Roban: Belco’s FAR will be reduced
Belco and the Regulatory Authority have to change the way they operate in order to reduce the cost of electricity, the Government has warned.
Speaking in the House of Assembly on Friday, Walter Roban, the Minister of Home Affairs, said that in an ever-changing economic environment, the utility “will have to think about how its operation can change”.
Mr Roban added that the RA, which has oversight over electricity prices set by Belco, must “adhere to the principals and statutory requirements that it has been designed for”.
The minister spoke out following a public outcry last month over a hike in electricity bills which saw the Fuel Adjustment Rate rise by almost 50 per cent.
The move, ratified by the RA, resulted in a rise of around 20 per cent in average monthly electricity bills.
Within days, Mr Roban announced that his ministry would take action to scale back the increase — while acknowledging that the Government would be breaking the law if it interfered with the workings of the independent RA.
At a press conference a week later, the minister stuck to his guns, insisting that the FAR hike would be reduced “in the immediate future”, and that the RA would also be amending the methods by which it calculates fuel prices.
Mr Roban later watered down those claims, telling a group of Belco customers at a public meeting that the Government, Belco and the RA were working independently of each other to explore “potential” ways in which electricity rates may be reduced.
On Friday, Mr Roban reverted to his initial position, telling MPs that last month’s FAR increase will be reduced and that, under proposed legislation, the RA will be forced to change the way it calculates fuel costs.
During last week’s Throne Speech, the Government revealed that laws will be drafted in the coming year “to provide for greater public protections” against dramatic price hikes.
Speaking in the House of Assembly on Friday night, Mr Roban said: “This is a part of an effort that’s been going on for quite some time because the regulatory regime which was put in place in 2011-12 … hasn’t had a serious revision in all that time.
“Since taking over that area of responsibility, the effort has been to look at it. These are weighty pieces of legislation.
“There needs to be modernisation in this area, but there are things now, things have changed now which need to be addressed.”
Noting that the RA had taken on “greater responsibility” in recent years, Mr Roban said that the organisation needed to ensure that fuels were priced “properly” with “realistic management and oversight”.
He acknowledged that there was no “silver bullet” to reducing energy costs, but added: “Up to this point, to be honest, it’s a bit of a wild, wild West, and pricing needs to be better.
“As we know, recently the issue of cost in this area has been an issue. We know in the last month, reflective of a number of factors, we have seen increases.
“We know that over a month ago, we had an increase in the Fuel Adjustment Rate, which cause considerable concern in the community.
“This government listens. We are concerned about these things. We are concerned about any uncontrolled costs and even costs that, for whatever reason they find confronted with, particularly electricity which is essentially the lifeblood of our community.
“I was disappointed with the increase that was produced because it was too high. I said things publicly, representing the Government, that ‘yes, we’re concerned about this, and we’re going to address it’.
“As the minister responsible for energy regulation and policy, I made it clear that I would be addressing the regulator on this issue, and that’s what was done.
“There’s been much discussion since. There’s been much work done by the RA since then, and I can certainly announce that, after my discussions with the RA, that there will be an announcement in the near future where the FAR will be reduced, and I wanted to make sure that I said that in the House today. The FAR will be reduced.
“And also additionally, there will be changes to how the FAR will be handled. This is nothing new, this has been announced already in the media that the RA is reconsidering how the FAR is calculated.
“It is now calculated on a quarterly basis. They are looking at going to a much more frequent period of calculation. These are things that are going to happen.
“It is important that the RA adheres to the principals and statutory requirements that it has been designed for, and the RA in my view must exercise dialogue with industry and do the due diligence to review and revise this Fuel Adjustment Rate understanding that the current method of calculating the FAR does not benefit the public.
“The Government intends to play its part in bringing relief, but we expect that we will do it together, not in a way that is not in the public interest.”
Launching a broadside on Belco, Mr Roban said: “Certainly the utility itself — and these are my thoughts on the matter as somebody who has dealt with energy policy — the utility will have to think about how its operation can change.
“Because I understand, and I say this not to be disparaging, that the electricity environment here is changing for many reasons — technology, the attitude that many of our residents have towards power.”
Mr Roban added: “So the utility will have to address this and change in response to the environment.”