As of Sunday, July 1, fifty thousand (50,000) residential customers will see a drop in their light bills. The Public Utilities Commission (PUC) and the Belize Electricity Limited (BEL) made the announcement on Wednesday, June 27, indicating that the PUC, the regulatory arm of Government that oversees the sector, had approved some substantial changes in rates.
Even though many customers will be getting a little reprieve in their bills, the bigger picture is significant in that the PUC is now saying that its initial rate calculations for 2007-2008 were wrong, and customers owe BEL not $10.6 million, but $16 million. Customers will repay BEL this money over the next few years.
It is also noteworthy that the PUC’s new decision leaves residential customers paying $1.7 million more than if the PUC had stuck with its initial decision.
While the PUC initially disapproved BEL’s main tariff proposals for 2007-2008, it has done an about face in its final decision; however, it has stood fast in rejecting BEL’s additional proposals for increases in reconnection charges and new charges for meter tampering and power theft.
We observe that even though the PUC has decided that the $10 service charge will be dropped from residential bills, higher per kilowatt charges for the usage of electricity will apply. The service charge alone would have netted BEL $7.3 million over the next 12 months. With the service charge eliminated, BEL has to make up that revenue from elsewhere, and hence the increase in rates for customers.
The net effect, however, is that virtually all customers using up to 500 kilowatts a month will see their light bills drop, while higher end consumers will see their bills increase in the region of 2%.
Residential customers make up 85% of BEL’s customer pool, and they account for over half of BEL’s earnings from electricity sales.
Commercial customers will also see their bills increase, but industrial customers will see an entirely new tariff system, whereby there will be one uniform rate as opposed to a peak and off-peak charges, as well as a monthly service fee and demand charge. Government will pay over $700,000 more for street lighting with the increase in electricity charges in that category.
The PUC’s final decision, announced Wednesday, differs sharply from its initial decision, made over a month ago. Initially, the PUC had reduced the service charge from $10 to $5, while keeping the tariffs for residential customers the same. The PUC had also calculated a lower mean electricity rate than it has now proclaimed—an average rate of 44.1 cents as opposed to 43.2 cents.
Because of objections to its initial decision by both the Government and the Belize Electricity Limited, the PUC brought in an independent expert, Dr. Paul Michael Sotkiewicz, Director of Energy Studies at the Public Utility Research Center, University of Florida, USA. Sotkiewicz had agreed with the PUC’s retention of the service charge, but like BEL, disagreed with the methods the PUC had used for its calculations.
The PUC now agrees with Sotkiewicz on the calculation of the figure for the annual correction, which takes into account the difference between what customers are charged based on the forecasted cost of power and what BEL actually pays for the power it distributes nationwide.
While the PUC had initially calculated that customers were overcharged almost $5 million for 2006/2007, the expert said that they were undercharged about $2 million. In its recalculation to arrive at its final decision, the PUC made a compromise, by recalculating the annual correction. Its new calculations put customers owing BEL almost $700,000.
The effect of this adjustment in the PUC’s calculation is that customers will take longer to pay off the rate stabilization account, a debt owed by customers which the PUC says now stands at $16 million. In its initial decision, the PUC had calculated the figure to be $10.6 million. BEL had disputed the PUC’s calculations, saying that the figure was $18.9 million. The independent expert calculated the figure to be $16 million, and the PUC has, evidently, accepted the expert’s calculations and methodologies, which are a modification of those originating in the tariff bylaws.
BEL is pleased that the independent expert found in its favor, and agreed that the PUC’s calculations were wrong.
The revised calculations in the annual correction and the rate stabilization account reflect a difference of about $10 million in BEL’s favor – $5 million will no longer be credited to consumers through the annual correction, and the debt in the RSA is up another $5 million, meaning that customers will have to pay back that much more over time.
PUC chairman Roberto Young told the media on Wednesday that the PUC has endeavored to be fair and to take the position of all parties into consideration in arriving at its final decision. This is the first time the PUC has received so much public input in the rate review proceedings, with 11 responses to its initial decision.
At the end of the day, however, the PUC has approved the majority of BEL’s submissions, particularly BEL’s rate and service charge proposals. However, BEL is still disappointed that the PUC did not approve its proposals for an increase in reconnection charges from $10 to $25, as well as charges for meter tampering and power theft.
For its part, BEL argues that this new tariff structure would encourage people to be more conservative with their electricity use.
The company is banking on collecting $172 million between July 1, 2007 and June 30, 2008. This is $22 million more than it collected from electricity sales last year, when the company earned record profits of $29 million.