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Power cut!

by Shawn Cumberbatch

The Fair Trading Commission is moving to shield Barbadians from higher electricity bills.

It means the Barbados Light & Power Company Limited, the lone entity permitted to provide electricity commercially here, could be faced with its own power cuts and historic penalties related to the operation of its plant.

This follows the submission of an “independent” consultants’ report by experts the FTC hired to investigate the BL&P’s Fuel Clause Adjustment.

The proposed changes, which are to be discussed between today and November 16, include capping the amount of money the power company recovers monthly via the FCA at $7.5 million and shutting down some of its major plant at night to save on the cost of fuel.

Rather than calculating the cost of fuel for its entire operation, it is being suggested that costs be calculated at specific BL&P facilities.

Additionally, it was also recommended that BL&P be “incentivised” through the use of escalating penalties if it failed to operate its generating plants optimally.

All of this was revealed today by the FTC, which announced in a 43-page consultation paper that while BL&P had been presented with the consultancy findings and given an opportunity to respond, Barbadians now had the chance to say yes or no to the proposed changes.

The FCA is used by BL&P as a response to fuel cost uncertainties and is a direct pass through charge where the customers are required to pay for the portion of fuel related to their consumption.

This means householders and other users typically will notice a fluctuation in the per unit charge of the FCA on bills from month to month reflective of changes in the cost of fuel.

The intent of the FCA is to eliminate the need for costly, time consuming rate hearings every time there is a change in the cost of fuel.

But as the FTC pointed out, the problem for Barbadians was that “since the cost of fuel is the single largest input cost in the production of electricity in Barbados, the volatility of international oil prices can have the effect of creating considerable uncertainty over the price of electricity”.

Calculated differently

Under the proposals, which the FTC is now asking the public and BL&P to accept, the FCA would be calculated differently, using energy generation, fuel costs, auxiliary consumption, and technical system losses based on the prior month’s numbers.

While auxiliary power is required for equipment such as feed pumps, cooling water pumps, air fans, and coal grinding mills, common auxiliaries etcetera of the generating station, and the technical losses mentioned were said to “occur naturally and consist mainly of power dissipation in electricity system components such as transmission and distribution lines, transformers, and measurement systems”.

“The present FCA reporting mechanism by the BL&P to the FTC is inadequate, and it is recommended that while done quarterly, a spreadsheet should also be sent to the FTC monthly. This will allow auditing by the FTC and the general public,” the consultants said in their report.

“This monthly FCA reporting would be supplemented by annual auditing of overall costs. The auditing should also include a review of the efficiency of the BL&P dispatch and the availability of all plant.”

They also advised: “The BL&P generating plant has higher levels of unavailability than is the norm for plants of similar types. This results in higher fuel costs, which are passed directly on to customers.

“The costs of fuel at each power station are calculated separately, resulting in differences in the cost of diesel oil between the three power stations. It is recommended that these costs be taken into consideration by the BL&P when determining the order in which the plants are dispatched.”

The FTC noted that although “at first glance” the proposed FCA change “could be efficient in stabilising customer billing, the potential financial exposure to the BL&P through its implementation would have to be controlled”. It therefore said controlling the BL&P’s exposure would mean capping the over and under cumulative recovery at $7.5 million.

BL&P currently has 239 megawatts of installed capacity, of which 149.2 megawatts is fuelled using Heavy Fuel Oil/Bunker C (60 per cent), diesel (25 per cent) and jet fuel (15 per cent). While the Barbados National Oil Company Limited supplies Bunker C, diesel and aviation jet fuel are currently supplied by Esso.

The FTC is requesting submissions “from all interested parties, including the BL&P, other potential operators, Government ministries, non-governmental organisations, consumer representatives, residential consumers, businesses and the academic community.

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