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Even Belco is not recession-proof

Power is a basic requirement that homes and businesses cannot do without, but just like almost every other company in Bermuda, energy provider Belco has not been immune to the effects of the recession.

Revenue from electricity sales decreased four percent, or $4.4 million, during the first six months of the year, while fuel adjustment sales and expenses fell $6.4 million due to the average cost of fuel being significantly lower than that of the same period in 2009, offset by identical fuel costs reflected in energy supply expenses.

Despite an average tariff rate increase of 1.5 percent on January 1 approved by the Price Control Commission and Energy Commission resulting in a $2.2 million rise in electricity sales revenues, this was offset by a decline in kilowatt hour (kWh) sales on the previous year, attributed to a 4.5 percent or 7.8 million kWh fall in sales to large commercial customers.

Average consumption in the hospitality, retail and international business sectors dropped as businesses sought to control their costs due to the continued weak local economic conditions.

But residential sales over this period were up 7.8 million kWh, or 5.9 percent, compared to 2009 and the company reduced operating expenses by 4.6 percent driven mainly by energy supply expenses which fell $5.2 million, or 7.5 percent.

Earlier this month Belco applied to the Energy Commission to defer its annual increase in rates due on New Year's Day in an effort to help customers during the downturn, while the company itself will seek to slash operating costs further through a reorganisation of its working arrangements and benefits.

“I think we have seen, as most of Bermuda has seen, that there has been a continued downturn in the economy that will and indeed has impacted us as it has every business here,” said Belco president Andrew Parsons.

“We did see an annual increase in residential sales but those have dropped off since the end of the summer and demand in commercial sales has not been good right from the get-go.”

An indication of the number of people and businesses who have left the Island during the economic downturn is the current availability of 400,000 square feet of office space and the growing number of unoccupied residential properties, as reflected in a decrease in consumption.

Mr Parsons said that Belco had made provisions for such a scenario, with all of his staff taking steps to tighten their belts and the companyhas cut down on discretionary spending. It is set to continue with those measures to control expenses in the year ahead.

Michael Daniel, senior vice-president of engineering and environment at Belco, said that as a result a number of projects in the planning or execution stage had been defered or delayed and would continue to monitor those developments already in place.

He said that large scale renewable sources were a part of the company's New Energy Equation to achieve a mandate of generating 20 percent of Bermuda's energy from renewables by 2020.

Mr Daniel said that the company had been working on renewable energy since the late 1990s and in 2007 invited formal submissions for viable projects that could be applied to Bermuda over the next 10 years, of which it whittled down 15 to a shortlist of five, and held a public forum where they were exhibited and presentations of the winning entries were made, ranging from large scale renewable offshore wind, solar photovoltaic, waste-to-energy and a research and development project in ocean technology which had the potential to be commercialised.

The timeline would see the solar photovoltaic based at 'The Finger' (the unused runway at LF Wade International Airport) commissioned in 2015, the waste-to-energy at Tynes Bay third stream the following year and the offshore wind in 2018 and 2020.

Mr Daniel said that Belco would face a number of challenges in implementing the technology, including the size limitation of the Island, and would require a significant “buy-in” from Government, while it would also be responsible for keeping the public informed of its progress.

He said there were a number of other issues including the impact of renewables on the reliability and supply of energy as a resource largely only available dependent on the weather conditions.

Looking ahead, Mr Daniel said that the company's strategy was to use proven and commercially viable technology installed by experts and established companies from overseas going forward which could be incorporated into the network and its evolution.

“The world's demand for renewables is growing and for Bermuda to really embrace the target we have set we have to be able to meet the demand for large scale renewables,” he said.

“We believe we can deploy that technology in the best format that works for the Island.”

Mr Parsons said acknowledged that large-scale renewables would have a impact on Belco's sales in the future and was preparing for that.

“We are planning for that impact and taking the appropriate steps to deal with that, but we recognise that it is also an offering that allows our customers choice,” he said.

To date, Bermuda's only large-scale independent power producer is the Tynes Bay facility, which has the capacity to produce three megawatts (MW) of power, of which 1.5 MW is sold to Belco.

Last month the company announced its Interconnection Policy for residential property owners or occupants who have a small-scale renewable energy generation systems on site that do not exceed 15 kilowatts which enables them to feed excess power back to the grid at the same rate that they pay for power.

The policy, which aims to encourage residents to adopt renewable energy technologies, initially saw fewer than 20 residential customers who have solar and/or wind systems express interest, with interconnection available to the first 200 qualified residential customers on a first-come, first-served basis.

Belco: Trimming expenses while planning to phase in large-scale renewable energy sources

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Published December 28, 2010 at 1:00 am (Updated December 28, 2010 at 7:54 am)

Even Belco is not recession-proof

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