A senior Barbados Light and Power Company (BLPC) official has claimed that an increase in electricity rates would have a positive impact on the economy and the island’s productive sectors.
Manager of Regulatory Affairs Dr Adrian Carter argued that position as he also insisted that Barbadians could afford to pay the 11.9 per cent increase being sought by the utility provider.
Dr Carter made the comments as he gave evidence on day 13 of the Fair Trading Commission (FTC) hearing into the power company’s rate increase application.
As he was being cross-examined by intervenor and attorney-at-law Tricia Watson, Dr Carter acknowledged that high electricity prices “can have a negative impact on the productive sectors”.
“And that could have an impact on economic growth?” Watson further asked.
“It can have an impact on economic growth,” Carter replied.
The company executive based that conclusion on the premise that all sectors had become increasingly more reliant on electricity; that electrical energy consumption by the non-residential sector acts as a driver of economic growth; that the average retail prices over a 12-month period rose by 12.8 per cent through May 2022; and that with wages and salaries remaining largely unchanged in recent years, the real inflation-adjusted salaries and employee purchasing power had been reduced.
However, pressed further, the witness not only defended his company’s rate increase request and said it had economic benefits, but contended that Barbadian consumers could afford to pay the proposed rate hike because, in his estimation, electricity is affordable and would continue to be so for householders.
“Our rate increase that we have proposed, the net effect of it is reduced prices and not increased prices. One of the key drivers of this application is our clean energy plant that was recently commissioned and is providing service to our customers. The net effect of that plant in service and the increase that we are requesting here in this application is actually a reduction in prices for most customers,” he argued.
“On average, the increase we are seeking is around five cents per kilowatt hour and we expect that that plant would provide savings in excess of 11 cents per kilowatt hour. So, the net effect really is not a price increase but actually a price decrease and, hence, as a result of our application, we expect that it would have a positive impact on the economy and the productive sectors within the economy.”
Under cross-examination by intervenor Kenneth Ricky Went, Dr Carter disclosed that the savings from the clean energy plant, in terms of fuel costs, were about $10 million in July this year and $9 million in August. He said the savings were already being reflected in customers’ bills.
The witness further contended that the clean energy plant would result in fuel price savings for customers, thereby cutting their overall electricity costs.
But intervenor Watson challenged him on this, pointing out that the fuel clause adjustment (FCA) is not part of the company’s current application, having already been settled.
Watson, who has expertise in utility matters, suggested to the witness that in any case, the FCA is a direct pass-through to consumers, so the BLPC cannot claim it would affect the rate increase application. Dr Carter disagreed.
The intervenor then turned the company official’s attention to its proposal to charge domestic customers who use less than 250 kilowatts of electricity a maximum increase of $6.
In revealing more details of the plan, Dr Carter told the hearing that the BLPC would be offering early payment consumers a discount which would see that increase being significantly smaller.
“If these customers do start taking advantage of that bill discount, the increase for these customers would be under $2, all things being equal,” he stated.
Watson put to the witness that many customers would struggle to meet the early discount date.
In reply, Dr Carter said: “All of us have our challenges and we often find different ways to meet those challenges. So, we do expect that our customers will seek how best they can achieve the additional savings that we are affording through our early payment bill discount.”
The BLPC official also informed the tribunal that some adjustments were recently made to the company’s proposed rate increases as a result of concerns pointed out by the FTC from a cost of service study authored by BLPC expert witness Dr Phillip Hanser during his testimony on Thursday.
However, Dr Carter explained that the changes were not significant enough to make any material difference to the current proposals.
He was also asked by Dr Donley Carrington, chairman of the proceedings, to explain a previously-mentioned figure of 60 per cent of cost of service which customers would be asked to pay.
The power company’s regulatory affairs chief said that represented a reasonable balance across all classes of consumers. However, Dr Carrington told him that some customers taking large voltage power would see their bills increase from $300 per month to $1 587.
In response to the chairman’s query as to if such a hike was reasonable, Dr Carter said: “We think it is reasonable given that, currently, if you look at the cost to serve customer charge, is still significantly below the cost of service to provide that customer-related cost to that customer,” he contended.
The hearing was scheduled to conclude on Friday, but because the FTC was not able to complete all of the business, it will resume on October 13 and 14 at 9 a.m. at the Accra Beach Hotel and Spa.
emmanueljoseph@barbadostoday.bb
