Barbados Light and Power Company (BLPC) customers will not have to pay as much for electricity as the utility provider wanted.
However, they will have to wait until sometime next month to find out exactly how much of an increase they will be forced to pay.
The Fair Trading Commission (FTC) announced Wednesday that the rate of return that the BLPC used to calculate a new requested base rate had been thrown out by the regulatory agency and the power company will have to make some adjustments.
“The rate of return on the rate base of 8.79 per cent, is denied. The commission approves a rate of return of 7.47 per cent to be used in the computation of the revenue requirement,” chairman of the FTC rate hearing panel Dr Donley Carrington said at a press conference held at the commission’s Green Hill, St Michael headquarters.
He explained that having refused to approve a series of requests on which the company relied to determine the 8.79 per cent rate of return, the FTC ordered BLPC to return to the drawing board and readjust its calculations and assumptions.
The BLPC was seeking an 11.9 per cent increase in base rates.
But in a swift response, lead counsel for the BLPC Ramon Alleyne, KC, said the decision has now to be carefully assessed to see if it’s sustainable.
“It’s an involved decision which requires serious review and assessment. The Light and Power will closely analyse the findings as it has always done and follow the directions that have been given. But there needs to be a full analysis to see if the decision is sustainable,” he told Barbados TODAY.
Dr Carrington said the electricity company has three weeks in which to submit a compliance report containing all the required recalculations and readjustments that will be used to determine the final base rate to be paid by Barbadians.
The FTC estimates that it would be able to announce the new rates about two weeks following the submission by the BLPC.
“For the avoidance of doubt, in a compliance filing, BLPC must submit a revised revenue requirement to be utilised in determining final base rates, which shall utilise a base rate that includes updated book valuation of plant in service, accumulated depreciation, accumulated deferred income taxes and regulatory assets or liabilities as of the interim rate effective date,” Dr Carrington said.
He explained that because the company did not get all of what it requested, the final rate will be lower.
Dr Carrington told reporters that the interim rates which were granted to the utility provider in September last year – between $1 and $3 for domestic service customers – will remain in place until the final rates are determined.
However, when the new rates are approved, the company will not get its request to have them made retroactive.
“The request that the proposed tariffs come into effect from April 1, 2022, is denied. The commission will make a determination as to the final approved tariff rates and the tariff effective date after the review of the compliance filing as part of the final order,” Dr Carrington said.
“Interim rates are to continue to be billed throughout the date to be determined in the final order. The issue of refunds to customers, if any, will be addressed in the final order.”
Among the submissions to the FTC that were rejected in the BLPC application was the request to recover, in the new base rates, some of the money from the cost of a five-megawatt energy storage device.
“The cost related to the energy storage device will continue to be recovered through the fuel cost adjustment,” Dr Carrington said.
The company was also directed to establish a regulatory liability account and place in it the $99.5 million which its trustees previously removed from the Self-Insurance Fund which is used to self-insure against damage and consequential loss.
“In the event of a catastrophic event that is eligible to be covered by the Self-Insurance Fund, the BLPC is directed to first deploy the monies recorded in the regulatory liability account. BLPC is further directed to refund to customers, the Self-Insurance Fund amounts withdrawn that are not redeposited into the Self-Insurance Fund over a 30-year amortisation period, as a reduction to insurance expense that shall be shown [as a] separately identifiable account for regulatory reporting purposes,” Dr Carrington explained.
The final capital structure equity of 65 per cent and 35 per cent debt used by the company in the determination of its rate return was also denied.
BLPC was instead granted a financial capital structure of 55 per cent and debt of 45 per cent for rate-making purposes in the determination of its rate of return.
Kenneth Rickey Went, one of the eight intervenors who participated in last year’s public rate hearings, said he would need time to carefully analyse all the FTC’s decisions.
However, he said the rejection of the company’s proposed rate of return and the FTC order regarding the Self-Insurance Fund were steps in the right direction.
Another intervenor, attorney-at-law Tricia Watson said she would issue a statement later this week as she had not yet read the decision.
None of the other intervenors could be reached for comment.
Following an October 4, 2021 application by the Light and Power for a review of its base rates, the FTC last year held a series of public hearings during which it issued 500 interrogatories or questions from intervenors and analysed more than 3 500 pages of responses.