Barbados Light and Power Company (BLPC) customers will have to wait a few more months to know whether they will have to pay higher electricity rates.
At the conclusion of a 15-day Fair Trading Commission (FTC) hearing on the utility company’s application for a hike in basic electricity rates on Friday, tribunal chairman Dr Donley Carrington told Barbados TODAY customers should not expect a ruling before December.
He explained that the panel had to wade through “tons” of oral and written information from the BLPC, the five intervenors, the Public Counsel and various witnesses before reaching a decision.
All the intervenors gave closing arguments on Friday, except the team of Tricia Watson and David Simpson who have decided to include their comments in the additional written submissions which all parties are required to hand into the FTC by October 28.
Lead attorney for the power company Ramon Alleyne, King’s Counsel was the first to present, contending in his near one-hour submission that his client had justified its request for a rate review and proven the quality of its stewardship.
“It is in these circumstances that I seek the Commission’s confirmation of the orders sought within this application,” Alleyne urged.
The senior counsel took the intervenors to task, suggesting that they had been inconsistent and at variance with one another in their submissions to the tribunal.
“Notwithstanding the noise from some corners, it is objectively clear and the evidence has shown that the BLPC has, and continues to be an efficient service provider that has a long track record of providing safe and reliable service to its customers at low rates,” he argued.
Alleyne sought to assure that if the rate increase was granted, it would benefit consumers.
“We submit that the BLPC has, via its written and oral evidence which has largely been unchallenged, discharged its burden and standard of proof. It is undisputedly evident that from the written and oral evidence, a rate adjustment is necessary. It is also evident that the rate which the applicant has sought will not result in over earning,” the senior lawyer declared.
In fact, he submitted that one of the major investments that impacted the need for the rate adjustment has been the Clean Energy Bridge from which customers have already started to enjoy financial benefits in the form of reduced bills. He said that will continue regardless of any rate adjustment granted by the FTC.
Alleyne also dismissed the contention by some intervenors that if dividends were not paid to shareholders, the BLPC would not need a rate adjustment.
“This Commission would well recognise that this argument cannot be entertained because to do so would immediately bring the Commission in conflict with its statutory mandate to ensure that an efficient service provider be able to finance its functions by earning a reasonable return on capital,” the company attorney stated.
Bad timing
However, Acting Public Counsel Sharon Deane told the FTC panel that if it granted the power company the increase, Barbadians would be plunged into further financial troubles as businesses would pass on the hike to consumers.
Deane also charged that during the hearing, the BLPC engaged in “accounting gymnastics and a manipulation of the system to exaggerate a pretended need”.
She also urged the FTC that when it makes its ruling, it should force BLPC to be accountable for its decision to pay out “exorbitant” dividends to shareholders.
“To me, it’s not simply an easy task to just make consumers accept responsibility for BLPC’s lack of prudence. In this current setting, with the hardship from COVID, high job losses, and high cost of living, it is unconscionable, irresponsible, and downright reprehensible to consider asking for a rate increase at this particular time.
“The timing is completely off,” the acting Public Counsel contended during her 12-minute presentation to the tribunal. “To my mind, this application is a strategic manipulative move to prevent the applicant from shouldering the impact COVID, while every other consumer in Barbados has had to bear the effects associated with the COVID pandemic.”
Intervenor Stephen Worme, who represented the Barbados Renewable Energy Association (BREA), was more conciliatory in his closing comments as he focused on the renewable energy sector.
Intervenor Stephen Worme goes through his notes during the final session.
Worme, a former CEO at the BLPC, said his concern was not so much whether the company was granted a rate increase but about the FTC getting its decision right.
“This is not a simple exercise about whether or not Light and Power should be given an increase, but more importantly about getting the decision right for the future of our country. In the electricity world, because the nature of the investments that have been made are long-lasting, any decision made today will have implications for us as a country for many years to come,” he cautioned.
Worme said while many Barbadians were hoping the request would be denied, BREA’s focus was on the FTC arriving at a decision that is fair and reasonable that would serve the country well into the future.
High dividends
Chief Legal Officer in the Division of Energy Samantha Cummins, meantime, said that while the BLPC may have shown that its request for a rate increase merits a hearing, whether it can prove it is entitled to a hike is another story.
“The Division of Energy submits that the applicant has not discharged its burden of proof to persuade the commission that it should get the increased rate that it is requesting or at a minimum at a rate of 8.79 per cent,” the Government representative argued.
The intervenor said the Ministry intends to elaborate on that in its written submission. However, she gave a peek into some of what would be in that document.
“The applicant’s ability to make such handsome disbursements of dividends to its shareholders counteracts and dissuades from the arguments that the applicant is in dire financial straits. The applicant is obliged to prove to the commission that it was and is prudent at all times with its financial management of the company and, notwithstanding, it finds itself in a negative outlook,” Cummins declared.
Another intervenor Kenneth Ricky Went also took a swipe at the company’s decision to pay out large sums of dividends which he suggested impacted its bottom line.
“Bearing in mind that the company will be going to the market to raise substantial debt in the near term, it is baffling why the BLPC opted to disburse excessive dividends and drastically depleted its reserves in the process,” he told the tribunal.
Went suggested that the power company should instead have retained more earnings to help it fund future projects in case borrowing interest rates should escalate. He said the approach of the company was inexplicable and should be discontinued.
The final intervenor to address the tribunal was Lieutenant Colonel Trevor Browne who asked the commissioners to consider the “adverse” impact the takeover of the BLPC by Canadian company Emera, between 2011 and 2014, has had on its operations, to the detriment of consumers.
Browne suggested that Emera’s acquisition of 100 per cent of the shares during that period resulted in the local energy company being transformed from a regulated utility entity into a mechanism to generate cash for its sole shareholder.
“Whereas for generations previously, about 15 per cent of net income has been paid in dividends, and 85 per cent reinvested into the BLPC’s operations, we have seen 86 per cent of income since 2011 being extracted as dividends and only 14 per cent reinvested in the utility,” the chairman of the Coalition of Cooperatives and Concerned Citizens claimed.
Browne argued that the monopoly power entity has not had “a single year of financial losses in recent memory” and that since the last rate hearing in 2010, consumers have paid $6.3 billion in revenue to the utility company.
However, he contended that neither Emera nor any other interest has invested in the company in recent decades.
Motions dismissed
On the final day of the rate hearing, the FTC also dismissed several motions, including from the Watson/Simpson team who asked that certain statements made by Alleyne be expunged from the record.
“The commission has reviewed the statements complained of. The commission does not think the statements give rise to any innuendo or cast any aspersions on the reputation of Ms Watson or were disrespectful or that the statements constitute any breach of any rules of practice,” the tribunal chairman stated, noted that during the two-week proceedings, the parties conducted themselves well and must be commended.
“The commission can find no basis for removing the statements from the record. Therefore, the Watson/Simpson team’s motion for specific pages to be expunged from the record of the proceedings is refused.”
Another motion that was dismissed related to a request by the Watson/Simpson team that the BLPC be required to make an application for a document to be treated as confidential.
The document to which she referred was a cost-of-service study produced by the company’s witness, consultant Dr Phillip Hanser, who used it in his testimony. When he gave evidence, he explained that he could not share the model with the intervenors, only the FTC, because it was owned by a company and therefore had to be considered confidential.
The panel also rejected a motion by Deane and Watson who had requested, on the penultimate day of the hearing, that the company answer questions sent to it. The tribunal ruled that the motion was too late.
However, the FTC granted approval for a request by Deane that cleared the way for the affidavit of her witness Ralph Smith to be admitted into evidence even though he was unable to give “live” evidence before the tribunal.
emmanueljoseph@barbadostoday.bb
