Intervenor backs Light & Power surcharge move ‘for now’

As the Barbados Light & Power Company awaits a High Court ruling on its rate application to the Fair Trading Commission (FTC), the electricity company has returned to the utility regulator with a new request to recover the cost of renting generators.

The company said in a statement on Thursday that it had filed an application with the FTC for its approval to recover the cost of renting 11 megawatts of temporary Aggreko diesel-generating units through its Fuel Clause Adjustment (FCA). It claimed the move is intended “to ensure reliable electricity supply” to the country, particularly as the T20 World Cup finals loom.

The utility cautioned that the continued provision of reliable electricity to Barbadians hinges on getting blessings from the commission for this latest application.

In an immediate reaction, two intervenors squaring off with the electric company’s ongoing rate hike bid, representing consumers and renewable energy providers, have tentatively backed the application, recalling fresh memories of power outages when heavy demand outstripped power generation capacity.

Finance manager Ricky Went said he was backing the power company’s latest request “out of an abundance of caution”. Stephen Worme, vice president of the Barbados Renewable Energy Association (BREA) and former Light & Power marketing executive, said the increase is likely to be “relatively small” compared to the cost to homes and businesses of possible electricity outages the company was seeking to head off.

Explaining Light & Power’s need to rent the generators, managing director Roger Blackman said: “The rental of these units is essential to provide adequate generation capacity, ensuring operational reserve, and addressing forecast electricity demand coupled with delays in the installation of battery storage and firm renewable generating capacity that was projected to come online.

“While existing installed generating capacity exceeds the forecast electricity demand this year, the 11MW of rental generation will increase operating reserves which can be quickly dispatched to address any emergency situations that may arise such as unplanned outages of existing units.”

The electric company said that this latest move underscores its commitment to meeting the “evolving energy needs of Barbados”.

“Light & Power,” the company said, “typically plans and makes projections for expected demand and  accommodates for moderate growth.”

“However, in 2024, Light & Power is expecting higher than usual growth in electricity demand due to ongoing construction of residential and commercial projects plus the continued up-take in customer electric vehicles (EV) and air-conditioning.”

He also pointed out that the timing for this rental generation is especially important as electricity demand is expected to be further driven higher this year with Barbados hosting the T-20 Cricket World Cup finals and other fringe events.

In the application, Light & Power has proposed using its existing FCA mechanism for “transparent and fair” cost recovery.

The utility explained that this mechanism allows for the “timely” adjustment of fuel costs to reflect changes in operational expenses, “ensuring a balance between affordability for customers and maintaining a reliable power supply”.

“The impact to the FCA, inclusive of estimated fuel savings from utilizing the rental units, is projected to be less than one cent/kWh,” the company added.

“BLPC’s application would have to be reviewed closely,” said intervenor Went but he added: “Out of an abundance of caution, our team would probably be inclined to support BLPC’s application to rent 11MW in diesel generating capacity at this time.  This is mostly because the country cannot afford a repeat of the 2019 disaster when there was a prolonged island-wide outage.”

Based on the information provided so far, Worme praised the electric company for “being proactive by approaching the FTC at an early stage to address this situation, especially as we are approaching the T20 World Cup in June where we will be showcasing our country to the world”.

In a statement, the BREA leader added: “It looks like this would result in an increase of around $1.50 for a customer who is currently paying a monthly bill of $100.  Even though no one likes increases, this will be relatively small compared to the cost of the impact that the outages that they are trying to avoid by doing this would have on our businesses and on individual households.

“BREA will continue to work with Light & Power, the Ministry of Energy, the FTC and all other stakeholders to find ways to overcome the challenges that are holding back the installation of PV systems so that Barbadians can continue to play their part by investing in the renewable energy sector and so that short term solutions like this to shore up the generation capacity are no longer necessary.”

But for Went, the utility’s decision to rent additional diesel-generating capacity has raised further questions about the usefulness of several existing generators in its current electricity rate calculations.

The veteran consumer representative asked if, apart from the “obsolete” steam units which BLPC were to retire in 2023, there were additional generators that should be retired and removed from the rate base.

“If so, and this is not done, would customers be asked to pay higher rates for service than need be?  Our team will be seeking information to get answers to these questions and more,” said Went.

He added: “At that time, BLPC purchased 18 MW diesel capacity and rented a further 12MW.  In granting approval, it is imperative that a detailed onsite review should be conducted to determine what generating plant is used and/or useful.”

The intervenor suggested that appropriate adjustments should then be made to the revenue requirements, so that consumers would not have to bear costs associated with redundant assets, which, once removed, would result in much lower rates for electricity service.

However, Went found it surprising that the company needed to rent the additional diesel capacity since it had indicated that its installed capacity is 282.5MW; its excess capacity is 110MW; total installed renewable capacity was 87MW as of last August 31, way above expectation; and it was predicting total renewable capacity to exceed 100MW by 31 December 2023.

He contended that Light & Power is also aware that there were renewable systems totalling 300MW at varying stages of development.

The intervenor highlighted that It is good to learn that the company is expecting higher than usual growth in electricity, bearing in mind that during the recent rate review which is currently before the Supreme Court for a final decision, the utility argued that electricity was projected to be either flat or marginally growing.

The power company has taken the commission to court for rejecting its request for an 11.9 per cent electricity rate hike and an 8.79 per cent return on its rate base. The BLPC has accused the FTC of making significant errors in law and policy which it said were affecting its ability to serve its customers.

The unmatched legal challenge came last December after the chair of the commission’s rate hearing panel Dr Donley Carrington told Barbadians they would learn before Christmas about the revised electricity rates, stressing that it would not be the 11.9 per cent increase the company wanted.

A legal source involved in that case has told Barbados TODAY the parties will meet next month in court to possibly get directions from the judge as to how the trial will proceed and to likely determine a date for the hearing of evidence to begin.
emmanueljoseph@barbadostoday.bb