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Energy Commission rejects Belco’s bid for 3.5% rate increase

A proposal by Belco to raise electricity rates was slashed by the Energy Commission.

The company had asked for base residential rates to be increased by 3.5 percent every year until 2014 the Commission approved an increase only for usage over 700 kWh this year.

The approved schedule does allow rate increases for small commercial and demand services in 2013.

The Commission also instructed Belco to cap its annual net income at a maximum of $13 million this year and $14 million for 2013.

Belco is now in the process of appealing the decision.

In October last year, Belco submitted a tariff filing to increase rates over three years staring on January 1, 2012.

The increases were explained as an effort to fund a $300 million planned expansion, needed to replace ageing equipment, and to combat stagnant sales.

Belco had received permission to increase rates in 2011, but elected not to do so due to the hard economic times.

The company proposed increasing the rate for residential customers by 3.5 percent annually in 2012, 2013 and 2014 while removing the minimum bill of $40.

Commercial demand customers would experience a five percent increase per year over the same period, while small commercial customers would see a 3.75 percent annual increase.

In a decision dated February 17, the Energy Commission agreed with the removal of the residential minimum bill policy but said that based on the original proposal the cost for the lowest consumers would increase more than that of the higher consumers.

A 100 kWh user would have seen their bill rise by 9.34 percent, while a 1,000 kWh user would have seen their bill rise by just 2.5 percent.

“The Commission reasons that it would be in the public interest to reduce the impact of the new proposed rates to those consumers below the ‘average’ 700 kWh usage and reasons that those consumers above average consumption should accept a larger burden from the new rates,” wrote the Commission.

They also noted that an example posted in advertisements was incorrect, and that Belco failed to correct the error.

“The Commission pointed out to Belco a calculation error in Belco’s tariff filing relating to an example 700 kWh residential home and the amount of the Belco bill that would result in 2012,” wrote the Commission.

“A series of Belco advertisements in the local media explaining what a 700 kWh example home is paying now and would be paying in 2012 also contained the same calculation error.

“Belco were requested to place new advertisements in the local media to correct this error, however the Commission is not aware of Belco doing so.”

The Commission took note of the need for Belco to invest in new generator equipment, but pointed some evidence of contradictions in Belco’s generation and load forecasts.

“The reduction of Belco’s kWh sales over the last 12 to 18 months certainly indicate that growth forecasts provided by Belco for the next three years are partially speculative,” they wrote.

The Commission also said that the traditional peak maintained by Belco is potentially in excess of Bermuda’s real needs to have spare engines and capacity in case of failure. That peak would be extended even further by the proposed expansion.

“The Commission accepts that the current ‘safety’ margin has served Bermuda well and the public has not had to often experience power outages due to a generation failure,” the Commission wrote.

“The Commission also realises that the public has little tolerance for generation failure. However, the Commission accepts that Bermuda may not be able to currently afford the size of this ‘safety’ margin.”

The Commission added that no information about the impact of a “squeezing’ of the safety margin was produced.

The approved schedule keeps the rate of electricity below 700 kWh at current rates, but increased the cost of electricity over 700 kWh from $0.2285 to $0.2804.

They further called for greater clarity in billing so that customers can be better informed of the charges for the electrical services they are paying for.

The Commission also suggested that Belco file a tariff for 2014 and 2015 as soon as practical after the end of fiscal 2012.

Neither Belco nor the Energy Commission were willing to comment on the decision yesterday due to Belco’s appeal.

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Published March 17, 2012 at 2:00 am (Updated March 17, 2012 at 7:55 am)

Energy Commission rejects Belco’s bid for 3.5% rate increase

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