The Fair Trading Commission, in its Fuel Clause Adjustment Findings Report released today, also took the position, that as a matter of priority, the BL&P should replace its two steam turbine generators with more efficient equipment in order to reduce input fuel cost.
The FTC’s review was to assess the method by which the FCA was applied to bills, and to examine the feasibility of using alternative approaches for the recovery of fuel costs by the power company.
While the commission found no evidence of any significant cumulative under or over recovery of costs by the BL&P when it applied the clause to customers basic bills, the FTC took the position that changes were necessary in the interest transparency and reliability.
“The FTC found that there is no evidence of any significant cumulative under or over recovery by the BL&P, when comparing the historic revenues collected from customers on a monthly basis through the FCA, to the actual fuel costs which were incurred by the BL&P,” the report noted.
“The commission is desirous of improving its ability to verify and audit the FCA calculation,” it added. “This will also increase transparency of the billing process.”
The utility regulator said that next month it would start the process for a motion to review the fuel clause, and at the same time it has proposed that it should be based on the actual energy generated and the actual fuel costs incurred by the company in the generation of electricity.
“The electricity generated in the previous month and the fuel expenses incurred in the previous month should be used to calculate the FCA. The motion therefore proposes that the BL&P move from the use of projected data, to the use of historic data,” recommended the FTC.
Additionally, the commission proposed that the company may, at its discretion, continue its practice of “smoothing” the FCA, that is, spreading fuel costs over more than one month to reduce the impact of larger world energy price fluctuations on customers.
This matter, the regulator pointed out, will be addressed in the motion.
“The commission has determined that the FCA should continue to be calculated on a monthly basis and not maintained at a constant value for several months, as this would expose both customers and the company to potential financial burden,” the FTC added.
It has recommended, too, that the power company do more robust reporting on the “smoothing” of the FCA, to achieve greater accountability and that in its monthly reporting, advise whether, and to what extent, the fuel clause was “smoothed”.
The latter must include calculation of the actual FCA and the smoothed FCA that will be applied to the electricity bills. The commission reserves the right to request any additional information.
Other recommendations are that reporting and verification of the fuel clause should be enhanced, even though the FTC did not consider monthly verification was necessary at this time; the commission will review the clause as needed and undertake annual fuel audits, require the efficiency of each generating unit be reported yearly, and that the BL&P would not have to read meters every month.
The assessment of the clause also discovered that the efficient dispatch of generation plant was impacted because the BL&P, due to age and reliabiity concerns, ran the steam turbines continuously to satisfy base load, instead of the more efficient low speed diesel engines.
“The BL&P submitted its Integrated Resource Plan on March 28, 2013 for approval of the commission. The IRP, among other things, makes recommendations or the retirement of the two steam turbines, the construction of new generating plant, the use of renewable energy options and energy efficiency measures,” stated the executive summary. (EJ)†††