Fortis Profits at the Expense of Belizeans

Summary

Fortis Inc. is the owner of both the energy distribution company in Belize (Belize Electricity Limited, BEL) and the largest energy supplier in the country (Belize Electricity Company, BECOL).  Between Fortis-BEL and Fortis-BECOL, Fortis companies generate 48% of the electricity sold in Belize, with the rest coming from a connection to the power grid in Mexico.

The monopoly control Fortis exerts in Belize allows it to charge Belizeans the highest prices for electricity in all of Central America, and many times higher than prices charged by Fortis companies in Canada.

Fortis’ profit in Belize is also far higher than profit from its operations in Canada: at least four times higher per kilowatt hour of electricity sold.

Fortis-BECOL’s plan to build the Chalillo dam, upstream from the existing dam it owns on the Macal River, would allow Fortis-BECOL to more than double its earnings, and places all the risk on the people of Belize.  The price of electricity from the new project is higher than the price from the existing dam, which is already the most expensive off-peak energy Belizeans purchase.

Fortis Gouges Belizean Customers

Fortis-BEL and Fortis-BECOL reported record earnings for the year 2001—far higher for the amount of electricity sold than any other Fortis company.  The table below shows profits in Belize compared to Fortis companies in Canada, showing that Fortis’ profit in Belize is at least 4 times higher than in Canada.

Fortis profit in Belize is many times higher than in Canada:

 

BELIZE

CANADA

DIFFERENCE

Price per kilowatt hour (Average, Cdn dollar)

28 cents

 

9 cents (approximate)

3.1 TIMES MORE

2001 Profit per kilowatt hour: generation company (Cdn dollar)

7.4 cents (Fortis-BECOL)
=$6.7 million/
91 million kwh

1.8 cents (Canadian-Niagra)
=$11.1 million/
631 million kwh

4.1 TIMES MORE

2001 Profit per kilowatt hour: distribution company (Cdn dollar)

3.6 cents (Fortis-BEL)
= $9.3 million/
257 million kwh

.6 cents
(NF Power)

=$28.9 million/
4,667 million kwh

6 TIMES MORE

 

New Dam Doubles Cost to Belizeans

The plan to build the Chalillo dam involves a new contract between Fortis-BECOL, Fortis-BEL and the government of Belize.  This “Third Master Agreement” more than doubles payments to Fortis-BECOL from $274 million to $548 million US[1] over more than 50 years. 

Anatomy of the Deal:

The new contract for the dams harms Belizean consumers, and ensures Fortis’ high profits in numerous ways:

 

  • Electricity from current dam is expensive:  Fortis-BECOL currently charges 9.79 cents US per kilowatt hour for power from an existing dam it owns downstream from the proposed dam.  This price is higher than any other energy source during off-peak hours.
  • Electricity from proposed dam would be more expensive: Under the new contract Belizeans will pay twice the amount for less than double the electricity generated.  The cost for the energy produced as a result of the project would be higher than the cost for electricity from the existing dam, an estimated 10 cents US per kilowatt hour.
  • Dam electricity displaces cheaper sources forces the cost of power to rise: Even though electricity from the dam is more expensive, a “priority dispatch” clause forces Belizeans to buy energy from Fortis’ dams first, no matter what other, cheaper, electricity may be available.  Most of the energy from the new dam would be produced during off-peak hours, when electricity from Mexico is far less expensive. So a new dam will undoubtedly increase the cost of power.
  • Fortis-BECOL pays no taxes: Fortis-BECOL, pays no taxes or duties to Belize, under a special law that was written just for the company.  The proposed Chalillo dam would therefore operate tax and duty-free—an anti-competitive incentive and is not available to other potential energy producers.
  • Belize government allows $15 million in a deal sweetener:  Under the new contract, Belizean consumers are forced to pay twice for transmission lines built to the existing dam.  Belizean consumers were already paying for these transmission lines as part of their current rates.  The new contract makes BEL purchase this asset again, at a cost of $15 million, which will be passed on to consumers again.
  • If anything goes wrong, Belizeans pay: Belize bears all of the risk for the Chalillo dam project.  If the estimates of power production are less or more than projected, Fortis’ two companies in Belize can renegotiate the contracts to charge consumers more.  Fortis companies do not have any liability, under the contract in case the dam breaks and harms people or property.  Also, if the dam does not perform as expected, with water flowing through for whatever reason without producing electricity, Belizeans have to pay as if the electricity was produced.
  • New contract gives Fortis-BECOL the Macal River: The Third Master agreement gives all the water rights for the Macal River above the dams to Fortis.

BACONGO lawsuit forces the release of the "Third Master Agreement"--secret contract between Fortis and Belize Government.  Download here (8Mb pdf).

Other electricity generation options:  eight bids submitted on May 15, 2002, by independent power producers to BEL.  Download copy of bids here (756 Kb pdf).


 

[1] All calculations are in real (inflation adjusted) terms, with an inflation rate of 1.5%, as specified by BEL’s “Request for Proposals” document for non-oil and gas generation projects.  This also matches the price increases under the power purchase agreements.  Figures are therefore in 2002 US dollars. 

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