Last night, we told you how the Public Utilities Commission had rejected a request from Belize Electricity Limited to amend the decision on the 2022 Annual Review Proceeding on electricity rates. BEL was attempting to point out to the regulator that the Cost of Power for the period July 1, 2021, to December 31, 2022, was higher than was provided for in the approved tariffs.
As a result, BEL argued that consumers benefited from electricity rates that were lower than the actual cost of power. As a result, the electricity company asserts that it will have to absorb the difference of a little less than 28.5 million dollars, accumulated from July 2021 to the end of December 2022. Additionally, the company was forecasting if the status quo were maintained, it would have to absorb another 14.7 million dollars in the short term from January to June of 2023 due to artificially low rates.
But, BEL was not requesting that the rates increase per se. Instead, they hoped that this sum of 28.5 million dollars and the additional 14.7 million would be added to the running regulatory balance that the Belizean public would have to pay back in the future.
The PUC has reviewed BEL's figures and calculations, and the regulators have come to a different conclusion. Moreover, the regulators say that BEL made critical omissions about its operational expenses.
But, the most significant disagreement between the two sides is the calculations for the excess cost of power for the period July 2021 to June 2022. The formula BEL used puts the excess that consumers owe them at 26.4 million dollars. The PUC says they used the wrong reference, Cost of Power. When the PUC implemented the necessary corrections, they determined the balance that customers owe the utility company at just 4.4 million dollars, a massive difference of opinion of 22 million dollars!
For these and other reasons, the PUC denied BEL's ARP amendment request and pointed out what they assert are other critical omissions of essential data that BEL failed to include in their submissions on electricity rates.
This morning, we spoke with with Andrew Marshalleck, the Chairman of BEL's Board of Directors, via Zoom teleconference. He asserted that after reviewing the PUC's rationale for denying their application, they didn't find the regulator's reasoned arguments credible. Here's how the chairman criticized the PUC's decision as a "reach for relevance" rather than a "cause for concern":
E. Andrew Marshalleck, SC - Chairman, BEL's Board of Directors
"Upon a review of it, we find none of the reasons to be credible, but I don't want to get into those numbers because what - in fact - happened during that year speaks for itself and speaks volumes. And that is you will recall that during that period, PUC recommended that the rates be increased. BEL insisted that they not be, that it was able to continue providing power at the same rates, the reduced rates, for the period, and we were, in fact, able to. Not only were we able to do that. We also realized a moderate amount of profit in doing it, notwithstanding that the rates were not increased. That is not cause for criticism; that is cause for complimenting the achievement of BEL. But what comes from the PUC is not surprising. This fire and brimstone approach to regulation is well known to us. In fact, the heavy-handed approach is so often used. I think it's now completely lost its intended effect. We see it more as a reach for relevance than it is a cause for concern. When we look at the actual calculations and the numbers, they say that we used the wrong Reference Cost of Power. They say it should have been 0.2563 cents instead of 0.2254 cents. Again, we say that the use of the former rate is correct, and it accords with historical practice. If they want to change that now, it is a change in the methodology of the calculation that they must justify it."
During that extended conversation, Chairman Marshalleck was also very aggrieved by the PUC's decision to chastise them at the end of the initial decision. He made the point that BEL tried its best to look after the welfare of its customers by keeping the price stable. That then allowed consumers and the private sector to access electricity and not worry about fluctuating rates that should have been keeping pace with the volatility of oil prices on the world market. Here's that explanation:
E. Andrew Marshalleck, SC - Chairman, BEL's Board of Directors
"I don't want to get lost in that methodology because you'll get lost in that. Let the technocrats sort that out. The fact of the matter is that they were saying that we needed to increase rates in order to supply electricity safely to consumers over that year plus. We have demonstrated that that is not the case; the rates need to have been increased, And it, in fact, wasn't. We were able to maintain the lower rates for that period and are still maintaining the law rates for that period, and still maintaining them now. And I must say that that's in the context of a global increase in electricity rates the world over. During the period from April 2020 through April 2022, crude oil prices rose by 350%. Natural Gas prices also rose significantly. And the knock-on effect is that electricity prices rose in some countries during that period by as much as 60%. Even in the US, which is a low-cost country, it rose by some 8%. In Belize, you know what happened? It decreased, and not only did it decrease, but we were also able to maintain that decrease and still turn a profit. That speaks for itself, and questioning dispatch and questioning methods of calculations to the extent to which that accomplishment met or passed the expected marks, based on projections, are neither here nor there because it was accomplished. It was accomplished in fine style. So, I think that is what is being missed here. But, what I don't appreciate, or what I have difficulty appreciating, is this fire and brimstone and accusatory, end-of-the-world approach as if everything is crumbling around BEL, and the PUC must come to save us. That is the message that I am trying to counter in that it's not crumbling. It's being handled very professionally and very efficiently and actually should be commended. Focusing in on what has been raised there seeks to undermine or negate the true impact of the effort that was required to realize what Belizeans enjoyed during that time, which is low electricity rates when the rest of the world faced ever-increasing rates."
Tomorrow you'll hear the chairman explained that they didn't want to increase electricity rates because Belizean consumers have done their best to catch up with arrears accumulated during the COVID pandemic.
