Government would consider duty relief for cleaner fuels
Belco has refused to say whether it will apply for government relief on the purchase of a cleaner fuel that could reduce pollution from its plant.
The Ministry of Finance told The Royal Gazette that the company could apply for relief on a lesser-polluting fuel than its current primary fuel, heavy fuel oil (HFO).
The burning of HFO was identified in 2021 by a leading British consultancy firm as being the most likely cause of soot emissions from Belco. These emissions, as well as high levels of airborne contaminants such as sulphur dioxide, have disrupted the lives of residents since the building of the North Power Station in April 2020.
While burning a cleaner fuel such as light fuel oil or a lower-sulphur HFO has been considered by the firm, it consistently states that such a switch would cost more and that those costs may be passed down to the consumer.
The Royal Gazette turned to the Government to ask if it would consider providing relief to Belco on the purchase of a more environmentally friendly fuel.
The Ministry of Finance responded: “Any application for relief made by a fuel supplier or importer for a more environmentally friendly product would be considered by the Ministry of Finance.”
Wayne Caines, the president of Belco and parent company Liberty, has attributed the “unforeseen challenges” at the North Power Station to Belco optimising its new 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 gas.
Approached for a response to the ministry’s statement, a Belco spokesman echoed a previously released statement, saying: “Belco continues to vet all options for resolving the issues experienced, bearing in mind that some of them, such as switching fuel grade, may contribute to higher costs for customers.
“The Electricity Act 2016 provides that the retail tariff shall seek to enable Belco to generate a total revenue that includes recovery for reasonable costs in respect of expenses for fuel procured for generation that is efficiently incurred.
“All fuel costs are recovered by the Fuel Adjustment Rate on which Belco makes no profit. Belco applies for FAR approval from the Regulatory Authority on a quarterly basis.”
A similar response was given by the RA when asked if the customer should foot any extra cost to burn cleaner fuel to mitigate pollution.
In its Retail Tariff Review, the RA set Belco’s allowed revenue for January 1, 2023, to December 31, 2023, at $2.3 million.
The Royal Gazette revealed that a cost analysis was carried out on alternative fuels in 2021 after the Department of Environment and Natural Resources proposed that fuels with a sulphur content of 2 per cent or more, including the HFO used by Belco, be banned.
However, the RA rejected the proposed amendment to local regulations on the basis of cost and that there may be a “decrease in reliability that could lead to an increased probability of forced outages or an increase in the maintenance regime”.
Denton Williams, then the RA’s chief executive, added that alternative fuels would decrease the efficiency of the engines and result in higher fuel consumption. He added: “This will likely lead to higher volumes of fuel being procured and an increase in government tax revenue.”
The Royal Gazette obtained the outcome of the cost analysis which the RA initially did not release in response to a public access to information request, as was the case with the DENR.
Asked at the time why the RA didn’t release it, an RA spokeswoman said: “Since DENR did not feel that the public interest test was met, the RA agrees, and adopts the same position.”
However, the DENR did eventually release the document to this paper with apologies saying it initially believed it to be an RA document but, on reflection, it could be argued it is also a DENR record.
Following a second, almost identical Pati request to the RA, filed again only for administrative reasons, the RA did then release it.
We have since asked the RA why it initially chose not to release it and a spokeswoman has repeatedly failed to answer the question.
We asked Belco, which said the analysis is now out of date, whether it was working to carry out a new cost analysis based on current fuel prices but an answer was not included in the company’s response.
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