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RA: passing on North Power Station costs imprudent

Belco is taking legal action against the Regulatory Authority over its rate-setting process (File photograph)

Regulatory Authority consultants determined that charging customers for capital costs Belco incurred when retrofitting the North Power Station would be “imprudent”.

Thomas Amram, the head of power, planning and regulation at Ricardo who led a team that advised the RA on its electricity retail tariff review of 2022-23, gave evidence during a continuing civil court case yesterday.

Mr Amram was cross-examined by Francis Tregear, KC, a British-based barrister representing Belco in the case being presided over by Puisne Judge Larry Mussenden.

Mr Tregear referenced a section of a report produced by Ricardo that spoke to soot elimination and other costs that said: “Attributing remedial costs to customers for retrofitting piston crowns suited for liquid fuels would be imprudent.”

The installation of piston crowns, instruments designed to improve combustion at the station, was one of a number of measures implemented by Belco to mitigate emissions problems. Belco says on its website that it spent $2.7 million on piston crowns and con-rod shims along with filter installations to deal with odour issues

Wayne Caines, the president of Belco and parent company Liberty, has previously attributed the “unforeseen challenges” at the North Power Station to Belco optimising its engines to run on liquefied natural gas and fuel oil but then only using fuel oil after the island’s first Integrated Resource Plan ruled out the use of LNG.

The RA has said previously that Belco did so because it believed the IRP, and the country, would accept LNG.

The Ricardo report read in court yesterday said: “Overall it would be imprudent to pass the costs to customers for risks Belco has undertaken.”

Mr Amram said: “The risks that it refers to have caused the necessity for this asset to be commissioned.”

Belco is taking legal action against the regulator, claiming that it failed to consider certain factors when refusing a price increase sought by the utility. The RA rejected Belco’s 2022-2023 recommendation for a 16 per cent increase in part of its bills — the base rates — and instead allowed for a 7.5 per cent increase.

Much of yesterday’s deliberations centred on the technical aspects of the RA’s review and the methodologies it used to come to its decision.

Mr Tregear questioned Mr Amram over why the report by Ricardo was not released to Belco to allow the utility to understand and potentially contest the RA’s decision. Instead, Belco was provided with the rejection decision and the rationale in March last year.

Mr Amram said he could not speak to the RA’s decision not to release it. He said the report provided “valuable insight into the make-up of decision but there was some degree of overlap of documents and what was shared in the rationale”.

However, he agreed that there was more information in the Ricardo report and that releasing it would have been “more transparent”, providing Belco with line-by-line calculations.

He said the rationale provided Belco with enough evidence on the key drivers of the RA’s decision.

The case has been adjourned until June 16, when closing arguments will be made.

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Published May 12, 2023 at 7:50 am (Updated May 12, 2023 at 7:50 am)

RA: passing on North Power Station costs imprudent

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