BEL will not lower electricity rates

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Attorneys Shaae Ann Keddo, Andrew Marshalleck
and PUC Chairman John Avery

 

The Public Utilities Commission (PUC) and Belize Electricity Limited (BEL) were back in court on Wednesday February 25. BEL had applied to the Supreme Court for an injunction against the PUC’s decision to lower electricity rates. On Thursday February 12, BEL filed for the injunction and Justice Minnette Hafiz Bertram heard arguments on Wednesday.

In presenting the case for BEL, Senior Counsel Michael Young argued that the position for the utility in asking for an injunction was clear and strong. He continued adding that there are currently five claims before the court involving BEL and the PUC and stated that it is really a pity that the court could not order for mediation to take place as is the case in Jamaica.

He stated that because of the contentious relation between the utility and the regulator the only way to settle the matter is through the intervention of an independent expert. He also stated that in an affidavit entered in the case by Betty Tam she explains that the electricity company finds itself in a serious financial crunch not being able to pay its creditors, not being able to get new credit and being unable to offer consumers their basic mandate of providing electricity services to new consumers.

Rebutting those arguments was Andrew Marshalleck flanked by Priscilla Banner, Leisje Barrow and Shaae Ann Keddo. Marshalleck explained that BEL’s financial woes are of their own doing with the utility company claiming that PUC is not allowing them 36 million dollars which they are double billing for the purchase of the Mollejon transmission line as part of their Regulated Asset Value (RAV).

He continued stating that there are mechanisms in place which would ensure that if it turns out that the PUC’s decision was not the right one the charges can be reversed. He noted that the ‘balance of convenience’ should be in the interest of the customers meaning that any benefits that accrue should be passed on to consumers.

After a ten minute adjournment, Justice Hafiz ruled that after considering the evidence she agreed with BEL’s argument and granted the injunction effectively barring the PUC from implementing the reduced rates.

In speaking with the chairman of the PUC John Avery, he expressed disappointment at the judge’s decision. He says that her decision was based on a supposed financial crisis, but in reality there was no evidence to show that claim. He added that PUC will be able to prove that however when the appeal to the PUC’s decision is looked at in the substantive case. Justice Hafiz explained that because of the urgency of the matter the case will be referred to the Appeal’s Court as soon as possible.

BEL’s Real financial status

In an interview with PUC Chairman John Avery, he referred to unaudited income statements for January to December, 2008, and for January, 2009, which were provided by BEL. He pointed out that those very income statements provided by BEL are the best evidence that there is no financial crisis at BEL.

Avery pointed out that according to the 2008 income statement, BEL’s total electricity revenues for 2008 amounted to $140,576,855 but that this was after reducing actual revenues collected from customers by the $36.2 million in corrections made by the PUC in its 2008 Final Decision. With this accounting treatment of the corrections, BEL reported a loss of $10.8 million for 2008.

The PUC responds to this by saying that the corrections were applied before arriving at the rate of 44.1¢ per kilowatt-hour approved in the 2008 Final Decision, which is the same rate charged throughout 2008. Therefore, it is improper for BEL to further deduct the $36.2 million out of revenues it has collected based on the rate of 44.1¢ per kilowatt-hour. In other words, BEL’s actual revenues for 2008 really amount to $176.8 million, after the $36.2 million is added, and BEL actually realized a profit of $25.4 million.

Avery said, “As you can see from BEL’s own statement, their claim of financial distress is clearly overstated. In fact, when you add the actual $25.4 million in profit to the $13.6 million in depreciation costs that BEL reports for 2008, the company actually had a positive cash flow of about $38.0 million for 2008. That is no crisis to me.”

As for the January 2009 income statement provided by BEL, it shows that BEL spent $6,586,243 for the cost of power during the month. But because the rate reduction approved by the PUC has not been implemented, BEL collected $9,595,353 for the cost of power from customers during the same month. This is a difference of $3,009,110 paid by customers in excess of what BEL paid and which, by law, must eventually be refunded to customers. Avery says that even if the rate reduction was implemented, BEL would still have collected about $300,000 more for power than it spent in January.

But customers must now wait to benefit from lower cost of power until BEL’s legal challenges in the Supreme Court are heard.
To this, Avery said, “Well, we now have to wait until BEL’s appeals against our decisions are heard. By law, the reductions in cost of power must be passed through to consumers, so they need not fear that they won’t get any benefit. Maybe that had some bearing on the judge’s decision to issue the injunction and stay. It may not appear fair to consumers when they see other commodities going down but one directly linked to fuel prices remaining high, but that was the Judge’s decision and we must live with it for now.”