A report surfaced as the headline story in the Opposition UDP newspaper, The Guardian, today, saying that BEL owed its Mexican supplier, Comision Federal de Electricidad (CFE), nearly $7 million, and that we ran the risk of losing the country?s primary power source because of the backlog of payments.

When we asked Young about the article, he said, ?It?s the fact. I don?t think it should come as a surprise to anybody. At 40 dollars a barrel [for oil], we said that we should have problems if we don?t have an increase in rates. Now, we?re at $60 a barrel.?

He said that BEL was only able to settle the $7 million arrears with CFE by taking out a loan.

According to BEL?s Corporate Communications Manager, Dawn Sampson, CFE supplies more than half of the power BEL distributes in Belize.

Sampson said, however, that if any such emergency situation arises where the company would run the risk of being cut off from CFE, BEL would inform its customers in advance.

Young said that BEL has tried to get more lines of credit from their bankers to alleviate their cash flow situation, but it has been difficult.

?A combination of things has been causing us problems,? he said, listing the Government?s tightening of liquidity at the commercial banks, as well as the country?s credit ratings and the recent downgrades.

?We are seeing a way out of it if we get the rate increase we had asked for,? Young told Amandala.

When we asked him whether he could provide us with a copy of the CFE letter that informed BEL that it was behind in its payments by nearly $7 million for power received since January, Young declined, saying that it was private and he did not have CFE?s permission to release the letter. We also requested a copy of the letter that BEL had sent to the PUC, informing the PUC of the backlog of payments; Young also declined, saying that the correspondence was ?private and confidential.?

We requested copies of the correspondences because of the timing of the report and possible suspicion that the reports of BEL?s troubles have been exaggerated in order to nudge the PUC into giving BEL the rate hike that it wants. The PUC?s final decision is due next month.

Young claims that BEL borrowed money to pay its CFE bill at a rate of 12%. That is the same rate at which BEL is charging customers for what it claims are arrears to the company.

Under an agreement with the Government of Belize, BEL has kept the average electricity rates stable since 2001, despite increases in oil prices and electricity costs.

On March 2, 2005, BEL requested an increase in electricity rates of 14.6%, partly to recover monies it said had accrued in the rate stabilization account. However, the regulator, the PUC, approved only 8.6%. BEL objected and, as a result, PUC contracted an independent consultant of the UK to review the decision. The consultant recommended that BEL get a 12.6% increase, which would take the average electricity rate up by about five cents per kilowatt-hour. (See story on page 18 of this issue.)

When we spoke today, Young told us that he was still reviewing the consultant?s report, but commented that it was very close to the rate increase that the company had originally requested.

If BEL were to get the 40-cent increase per kilowatt it is requesting, it could garner roughly $15 million more in revenues per year.

Sampson said that the balance in the rate stabilization account up to the end of May was $19.6 million.

Even with the rate stabilization account in place, BEL earned a net income of $14 million (after taxes) in 2003, up $1 million from the previous year. Shareholder dividends of $5.5 million were paid for 2003.

Young said that BEL had requested a rate increase in 2004, because it anticipated further cash flow problems. He said that the PUC should have acted long ago.

On average, BEL pays CFE US$1 million a month, said Young. The May bill has to be paid by the end of the month, Sampson informed.

Young said that BEL should be able to get rid of its cash flow problems by the end of the year, if the PUC grants the requested rate increase.

BEL?s contract with CFE expires in 2006 and the parties are negotiating a new deal. BEL anticipates that the cost of Mexican power could increase by 30% under the new contract. However, the company expects to complete the Chalillo hydro later this year. This new power source, according to BEL, would reduce its dependency on Mexican power.