The Public Utilities Commission has released its Initial Decision on the 2022 Annual Review Proceeding. The regulator has agreed with Belize Electricity Limited that your light bill should NOT increase for the next 13+ months.
As viewers will remember, the Commission approved a mean electricity rate of 40.1 cents per kilowatt-hour from January 1, 2021, to June 30, 2024. That decision was made back in 2020, but in 2021, the Commission made an updated assessment for its Annual Review Period that the electricity rates should decrease to 39.99 cents per kilowatt-hour.
That gave the Belizean public a small relief in the monthly light bill that you pay, but the 2022 review period is here. Both the PUC and the electricity company both agree that the cost of power has increased. In its most recent ARP submission, BEL pointed out to the regulator that after rigorous calculations, they will have to find an additional 39.7 million dollars in input costs.
Normally, that additional cost is passed to you, but, in their submission to the PUC, BEL said, quote, "It is our view that a rate increase in these challenging economic times, when the country is just emerging from the throes of the COVID-19 pandemic, will only discourage sales and worsen the cost recovery and cash collection challenges." End quote.
But, while the utility company and the regulator agree that Belizean consumers should be protected "from the bludgeoning increase in Cost of Power", they disagree on the method that should be used. BEL is of the view that the additional cost of power should be defrayed using the running regulatory balance. That would mean that you would owe them, and that the PUC would implement a rate increase at a date in the future to pay BEL back.
The PUC has decided instead to reduce the rate of return for BEL shareholders from 10% to 8% this year, and then to 8.5% next year. Effectively, BEL's shareholders are the ones footing the bill for the additional Cost of Power.
Today, we spoke with PUC's Ernesto Gomez via Zoom, and he provide insight from the regulator's perspective on the decision being taken:
Ernesto Gomez - Director, Tariff Compliance and Standards, PUC
"I agree with you that we all looked at the Full Tariff Review Period as a solid block of years, 4 years. It started in 2020 and goes all the way to 2024. So, in that block of years, overall, the cost of power is going a little bit higher than what was originally approved. But, what we noticed is that there are 2 more years left, which are this year and next year, for the Full Tariff Review Period to be concluded. And what BEL forecasted for the cost of power for this coming year, beyond the next one, was pretty similar to our calculations. So, even though, as you say, it's higher, we concur more or less. We are in the vicinity of the same figure. So, there was nothing much to adjust there. The way we look at it is that during the Full Tariff Review Period, which was in 2020, the PUC set the regulated value of the rate of return. PUC approved an upper limit of 12%, and a lower limit of 8%. So, there is a target of 10%, but the PUC has the authority to move within the upper and lower bands. That is set on the statutory instrument that applies. So, when we looked at the whole block of the FTRP, moving the rate of return for next year at 8% and the following year at 8 and half%, overall on the block, we would remain at about 9.1%. So, what we are looking at is working on the parameters, and in that case, being able to achieve stability in the rate. All that we're looking for, both BEL and PUC, is stabilizing the rates as much as possible, and especially that we don't negatively influence the economic recovery of the country."
So, what if BEL objects and decides to resist the PUC's reasoning for the method of relief to the consumer? Here's what Gomez had to say about that.
Ernesto Gomez - Director, Tariff Compliance and Standards, PUC
"I will have to say that it is not a surprise. It is a regulatory parameter that is set in the statutory instrument. So, we're not going outside of any parameters. While it might have a little dent financially on BEL, it's all within the laws of Belize. That's one. Secondly, I'm sure that the shareholders of BEL should have something to say on that, if they're aiming for a maximum profit, or they're aiming for a leveled profit over time. The law requires that there is a public consultation, and as a result, there are 10 days from when it was set out yesterday, to the 8th of May. Anybody can comment, or object to the decision done by the PUC, including the government; the licensee, BEL; organizations like the Chamber of Commerce. Anybody can comment."
