The Fair Trading Commission’s decision on the BLPC’s application for the recovery of the rental and operating costs of 11 MW of temporary generator units through the Fuel Clause Adjustment is very wrong based on the evidence, and very bad from a rate regulation perspective.

Background

On October 13^th 2013 the Barbados Nation carried a news article where Emera, Barbados Light and Power’s only shareholder, threatened Barbadians…and I am quoting the Nation here, that

“it wants another 40-year licence from Government or it will not build a planned new generating plant.”

That “planned new generating plant” was the Clean Energy Bridge to replace the obsolete and unreliable Steam Plant that was past due for retirement.  In 2010 the Barbados Light and Power was granted the $25M per year rate increase that was in part specifically requested by Barbados Light and Power for the express purpose of implementing the Clean Energy Bridge.

I previously informed ratepayers that Barbados Light and Power did not retire and replace the steam plant and this refusal to replace those generators left our electricity system in an extremely unreliable state without adequate capacity reserves, in addition to costing Barbadians upwards of half a billion dollars extra in fuel costs.  Barbados Light & Power gambled very recklessly with this situation for a number of years, until in November 2019, their (and our) luck ran out, and our electricity system crashed, and we had that two-day black out that affected us, for a whole week in some cases.

In its report on that 2-day blackout the Fair Trading Commission found that “Insufficient Operating Reserves” was the #1 Regulatory Breach that contributed to the blackout.  In layman’s terms, Light and Power did not have enough of its generators in reliable working order. This is a serious breach of a regulatory requirement, namely, the “statutory obligations of generation adequacy and security of supply.”

In a live streamed report on the November 2019 outage, the Prime Minister spoke specifically about addressing this shortfall by renting 12MW of generating equipment, and she emphasised “the decision not to pass on the cost of the rentals to the people of the country.”

Managing Director of the Light and Power, Mr. Roger Blackman stated specifically,

“The purpose of the rental generation is to have that additional capacity and security and insurance on the ground as quickly as possible.”

Back then Mr. Blackman went on to also state that Light and Power was finally installing the Clean Energy Bridge that was nearly a decade overdue specifically referring to the Clean Energy Bridge as the “permanent solution”

On multiple occasions during those live-streamed conferences, both the Prime Minister and Mr. Blackman assured Barbadians that we would not be saddled with the costs of the rental generation equipment.  This was to be expected, because the Barbados Light & Power was the sole entity at fault, due to its failure to maintain its equipment properly and to plan properly for plant retirements, or to mitigate against the fact that as the equipment gets older it becomes less reliable and therefore is more likely fail and not always be available either as on-line generation or back up capacity. 

It must be emphasised that it is solely the utility’s responsibility to maintain adequate generation reserves.  And it was solely the fault of the utility that the reserves had been allowed to become inadequate.  There was no hurricane, no climate change event that precipitated this deficiency in generation reserves.  This was the simply the result of a Public Utility that refused to invest in its network.

Also very important is that with the exception of fuel ALL of the generation costs are already included in the Rate Base.  The cost of the equipment, the installation costs, the ongoing maintenance costs. This means that the ratepayers pay for it all by way of electricity rates.  We even pay for the Light and Power to maintain adequate generation reserves.  The plain facts are that at this moment, ratepayers pay for approximately 260MW of generating capacity including the non-functional Steam Plant that is still included in the rate.  If you look at the data provided in the FTC’s decision, the peak demand is 149MW.  Therefore, ratepayers pay for more than 100MW in generation capacity over and above that which is needed to cover peak demand.  And for the record, 150MW more that what would equate to AVERAGE demand.

Ratepayers recognise and accept the need for this excess reserve, this buffer, this safety net and that is why ratepayers pay handsomely for the Light and Power to purchase and properly maintain this excess equipment.  In simple numbers, ratepayers have paid over ¼ of a Billion dollars to purchase the generators that make up the “reserve” portion of the generation capacity and they pay the Barbados Light and Power about $16 Million dollars a year to maintain that “reserve” portion of the generation capacity in proper working condition.  An analysis of these payments show that in the 5 years since the 2019 island wide blackouts, ratepayers have paid over $135 Million dollars towards the purchase and upkeep of the generation reserve capacity.  IN OTHER WORDS, RATEPAYERS HAVE ALREADY PAID…and the FTC knows this. 

Now that the Clean Energy Bridge, which Mr. Blackman described as the “permanent solution”, is fully operational, why are Barbadians being made to cover the cost of Barbados Light and Power’s failings?  Why are Barbadian ratepayers paying for Barbados Light and Power’s imprudence and mismanagement?

Key issues resulting from the FTC’s decision

Having been shocked and deeply hurt by the FTC’s decision, Barbados’ electricity ratepayers need to know that:

1. This rate increase will equate to a minimum of $10.3M per year.  Put in context, that is equivalent to approximately 50% of the interim rate increase that the FTC unlawfully granted in 2022, that is currently hurting many Barbadians.

1. The costs for the actual rental units are being recovered through the Fuel Clause Adjustment, that is in addition to the fuel used to operate the units.  If those operating costs increase for any reason, the increases will likely just be absorbed into the Fuel Clause Adjustment without a proper rate review.

1. The cost to the consumer for every kilowatt hour of electricity generated by the rental units is about 4 times greater than the cost of electricity generated by the Clean Energy Bridge.

1. The final cost to the consumer, of the electricity produced by the rental units, will be approximately double the current average cost of electricity to consumers.  That is to say, a Rental Generator kWh of electricity will cost $1.05 as compared to the current $0.54.

• The additional 11 MW of capacity does not bring us up to an adequate reserve margin.  Accordingly, consumers are still exposed to the same high risk of major power outages.  Amazingly, based on the Light and Power’s answers to the FTC’s own interrogatories in this rate case, the additional 11MW of capacity just approved by the FTC will fall well short of increasing the reserve margin sufficiently to offset the risk of electricity demand shortfalls and grid instability…it does not even make us safe.

The FTC itself expressed grave concerns about,

“the BLPC’s ability to meet statutory obligations of generation adequacy and security of supply provisions to customers.”

The FTC went on to say,

“the BLPC’s maintenance of its generation resources is questionable. Additionally, the Commission is deeply concerned about the prudence with regard to effective scheduling of maintenance activities and how this impacts generation adequacy.” 

Barbadians must now ask themselves, how does our consumer protection and utility service regulator acknowledge imprudent management and breaches of statutory and regulatory requirements, and then in the same breath, blatantly contradict themselves by rewarding that mismanagement by the utility and punishing consumers for it? This is inexplicable and unjustifiable. Furthermore, in all of this, Barbados Light and Power has been experiencing record electricity sales, at the highest electricity prices ever seen in Barbados (not factoring fuel) and has been unapologetically paying millions of dollars in dividends to Emera, clearly with the blessings of the FTC and the Government.

• This rate case, and this ridiculous decision, send a very bad message to the Barbados Light and Power and other regulated utilities. It says to these companies, consumers will pay for your negligence, inefficiency, mismanagement and breaches of statutory obligations, so you are free to do as you please.  

• Also, coming on the heels of the secret, closed door, non-public $800M Clean Energy Transition Rider rate increase application filed late 2023, where not a single Light and Power witness was questioned or cross examined, where Light and Power refused to provide financials to show its record sales or revenues, the mechanism for dealing with this latest application from Light and Power will certainly reassure all regulated utilities that the FTC will pursue untransparent rate setting procedures that leave Barbadian consumers out of the process, out of the loop; that the FTC has cast aside a rate setting process, enshrined in law, that has protected Barbadian rate payers for seventy years. What you can be sure of is that consumers ARE NOT AND WILL NEVER BE the beneficiaries of this untransparent pro-investor-only approach of the FTC and the government of Barbados.

• Whoever in the FTC is calling this increase a “modest” increase (as reported in the print media), must think that we are all foolish and naïve. Any increase whatsoever will affect prices for goods and services throughout our economy, prices that Barbadians are already crying out for relief from. As consumers our concerns are being disregarded; you are here to just pay the rate increases and suck it up, no questions asked.

Tricia Watson is an Intervenor in the Application for the recovery of the rental and operating costs of 11 MW of temporary generator units, filed by the Barbados Light and Power Limited with the Fair Trading Commission on January 29^th 2024.

As an ‘Intervenor’, I am concerned about anything that could possibly result in a process or decision that is not just.  Misinformation, misleading information or simply inaccurate data or inappropriate actions can place Barbadian residents and rate-payers at risk of an unjust result that would have a negative financial impact on the average resident or business.  I will continue to monitor and call out any steps or missteps in the process and any poor decisions that can result in an unjust outcome for consumers.

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