Headline — 04 January 2013
New Year’s gift – 16.87 % electricity rate increase

Monday, January 7, deadline for public’s comment – but documents not on website yet!

The year 2013 kicks off with a painful increase in electricity rates, with the average cost per kilowatt hour seeing an increase of nearly 17 cents on the dollar.

“The new approved electricity rate is now 48.86 cents, which is approximate 16.87% above the existing 41.81 mean electricity rate,” chairman of the Public Utilities Commission (PUC), John Avery, told the media at a press briefing last Friday afternoon.

Whereas the rate increase is going to be applied to January light bills, as of January 1, the PUC has set a deadline of Monday, January 7, 2013, for the public to comment on the decision. (We note that the documents had, at the time of this report, still not been released on the PUC’s website.)

News from the Commission is that Prime Minister Dean Barrow will travel to Mexico in the coming weeks to meet with President Enrique Peña Nieto, to negotiate a better price for power supplied by the state-owned Comisión Federal de Electricidad (CFE).

Avery acknowledged that Belizean consumers, including the already struggling productive sector, will take a hit with the hike in electricity rates, but he noted that the cost of power, which had been unexpectedly high in the second half of 2012, is by law a direct pass-through cost that must be billed to consumers.

“Because this is a fairly big increase,” said Avery, “certainly it will put our productive and business sector at a disadvantage, comparatively. It’s not something we like to do and we try to minimize the impact on consumers while not putting any additional strain on the utility.”

In the 2012 pre-election season, electricity rates were decreased by 6.14%. The Belize Electricity Limited (BEL), the government-owned electricity distributor, had said at the time that the proposed reductions [in the electricity rates] would only be sustainable if the actual cost of power remained as projected.

The company now notes, however, that “cost of power has increased more than 30 per cent above the PUC’s approved reference cost of power.”

BEL said the rise in cost of power has been occurring since July 2012. In briefing the media Friday, the PUC chairman explained that the three largest independent power producers in Belize which generate power from hydro and bagasse have not been supplying power as had been projected, and this has, in turn, forced BEL to buy very costly power from Mexico.

Avery explained that, “…we had unexpectedly low production from BECOL [Belize Electric Company Ltd.] due to unexpected low rainfall during 2012. Unfortunately, unless something happens within the next couple weeks, this situation with BECOL getting slightly lower production will continue to persist in the upcoming six months, which is the traditional dry season for Belize.”

He added that “…BELCOGEN [the cogeneration facility owned and operated by the Belize Sugar Industries] was unable to produce the amount of power that we expected from them.” Avery said the situation may soon be rectified and “we expect them to be able to supply us with the usual amount of power over the next six months.”

Power supplied by Belize Aquaculture Limited (BAL) has also been extremely costly.

According to Avery, “All in all, BEL is projected to spend some $45 million more in cost of power than was projected up to the end of December 2012.”

In a December 13, 2012 statement, BEL said that the challenges with power supply include “…uncharacteristically low rainfall levels at the onset of the rainy season, which resulted in considerably lower hydroelectric production.”

BEL added that “This, coupled with production problems at Belize Cogeneration Energy Limited (Belcogen), forced BEL to purchase more power from Mexico, at an average cost of 42.9 cents per kilowatt hour (kWh) compared to the PUC’s reference cost of 26.2 cents per kWh.”

The Mexican supplier had challenges of its own to contend with: CFE significantly increased its cost of power after it experienced problems with its natural gas supply from PEMEX, and its hydroelectric plants in Mexico are experiencing similarly lower rainfall levels.

According to Avery, “Mexico sells [Belize] power on an economic basis only. This means, basically, that we pay for their highest rate at the time. So if they have ten different sources, we pay the rate at the most expensive source that they bring on last.”

In its rate submission, BEL had asked the PUC for an increase up to 55.7 cents per kilowatt hour—an average increase of 33% on light bills, but the PUC approved about half that amount.

Avery said that BEL did not take into account $25 million still owing to consumers from 2008 from the Cost of Power Rate Stabilization Account, which, he said, made the big difference.

For its part, BEL said that it had appealed to the PUC to net the recent increases in cost of power against the $30.2 million that BEL owes customers, as ruled by the PUC in February 2012. BEL also proposed a reduction in its mark-up.

“After these adjustments, the unrealized earnings would be expected to be recovered in the next Full Tariff Review Proceeding or when cost of power falls to more manageable levels,” the company said in detailing its rate submission, in which it proposed a deferral of the rate increase.

The company added that, “This arrangement is possible since BEL has already secured the financing required to absorb this spike in cost, so as not to increase rates in 2012.”

BEL’s cash flow woes have eased thanks to a very successful debenture series closed just weeks ago, and the company has indicated that it could issue another debenture offer this year, 2013.

“We have been managing this situation towards minimizing impact on customers,” said BEL’s Chief Executive Officer Jeffrey Locke. “We have kept the lights on and also paid back customers at a much faster rate than the PUC had prescribed. We have a very competent workforce and management team who have been working diligently to manage these circumstances.”

The company said it “…continues to address the extreme challenges faced by its electricity producers… and [it] will be collaborating with the Ministry of Energy in promoting energy conservation initiatives aimed at offsetting the anticipated increase in electricity rates.”

BEL advises customers to practice energy conservation at home and work. See image appearing with this article or visit http://www.bel.com.bz/Save_Energy.aspx.

Apart from energy-saving measures by consumers, the only other hope for savings seems to be a new deal with Mexico.

“We are hoping—and we are a bit optimistic—that we should be able to get a more blended cost from Mexico, as we have been able to get in the past through diplomatic channels,” Avery told the media.

The next rate review is scheduled for April.

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