The rates charged by utility companies here could be reviewed more frequently in the future.
Chairman of the Fair Trading Commission (FTC) Dr Donley Carrington gave that indication on day five of the hearing into an application by the Barbados Light and Power Company (BLPC) for an increase in basic rates – its first such request in 13 years.
“We may reach a point where we may be able to get to some type of rate design that will enable us to have a more frequent review of rates,” he said as he engaged with intervenor Lieutenant Colonel Trevor Browne who suggested that the FTC should track the operations of utility companies more regularly.
Browne, chairman of the Coalition of Cooperatives and Concerned Citizens, cited the Utilities Regulations Act Chapter 15 (1) which states that “the Commission may fix a period of time not exceeding five years in respect of which the rates for the supply of a utility service… and the standards of service, will apply.”
While cross-examining BLPC’s managing director Roger Blackman, Browne said: “From the point of view of transparency, it is far better on a regular basis for an independent panel like the Fair Trading Commission to say that things are on track.
“It has been very difficult for me to convince my members that in the 13 years since the last review… for Light and Power everything was going perfectly. We were not being robbed and you were good. The actual inclination of my members is to think that during that time you were making a killing and now that you are no longer making a killing you want to get back to the point where you are making a killing.”
At that point, Dr Carrington intervened and explained that BLPC’s standards of service were reviewed every three years and it was only the rate review that had not been done since 2009.
Browne then asked the FTC chairman why the standards of service were more important than the rates.
“Well, the process is a lot simpler and a lot cheaper,” Dr Carrington replied.
However, the intervenor pressed further, stating that his query was about the importance, not cost.
Dr Carrington responded: “The standard of service that you see that is normally required to be posted on the applicant’s website, we do look at them having to report on faults and all of these different things. There are different sections. We would look to see if there are any of those particular standards that need to be adjusted within the three-year cycle.
“And what you are getting to here now is probably rate design, and maybe it is something we will need to look at because that is one of the issues that have been set down for discussion for this actual hearing. So that when we look at the whole issue of rate design, maybe we may reach a point where we may be able to get to some type of rate design that will enable us to have a more frequent review of rates, as opposed to the current one that we do have.”
Earlier, Browne questioned Blackman about the soundness of BLPC using 2020 as the test year on which to base its rate hike request, suggesting that it was an unusual year, being the height of the COVID-19 pandemic.
The power company executive defended the decision.
“It was the year of closest proximity with full financial data. And when we do the assessment on that year and determined rates on that basis, and forecast based on those rates, and test it with a full year that we can test, we determined that those rates, even with that test year and the sales as they were, would not result in an over-earning position,” he explained.
“And, at the same time, it would have been irresponsible, we believe, to further delay the request for rates beyond what we had already [done],” the BLPC witness added.
The FTC chairman intervened again and explained that the Commission “does allow in any rate hearing that the rate applicant uses the year closest for the purpose of filing the application”.
“It has not necessarily been approved, and part of this process here is to interrogate the data that has been supplied in that particular test year to see whether or not it is appropriate. We may ask the applicant to recalculate based on another year, so the purpose of using that particular year is for the purpose of filing the application. So that is the principle that is used,” Dr Carrington added.
Blackman was also cross-examined by intervenor Ricky Went.
The hearing resumes on Wednesday at 9 a.m. at the Accra Beach Hotel and Spa.
emmanueljoseph@barbadostoday.bb
