January 8, 2006

Killing with the Kilowatts


by Adele Ramos-Daly

BELIZE CITY, Thu, Jan. 05, 2006
Electricity consumers were hit with another rate hike on New Year’s Day, January 1, 2006, when the Belize Electricity Limited (BEL) increased rates from an average of 39 cents per kilowatt hour to 44.1 cents per kilowatt hour (kwh).
A residential consumer who uses 136 kwh has seen her bill increase $17 in six months.. Her bill increased by $7.80, from $42.38 cents to $50.18 in July, 2005, and by another $9.58, to $59.76 this month.
Meanwhile, a commercial customer who uses 10,000 kwh will see a hike of $1,085 as of January 1.
The Belize Water Services (BWS) will pay 32% (or $150,000) more for electricity, while the Government of Belize will have to find an additional $1.5 million to keep the streets lit at night.
The New Year’s Day rate hike was the second rate increase for electricity consumers in six months, the last one having been implemented in July, 2005, when the Public Utilities Commission (PUC) approved an increase of 12%, from 34.9 cents per kilowatt hour to 39 cents.
BEL can go back to the PUC for another rate increase if the forecasted cost of power is at least $3 million more than current projections. Additionally, BEL is scheduled for another annual rate review shortly and prices may shoot up yet again by July.
Consumers who use more than 150 kilowatt hours of electricity a month will be especially hard-hit, since the Government intends to impose a 10% General Sales Tax (GST) on their light bills as of July 1. Currently, no one pays tax on light or water, only on telephone.
Previously, we had been told that with the construction of the Chalillo hydro, electricity rates would be buffered, since the price of hydro would be cheaper than any other source. Well, for now, prices remain high at 21 cents per kilowatt-hour, more expensive that the average cost of Mexican power that BEL buys from CFE – Comision Federal de Electricidad.
Official estimates show that diesel generation by BEL, which accounts for about 10% of power, is the most expensive at almost 90 cents per kilowatt-hour in some instances. Projections for the price of diesel generation place it at a high $1.08 per kilowatt-hour in late 2006.
The cost of power that BEL buys or generates is passed directly on to consumers. Since 1999, BEL has operated what is dubbed the “rate stabilization account.” This is an account into which increases in cost of power are deferred, rather than being charged to consumers right away.
The PUC says that with the latest rate increases, the current amount in the RSA, which is roughly $27 million, should be paid back to BEL by 2009.
If the cost of power declines between now and then, customers won’t see a simultaneous drop in rates, but instead BEL will be allowed to recover what’s in the RSA earlier, says PUC chairman, Dr. Gilbert Canton. On the other hand, if cost of power continues to climb, electricity rates will climb also.
When we asked what level of profits is factored into current electricity rates, Canton told us that it is in the region of 12%.
When Chalillo was commissioned in November 2005, BEL immediately announced that it would seek a rate increase of 10%. When it made its filing with the PUC on December 20, 2005, BEL requested a 14% hike.
BEL argued that the PUC had already established a mechanism whereby, if the cost of power turns out to be more than $6 million above their estimates (the threshold event), there would an almost automatic rate increase to recover the excess cost.
The PUC legalized this new rate setting scheme on December 20, 2005, when chairman Canton and Minister of Public Utilities, Hon. Ralph Fonseca, passed a new Statutory Instrument (#145 of 2005). It furthermore reduced the threshold figure to $3 million.
With this latest increase, electricity consumers are seeing a total increase of 26% in the average electricity rate since July 2005. Residential customers are seeing an increase of 25% on average while commercial customers are seeing an increase of 12%. Industrial 2 Customers, Citrus Company of Belize and Spanish Lookout see an increase of 48% on average.
Together, the two rate hikes give BEL an additional $34 million for 2006—9.2 cents more per kilowatt hour at a projected usage of 374 million kwh.
PUC says that most of the increase is attributed to cost of power, with a small amount going to reduce the rate stabilization account and the bulk to pay for expensive power.
Current estimates indicate that the second most expensive power is coming from hydro, generated by BEL’s sister company, the Belize Electric Company Limited (BECOL). Canton says that the reason for the high price is that the reservoir for the hydro is low and so Chalillo is not generating as much as was anticipated.
The price of hydropower from BECOL is, incidentally, projected to fall by eight cents per kwh between September and October 2006, while the price of Mexican power is projected to increase by 8 cents per kwh as between July and August.

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