Belco charges could be reviewed monthly, says minister
Reviews of Belco charges could be done on a monthly basis as the Government and regulators look to avoid a repeat of a shock 20 per cent increase in electricity bills.
Walter Roban, the Minister of Home Affairs, whose ministry oversees the Regulatory Authority, also did not rule out a price cap, saying caps had been adopted in Britain as fuel prices rose in the wake of the Ukraine war with Russia.
The RA approved a more than 50 per cent increase in Belco’s fuel adjustment rate for the quarter from October 1.
This caused a wave of protests outside Belco offices, the One Bermuda Alliance demanded the recall of Parliament to discuss the rate and the Government threatened the RA with legal action.
Following the increase, the RA initiated an investigation into Belco, specifically the operation of the new North Power Station.
The Regulatory Authority has started an inquiry into Belco’s operations, focusing in particular on the North Power Station, which it expects could lead to a reduction in the fuel adjustment rate for customers.
Asked if he could shed any light on why the focus was on the NPS, Mr Roban said “I think we're aware that for quite some time there have been challenges with the North Power Station, and it has contributed to some other matters that have been of concern to the community, particularly the community in that part of Pembroke.
“So I believe that the RA — and I’m dealing with this as being the minister responsible for energy who looks over the RA, but I do not get involved with the daily operation of the RA or necessarily the decisions of the RA — clearly sees that there are issues that they need to investigate more deeply with the operation of the North Power Station and if its operation might have some impact in relation to how they have used fuel over that period of time, and if that in any way impacted how the FAR might be calculated.”
He added: “They have every right to do that as a regulator, and I think that’s why their attention is on the North Power Station. It is a major component of the power generation of the country.
“It is supposed to be a new station, a new operation. The fact that it has ongoing challenges and problems is something that the RA has been observing and certainly they want to look further into.”
Mr Roban was asked if the results of the investigation would be made public and he added: “I will encourage the RA to be as transparent as they should be in the public interest. I believe in transparency. Legally they are required to be transparent.
“I am supportive of transparency and openness in all of the matters that pertain to the public around the utility sector of energy. Let’s just make that clear. So I would hope that with the investigation and with the findings that the RA will be as transparent as they are legally required.”
In an interview with The Royal Gazette, Mr Roban said the methodology used to calculate the FAR, which is adjusted every quarter, was being re-examined.
“The RA is going to review it in a way to ensure that the type of experience that was had on October 1 doesn't happen again,” he said.
“So it could be once every two months or maybe once every month, but they will assess what is needed, because in a market where the oil price is fluctuating, that may be better.”
The minister said fuel adjustment rates were used across Europe and were not unique to Bermuda.
“As you may know, in parts of Europe and particularly in the UK to deal with the volatility, they had a fuel price cap. Clearly the fact that the public was experiencing price changes that were actually debilitating, they put in a price cap.”
Asked if the Government would consider something similar, Mr Roban said: “That's a matter I think you would want to put to the regulator but as you know we've already deployed a price cap on gas.” In February 2022, David Burt, the Premier and finance minister, set a cap on prices at the pump in a bid to drive down the cost of living.
The minister added: “So the answer is: we’ve done it in one sector, whether it would be appropriate for another sector, I cannot speak to. And I won't speak to that. I will leave that to the experts and to the regulator to, perhaps, glean some thoughts from them.
“But I will say this in that the fuel adjustment rate is also supposed to be a smoothing mechanism to cushion a sector from volatility of price.
“So not only is it a cost recovery mechanism, it’s also something that’s supposed to cushion the exposure of the public to the huge variations in price.”
He added: “Now, going back to the methodology, the methodology is being looked at because clearly there is volatility, which needs to be addressed.
“The fact that costs are passed on to the consumer in a way that is perhaps not to the consumer's interest is where we have to address the issue.
“Because ultimately, these markets are regulated in a way to ensure that the consumer's interests are protected. So exposing the consumer to volatile changes in the electricity price, irrespective of whether it’s the base rate or the fuel adjustment rate, is not in the consumer interest.
“And certainly that is the position I would take and I would argue that is the Government's position as well.”
Asked why, if the FAR was a smoothing mechanism, it went up by more than 50 per cent on October 1, Mr Roban added: “I suspect that the investigation being done by the RA may glean more clarity on that issue.
“It is very clear the impact that adjustment had on the public. And when I say the public, I mean not just the residential public but also business.”
In the recent Throne Speech, amendments to the Regulatory Act 2022 and the Electricity Act 2016 were discussed.
It said: “The Government will advance amendments to the Regulatory Act 2022 [and] the Electricity Act 2016 … to provide for greater public protections in pricing determination and implementation.”
After the shock rise in Belco bills, Minister of Home Affairs Walter Roban threatened legal action, although the threat was not followed through.
Asked why, the minister said: “Because after consideration of all the information, it was decided that that would not be an approach that was needed based on the engagement and discussions with the RA.”
In addition, there had been discussions between Belco, the Ministry of Finance and the fuel providers, who had agreed that “a pathway could be taken to change the nature of the situation”.
He said the RA and Belco also discussed the methodology used to calculate the FAR.
“Everybody felt that this process could be done better and could be handled differently,” said Mr Roban.
Mr Roban said he could not yet be specific about the amendments, but added that there would be a “further deep down regulatory review of issues” so that the circumstances seen from October to December “can be looked at differently from the standpoint of the legislation”.
“Our desire, I think everybody's desire, is that we don't go back here again. But one thing we do know is that you must constantly review your regulatory framework because often you confront situations that the law doesn't account for.”
• For much more watch the interview in full — see the video file.
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