Six dollars more?

The island’s sole electricity supplier told a rate hearing today that it proposes to cap the bills of 41 000 low-income consumers at $6 per month provided they don’t go over 150 kilowatts per hour of usage.

This position was put to the Fair Trading Commission (FTC) panel in the rate adjustment hearing, by the lead attorney for the applicant, the Barbados Light & Power Company (BLPC).

In his opening presentation on Thursday, Ramon Alleyne, King’s Counsel (KC), said the number of domestic customers who stand to benefit from this cap has increased by close to 10,000 since the last rate hike in 2010.

“The customer charge increase on lower usage blocks will be kept below full cost of service to reduce bill impacts on lower usage customers, many of whom may have low incomes; while the customer charge on the higher usage blocks will be at the cost of service,” the senior attorney submitted.

He told the hearing, “Relative to the base energy charge, the inclining block rate structure and usage blocks will also be retained. The increase on the first block will be limited to an additional two cents per kWh to lessen the impact on the low-usage customers. The energy charges at the higher usage bands will vary from an additional four cents per kWh for the second usage block to an additional six cents/kWh for the higher block.”

The attorney told the commission chaired by Dr Donley Carrington, that in the other customer classes, the inclining block structure has also been used and there have also been limits to the increase on either the customer charge, base energy charge or both.

“The BLPC acknowledges, however, that rate design is an art and a science as various objectives, some of which are competing, must be balanced and tailored to the circumstances of the environment in which the utility operates. The BLPC has undertaken this delicate balancing exercise in a manner that is fair, based on the rate design objectives and cognizant of the need for rate stability,” declared the power company’s senior legal advisor.

Alleyne also announced that the company proposes to disaggregate the recovery of fuel costs from consumers in light of the transition to 100 per cent renewable energy by 2030 and the decline in the use of fossil fuels.

“The fossil fuel costs will continue to be recovered via the Fuel Adjustment Clause which was previously approved by the commission,” counsel submitted. However, he added, the non-fossil fuel costs which are presently recovered under the Fuel Clause Adjustment will be transferred to the Renewable Purchased Power Adjustment (RPPA).

“The RPPA is being proposed to recover the costs of energy purchased from renewable energy sources. The rationale for this disaggregation is to facilitate the better tracking of the progress toward the transition to 100 per cent renewable energy,” Alleyne informed the hearing held at the Accra Beach Hotel.

“Further, there will be increased transparency as consumers will also be able to recognise the true cost of RE as compared to fossil fuels. There will be no increase in bills as a result of the implementation of the RPPA,” the BLPC’s legal counsel assured the panel.

Putting the case for a boost to the company’s revenue requirement, Alleyne explained that the requirement is the total amount which must be billed and collected in rates from utility customers for the BLPC to recover its costs and earn a fair and reasonable return.

“The formula applied to determine the company’s revenue requirement is the same formula that was applied in the 2010

decision. Consistent with the last rate review, the company’s revenue requirement has been developed with the intent to provide an opportunity to recover its prudently-incurred costs for providing utility services and to earn an appropriate return on invested capital, including a fair return on equity,” he argued. Alleyne underscored that if the company was not granted the increase, its viability would be at risk and it would not be able to meet its expenses involved in supplying a service that is safe, adequate and reasonable. He also contended that the company would not be able to continue to deliver a secure and reliable supply of electricity to all customers in an environment where the cost of inputs to the BLPC’s operations had risen substantially.

As a result, Alleyne told the commission that while the test year revenue requirement on existing rates is $393.7 million, based on a proposed base rate of $825.8 million, a revenue requirement of $440.2 million is necessary.

“Therefore, the applicant’s revenue requirement has increased by $46,4 million,” he argued.

The BLPC is seeking increases ranging from $2 to $6 more per month for domestic customers and between $4 and $10 more for general service users.

The hearing continues tomorrow at 9 a.m at the Accra Beach Hotel and Spa.

emmanueljoseph@barbadostoday.bb