The dispute over whether Belco should be allowed to increase its rates is a classic example of competing interests.One the one hand, Belco says it needs the increase in its basic rate in order to pay for a replacement for one of its main, and outdated, generating stations. Without it, its ability to provide reliable power to Bermuda will be at risk.On the other hand, Bermuda businesses and residents are reeling under the weight of the worst recession in 50 years, in which any added costs will cause more people to run into financial difficulty and more businesses to close.The rate increase Belco is seeking has nothing to do with the price of fuel, which is governed by the fuel adjustment clause. But, as a monopoly, it must get permission to raise its basic rate, and like all other businesses and individuals, Belco’s own costs are rising, meaning at some point it must raise its rates to cover health insurance, wages and the like. Indeed, Belco, in recognition of the difficult times the Island was facing, cancelled a planned rate increase recently.It is worrying that Government and the Energy Commission do not seem to understand some fundamentals of business and economics. In proposing that Belco fund the capital expenditure through retained earnings, changing dividend payouts, a bond or issuing more shares, rather than at the expense of the customer. That sounds good, but the reality is that the customer will always end up paying for capital improvements in the end. As Belco president Andrew Parsons noted, bond issues must still be repaid, and investors will not put money into businesses if they are not sure they can get a competitive return.Perhaps the most significant statement by Mr Parsons was that Belco has spent 41 percent more on capital improvements in the last 15 years than it has taken in profits. That’s a substantial figure, and a useful rebuttal to those who might think that the profits Belco has enjoyed are going to straight to shareholders.That’s not to say that Belco is perfect. It has miscalculated fuel purchases in the past, with the result that consumers have ended up spending more than they should have. Nor have its attempts to diversify always been successful. There is nothing wrong with a company diversifying, but what should be clear is that Belco’s electricity customers should not be funding the company’s moves into, for example, facilities management. There should be a way to segregate those efforts.Similarly, while this newspaper accepts that alternative energy is not now a solution for all of Bermuda’s energy needs, Belco has in the past dragged its feet on alternative energy investment, which means Bermuda is now more dependent on fossil fuels than it should be.Indeed, it may be that the Energy Commission could grant this rate increase in return for a commitment from Belco that it will produce or accept a certain percentage of the power supply from alternative sources. In this way, Belco could get its new power plant, but also be mandated to promote and push alternative energy in a way it has not in the past.No one now disputes that Belco needs a new and more efficient power plant and that it needs to be able to fund it. To do so, it needs a rate increase, even at a time when such an increase will create hardship. But any condition to get the increase, even if it is smaller than Belco has requested, should be contingent on a great effort to promote alternative energy, an understanding that the increase will be used to fund the power plant expansion and not to fund enterprises which are separate from power generation, and failure to meet these conditions should be met with financial penalties.