that are crucial to providing a reliable service for customers.

In fact, Managing Director of the Barbados Light & Power Company (BLPC) Roger Blackman, said asking the Fair Trading Commission (FTC) for the 11.9 per cent rate adjustment was the last resort.

He insisted that before going to the FTC, the company had to be “internally satisfied that we have pulled every lever available to us and considered all the options or alternatives”.

“We are facing a financial situation that does require urgent rate relief and there are actually several projects we have had to defer, and of course every delay on a project has repercussions and while they might not be realised immediately, in the long run, there could have impacts and are cause for concern,” Blackman said on the BLPC’s Watts New roundtable discussion forum for July.

He did not give details of the projects that have been delayed but said financial constraints had affected the utility company’s ability to continue to sufficiently carry out its maintenance programme.

Acknowledging that there was “no ideal time for a business to ask its customers to pay more for services”, Blackman stressed that seeking a rate increase in an economic environment that has also been devastated by the COVID-19 pandemic was an absolute last resort for the BLPC.

“It is critical for us to continue having adequate resources to meet the level of service both in terms of resilience and reliability that’s required by our customers,” he said.

“The rate increase will enable us as a company to continue the rate of investment that we have been making over the years in the electricity system and, therefore, the upkeep of the network that’s required,” the BLPC official insisted.

Blackman said that since receiving the last rate increase over a decade ago, BLPC has been working diligently to manage its operating costs and has reengineered its business processes.

According to him, during that period, the company invested more than $700 million in modernising its operations, strengthening the transmission and distribution network, and facilitating the introduction of renewable energy to the grid.

Pointing out that the provision of electricity was “very capital intensive”, Blackman insisted that in order to sustain the business, “we require sufficient funding to pay for the capital investments and to meet our operational costs”.

He said rising inflation has significantly increased the company’s cost of doing business and in more recent times, supply chain challenges have compounded the problem and further curtailed BLPC’s ability to make necessary investments.

The BLPC filed a request for a basic rate increase with the FTC on October 4, 2021. It is estimated that if that is granted, customers will pay between five and 20 per cent more on their bills.

The power company is also seeking an interim rate increase.

Director of Customer Solutions at BLPC Kim Griffith-Tang How said the interim rate increase was important “because for our business, we have to continue to maintain our plants and equipment and there are a number of customer projects that we have to keep moving with to ensure that our customers can enjoy a highly reliable service”.

“In order to do that, it is a really cost-intensive business. It costs a lot of money to do the things we need to do and so an interim rate increase would help with that,” she added.

Meanwhile, Blackman said the Government’s decision to reduce Value Added Tax (VAT) on electricity from 17.5 per cent to 7.5 per cent for the first 250 kWh was commendable.

The measure, which takes effect from August 1, 2022, to January 31, 2023, will see the Government foregoing millions of dollars in revenue as part of wider measures to bring relief to consumers burdened by the increasing cost of living.

marlonmadden@barbadostoday.bb