bittersweet news from the Price Control Commission.

Belco's proposed rate increases will not be as high as the utility hoped.

Although the Price Control Commission agreed with Belco that rates should increase by 2.75 percent this year, it has, for the time being, disallowed proposed increases of 3.5 percent in 1995 and 1996.

The rate increase will be 2.75 percent in both 1995 and 1996. Newly appointed Belco president Mr. Garry Madeiros said capital expenditure programmes would go ahead, although he added a caveat that plans would have to be constantly reviewed to keep operation costs in check.

Price Commission secretary Mr. Philip Compton, described the ruling as "good for everyone''.

"Belco has come out better than if the Price Commission had ruled that rates should be linked to the consumer price index, or slightly less than the consumer price index,'' he said.

The commission's decision was based on anticipated rates of inflation, which differed from Belco's inflation assessments for 1995 and 1996. Belco projected in it submission that inflation would increase at 3.7 percent during those years. Government's Assistant Financial Secretary Mr. Donald Scott, said rates would be less.

"Belco should be happy as it has a degree of flexibility. It can resubmit in the event of the consumer price index exceeding three percent,'' said Mr.

Compton, who is also Government's Economic Advisor.

"It is a good deal for the consumer,'' he said. "An increase in electricity prices has been held down for a while.'' Mr. Madeiros said a flexible relationship with the Price Commission had been established, and he was comforted that if costs and the consumer price index increased, the rate would be reviewed.

However, he said Belco's original proposals had not inflated the rate increase.

"The submission was presented based on the cash flow that Belco needs for capital expenditure programmes,'' he said. "The question was asked by the chairman, Mr. Michael Mello, `What could we live with?' I said: `Exactly what we have asked for'.'' The two youthful new bosses at Belco, Mr. Madeiros, aged 44, who replaced Mr.

Alfred Oughton, and 45-year-old Mr. Vincent Ingham, senior vice president, are keenly aware that the days of burgeoning demand for electricity are over, and they will now preside over a new era of environmental concern and corporate cost cutting.

Rather than having to accommodate increased demand for electricity as in the Seventies and early Eighties, the new onus on management is to control costs, increase productivity and efficiency, and closely monitor operations, said Mr.

Madeiros.

At a time of declining growth in demand for electricity, Belco is facing huge capital costs.

This year, $21 million will be spent, and in 1995, $16 million will be spent on transmission and distribution, underground projects, sub-station, plant and systems improvements, and tools and vehicles.

"There will be a different way of doing business,'' he said. "It is a new challenge that Belco has never faced before and calls for good management practices, and establishing close ties with customers,'' he said.

During the 1993 transition year, the management team in waiting, tried to set up a dialogue with 140 major customers, known as demand customers, whose power requirements exceeded those of residential users.

"By extracting market intelligence from demand customers, like the banks, the hospital, hotels and supermarkets, we can better appreciate future challenges,'' said Mr. Madeiros.

Most demand customers are using energy more efficiently as it can affect their balance sheet, he said.

Belco's 1992 annual report acknowledged "stagnant peak demand, the planned closure of the Canadian military base and the uncertainty about the future of the US Naval Air Station'' as cause for in-depth review.

Since then the news of the American's accelerated departure from the base, now set at a September 1995 deadline, has left the new management with a perplexing conundrum.

"We still do not know what the total impact of the closure of the Base will be,'' said Mr. Madeiros. "I imagine that some infrastructure for air traffic will still be required, but in the worse case, there could be no demand.

"The Americans have shared information with us, and we are confident that in the first quarter of this year, we will know more.'' Belco predicts that US Naval Air Station power demand will decline by 15 percent in 1994 and 1995 and between 20-30 percent in 1996.

The new management is also committed to the search for new power-producing technologies.

Although wind and solar power are adjudged non-starters, Mr. Madeiros' team are investigating fuel cell technology, which is expected to be commercially viable later this decade.

The Clean Air Act will also have a substantial impact on the company, said Mr.

Madeiros. The extent of the impact will be determined by the new Environment Authority, which adjudicates how the new Clean Air Act will be enforced.

"It is important to balance the economic reality and environmental concerns,'' he said. "I personally think that the standards that have been set out are much more strict than is actually needed in Bermuda.'' "However, whatever the authority deems appropriate we will over time meet,'' said Mr.

Madeiros.

And not least in the ranks of Mr. Madeiros' pledges to the company he rules is his favourite "area'' -- people. He is committed to stripping away the hierarchical staff structure at the utility.

"I want everyone to participate,'' he said. "There will be more open dialogue in the organisation.'' PEOPLE POWER -- Mr. Garry Madeiros, new president of Belco, has vowed to break down departmental divisions at the utility, and seek greater involvement from staff in decision-making.