#BTColumn – Electricity tariff rates cut by FTC

Disclaimer: The views and opinions expressed by the author(s) do not represent the official position of Barbados TODAY.

By Trevor Browne

A Ponzi scheme is defined as a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money taken from later investors.

The singular characteristic of all Ponzi schemes is the deliberate absence of any well-engineered plan, since such a plan would immediately delete all of the ‘Ponzi-like’ attributes of that scheme. 

The Barbados Fair Trading Commission (FTC) in late 2022 granted an ‘interim’ rate increase to the Barbados Light & Power Company (BLPC) based only on that company’s assertion that they were facing a ‘cash crisis’. 

On November 28, 2022, the BLPC issued a letter to the public indicating that they would no longer be entertaining photovoltaic (PV) connections to their Grid, unless appropriate ‘mitigating measures’ were addressed.

These measures apparently require the provision of commensurate battery storage by the applicants themselves, or the granting of licences to BLPC to install their own battery storage – to be 100 per cent paid for by electricity consumers along with handsome guaranteed profits to Emera.

Just recently, in January 2023, the FTC also announced new Feed-In-Tariff (FIT) rates, which saw decreases in these rates now being paid to many private investors who install such systems.

For some years now, and at all levels in Barbados, the Barbados Association of Professional Engineers (BAPE) has been warning about the dangerous possibility of what should be a fantastic National energy policy initiative, being hijacked as a scheme to generate quick profits for early investors – while trapping other stakeholders in a costly and inefficient scheme of subsidies and losses in the medium and long term.

With the FTC set to issue a ruling on BLPC’s substantive rate application later in January, there is also the possibility of yet another added cost coming to customers, while BLPC continues to enjoy huge guaranteed profits and legal protection from competition.

It has been obvious from the very start that the Barbados National Energy Policy (BNEP) would be an ambitious, ground-breaking initiative, needing meticulous creativity, planning, and technical expertise – if it was to be executed successfully.

International best practice requires that a well-engineered plan be compiled for such complex projects. This is also the very best way to avoid falling into ‘Ponzi-like’ arrangements.

Unfortunately, the Barbados energy situation has now reached the stage where, while those early Renewable Energy (RE) investors will continue to make great profits, everyone else will now be required to subsidise these ‘profits’ through excessive electricity rates, reduced FIT rates, and by the even bigger price of reduced energy reliability, and its impact on national productivity.

It may be a lot clearer now why some interested persons would have resisted BAPE’s call for a clear Plan to be established, since such a Plan would have clearly demonstrated that:

1. The initial high FIT rates (which were used to lure investors to commit to RE) were not sustainable in the medium or long-term.

2. Guarantees of 20-year price contracts for such rates would result in ordinary electricity consumers actually subsidising these profits for the select early investors, and in the inflation of the cost of energy (and of national productivity).

3. There are clear limits to the percentage of intermittent energy injections that are allowable on a fossil-fueled system, after which system stability becomes a critical issue.

4. In the medium and long-term, the more capital intensive alternatives, such as biofuels and large-scale wind, are actually more attractive investments for investors than are basic PV projects.

5. Storage is central to the successful roll-out of the BNEP. This is why BLPC has been maneuvering itself to take over that portfolio, which is currently held by the Barbados-owned BNOCL.

6. Basic research would also have clearly indicated that these pitfalls have already been encountered by Spain, Australia, and most recently in California, where the headlong
 rush to unplanned RE development has led to chaos and bankruptcies. 

We have now reached the stage where even routine ‘proper planning and preparation’ methods will likely be too little and too late. Many current investors who are already into the process stand to lose significantly, as a result of BLPC’s curtailment. Even if they invest more money in storage in order to be connected, the increased expenses, and the reduced FIT, will negatively impact their financial projections.

In effect, then, all future investors, and all future electricity customers, will be subsidising the early RE investors, and Emera, in addition to paying their own basic cost of energy. 

Solutions

The solution, as BAPE sees it, and as we have been proposing for some time now, is for urgent crisis controls to be implemented to address the grave challenges that now face Barbados’ energy future.

1. The BLPC licence matter should be resolved immediately, by issuing a single monopoly licence to a new entity, ‘The Barbados Energy Authority’ (BEA) to consist of: 

• Emera Caribbean Inc. (40 per cent)

• BNOCL (20 per cent)

• The Barbados Energy Cooperative (20 per cent)

• and the general public (20 per cent)

 2. This new Authority will then take full and exclusive responsibility for executing the Barbados Energy transition as outlined in the BNEP.

 3. A new Utilities Regulation Board to be established and consist of seven professionally qualified experts, each nominated by their appropriate professional body, and including a minimum of:

• One electrical engineer

• One civil or structural engineer

• One architect

• One lawyer experienced in Regulatory Law

• One certified accountant

• One project management specialist

 4. This Board would assume responsibility for all regulatory matters and for overseeing the operations of the BEA. 

5. The FTC can then concentrate on its substantive role of ensuring fair market competition, adjudicating service quality issues, and protecting customer rights.

 6. The key deliverable from the now unified national energy stakeholders, (the BEA), would be a comprehensive, engineered plan for the transformation of the Barbados energy framework as laid out in the BNEP, to be completed by September 2023.

Summary

Energy is fundamental to the very survival of society. National development is impossible without access to reliable and affordable energy. Such a critical pillar of our society cannot be left to happenstance, but must be carefully planned and executed by those among us who understand the issues involved, and who appreciate the consequences of failure. 

 Trevor Browne  is the President of the Barbados Association of Professional Engineers.