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#453492 - 12/14/12 02:26 PM BEL Says Cost Of Power Crippling
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BEL Makes Submission to PUC as Required by SI 116 of 2009

Belize Electricity Limited (BEL), in accordance with Statutory Instrument (SI) No. 116 of 2009, section 7, and in compliance with the Public Utilities Commission’s (PUC) Rate Setting Methodology bye-laws, is making a submission to the PUC showing that Cost of Power has increased more than 30 per cent above the PUC’s approved reference Cost of Power. This significant increase in Cost of Power has been occurring since July 2012 due to various challenges faced by the three largest Independent Power Producers that supply BEL with electricity.

According to the Law, BEL’s submission is to occur no later than 21 days prior to January 1, 2013, which may trigger a review for the period January to June 2013. In its January 25, 2012 press release on the PUC's Full Tariff Review ruling, BEL noted that “…the proposed reductions [in the electricity rates] will only be sustainable if the actual cost of power remains at the projected level or lower. BEL is committed to doing all within its control to meet its cost of power projections and seek ways to lower it even further. BEL will be working closely with the PUC in this regard and meetings on this matter have already commenced”. Therefore BEL is providing all the necessary information to the PUC to help inform their decision.

As BEL had reported in its October 10, 2012 press release, the increase in Cost of Power since July 2012 is attributed to the uncharacteristically low rainfall levels at the onset of the rainy season, which resulted in considerably lower hydroelectric production. This, coupled with production problems at Belize Cogeneration Energy Limited (Belcogen), forced BEL to purchase more power from Mexico, at an average cost of 42.9 cents per kilowatt hour (kWh) compared to the PUC's reference cost of 26.2 cents per kWh. Comisión Federal Electricidad (CFE) of Mexico significantly increased its Cost of Power, after it experienced problems with its natural gas supply from PEMEX and its hydroelectric plants in Mexico are experiencing similarly lower rainfall levels.

To reduce the burden to customers, BEL is appealing to the PUC to net the recent increases in Cost of Power against the $30.2 million that BEL owes customers as ruled by the PUC in February 2012 in its FTRP Decision. BEL is also proposing to temporarily reduce its mark-up, Value Added Delivery (VAD), until its energy suppliers have recovered from their present challenges. In effect, this would result in a lesser adjustment to the electricity rates and in return BEL will pay off customers over a one-year period instead of the 4-year period prescribed by the PUC. After these adjustments, the unrealized earnings would be expected to be recovered in the next Full Tariff Review Proceeding or when cost of power falls to more manageable levels. This arrangement is possible since BEL has already secured the financing required to absorb this spike in cost so as not to increase rates in 2012.

"We have been managing this situation towards minimizing impact on customers," said BEL's Chief Executive Officer Jeffrey Locke. “We have kept the lights on and also paid back customers at a much faster rate than the PUC had prescribed. We have a very competent workforce and management team who have been working diligently to manage these circumstances."

As BEL continues to address the extreme challenges faced by its electricity producers, customers can also help manage their electricity cost by practicing energy conservation at home and work. BEL will be collaborating with the Ministry of Energy in promoting energy conservation initiatives aimed at offsetting the anticipated increase in electricity rates. Visit the Company’s website at www.bel.com.bz for practical ways you can save money by saving energy.

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#453493 - 12/14/12 02:26 PM Re: BEL Says Cost Of Power Crippling [Re: Marty]
Marty Online   happy

BEL Says Cost Of Power Crippling: Will It Ask For A Rate Increase?

3 months ago, we gave you a brief preview of the financial difficulties that BEL was facing. The main problem then as it is now is the cost of power. Rainfall was low this year, so there hasn't been enough Hydro power; BELCOGEN has been producing under capacity, and energy from Mexico was selling BEL power for almost 43 cents per kilowatt hour - which is about what you pay for it! And everyone knows you can't sell a product for the same price you're buying it for!

In a press release sent out today, the company noted that since July of this year, their cost of power has spiked up to more than 30% since the rate reduction of January 2012.

So, what does all this mean for you the consumer? Well, BEL representatives spoke to us today saying that by law they are required to report the costs of electricity at the current period as compared to when the new rates were effected.

They told us that it is their obligation to report to the country and the PUC what their financial position is.

Here's what they told us about the financial difficulties they've been facing with the soaring cost of power:

Ernesto Gomez - Sr. Manager of Energy & Supply, BEL
"Under the law, the cost of power that BEL purchases for its suppliers, it's just a pass through to the customers. So, the expensive of the cost of power, if you remove that from the rate, BEL has just a small margin to operate on, like 30%. So, if the cost of power rises, it takes away from our everyday cash to be able to operate. BEL has used all its resource to be able to easily keep the lights on for the customers. And as a result, the customers do not even know that this thing is occurring, but as a result, we are committed by law to report these changes to the Public Utilities Commission for them to look at it. And they may or may not make decision. That's their prerogative. In January 25 of this year, BEL put out a press release to the public, just after they had given the initial decision for the full tariff, the PUC had given that. And, we had studied the decision and the rates, and we realized and decided that we can easily operate efficiently with those rates, if the cost of power would remain at the price that it was in January of this year. But since the price of power did not stay at that level, we are now obligated by law to make a submission to the PUC that would report them our actual cost power and our forecasted cost of power from the end of June, which tariff review period. That's what we're submitting, only that. The PUC will take that information, and they may decide if they will do any adjustments to the decision that they made in February of this year, or they may chose to go another direction, but at this moment, our submission is basically the submission of data, as required by law. At this moment that we have done our submission to the PUC, we have to be careful not to be scene suggesting to the PUC any decision that we would want them to take. As a result, I would not want to suggest anything to the media. I prefer the PUC keep their independence, and make their decision without any influence from us, the licensee. We believe that the problem has done a strain on our finances, and we have gone ahead sought short term financing, as you have seen, with debentures and what-have-you. So, we are prepared to make sure that the customer still has electricity continuously. That is not a problem."

Daniel Ortiz
"Are we saying that the 6.14% rate reduction is currently unsustainable?"

Ernesto Gomez
"Well, at this moment, with the fuel prices at this level, if you do the analysis now, obviously, it's unsustainable. But, you cannot do it at one moment in time. The PUC has to be looking at it in periods of 4 or 5 years. That's why they call it full tariff review. Like I said before, and forgive me for insisting, because we did our submission to the PUC on December 10, the PUC takes 15 days to deliberate and do their own technical stuff with us supporting them with whatever information they want. During that period of time, we cannot by law say anything to the public that would influence - or that would look like we're influencing the PUC in a decision. So, suggesting a rate, or suggesting an increase or a bottom line, I would not be able to do it. After the PUC put out its first decision, which will be around December 27 or 28, then I could answer you on all those questions, without a problem. We're trying to encourage and promote the public for energy conservation. Whatever way the rates go or don't go, we don't want the public to pay any more than they need to."

So, at this time, there is no rate increase being suggested, it's the PUC's responsibility to come up with a decision on what steps the company will take in the next rate review period.

Channel 7


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