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He dropped the bombshell of a request for
increased electricity rates back on November fifteenth... and today it
was formally announced by the Public Utilities Commission that B.E.L.
Chief Executive Lynn Young got his New Year's wish. The new prices,
effective January first, average thirteen percent. And while Young has
successfully cited the company's increased costs for petroleum and power
purchases from Mexico, we asked him this afternoon what mechanism will
enable electricity rates to go down should the situation change.
Lynn Young, CEO, Belize
Electricity Limited
”The same mechanism that is
causing it to go up will cause it to go down. What the P.U.C. did at the
last hearing we had earlier when we got the first increase, we were
projecting that we were going to have higher cost of power because of
the Katrina effect, the hurricanes and all that and oil prices. And we
had already gotten notice from Mexico that the Mexican rates will go up.
The P.U.C. took the position that we’ll adjust to what the cost is now
and we’ll put a mechanism in place that if the cost continues to go up
above a certain amount we would do another increase, which is what has
happened. But what they also did was we looked at the rate stabilisation
account, which is at—it’s over twenty-seven million dollars now. They
agreed with us that it’s really going too high; it’s putting a lot of
pressure on the company to keep up with the payments, actually finding
cash to meet payments. And in fact, unfortunately, we’ve actually
neglected some street light maintenance and all that and I think it’s
beginning to affect service. So they agreed with us that they will not
adjust the rates down until we’ve cleared off that twenty-seven million
dollars balance, because it’s just too big. So as oil prices go down,
what they did, they’ve spread that balance over four years. In the
rates, it is set up that we recover that over four years. If oil prices
go down and if Chalillo does better that we expect it do, then it will
go down faster and we hope that that would happen because once that
twenty-seven million dollars is cleared off, then the rates will fall
back to the base rates that the P.U.C. has approved.”
Stewart Krohn
“Lynn, looking at the schedule of price increases you can look at
the rise per kilowatt hour and say fine, it’s related to increased cost.
But the service charge, in the case of residential customers it went up
by a hundred percent from five dollars to ten dollars; in the case of
commercial customers it went up from seventy dollars to a hundred
dollars. This looks like a little bit of a trick being played here. How
can you account for those massive increases in service charges?”
Lynn Young
”No that’s not a trick. At the end of the day the P.U.C. looks at
the overall amount of money we get and how much we spend and whether
we’re covering our expenses and covering our loan payments and
everything else. The structure of the rates, it’s really structured to
send the right, if you wish, economic messages to the customers. For
example the commercial rate, it gets lower after a certain amount,
whereas the residential rate has a different structure and...”
Stewart Krohn
“But I’m talking about the service charge. That looks like the kinda
charge that no matter what happens in the future it doesn’t go down.
It’s a fixed administrative charge... even if petroleum prices go down
we’re not gonna see those monthly service charges go down are we?”
Lynn Young
”Yeah, you see Stewart in any business you have—and I know you
know this—you have the variable cost and you have the fixed cost. In our
business, the variable cost is the cost of power, the cost of fuel, the
cost of buying energy. Every time you buy a kilowatt hour from us, we
have to get fuel or purchase it from hydro or from Mexico, so that’s
variable. Now the fixed cost, all the lines, the street lighting,
metering, all those things are fixed costs. Once we put in a line that
costs, say I don’t know, twenty million dollars to run a line from here
to P.G. or whatever, that is in. We borrow money or we get money from
whatever sources and we have to meet those payments now to pay that
back. So that’s fixed cost, right. So for every customer that’s buying
power from us, there’s a certain amount of fixed cost whether or not
that customer’s buying one kilowatt hour from us. And the fixed cost is
much higher than that monthly amount that’s in there, but we put in a
certain monthly amount to try and make sure we cover at least the fixed
operating cost of sending out a truck to do metering, to fix the pole,
to do things like that.”
The timing of the price increase could not have been worse, as it
comes at the very time that Belizeans are being told of all the
wonderful money saving developments in the energy sector. Things like
the Chalillo Dam, Hydro Maya, and B.S.I.'s co-generation project...not
to mention the oil wells multiplying at Spanish Lookout. With these
prospects in mind, Young remains cautiously optimistic about the future.
Lynn Young
”I always in interviews hesitate to promise lower rates because
there’s so much outside your control. But yes, you are right, things
certainly look more hopeful for rates to go down in the medium term. We
really haven’t seen the effects of Chalillo yet, we’ve just maybe a
million dollars or so we’ve saved over the last two months of operating
Chalillo by getting power from Chalillo rather than running diesels or
buying expensive Mexican peak power and economic energy. But Chalillo
really was two years late and in fact we didn’t finish the dam until I
think it was in September when we finally closed it off and we
inaugurated it in November. So we only got a bit of the rainy season
storage in there, so we haven’t really gotten the full effects of
Chalillo yet, so that’ll kick in some time next year. The cogen, we hope
that comes on line the year after. Hydro Maya is supposed to come on
line next year and Hydro Maya is another very economically priced hydro
power. So I guess...”
Stewart Krohn
“Before you go on, you failed to mention crude oil. Don’t you think
that you can covert your present diesel plants now to use the crude oil
as many people in Belize are doing? Is there a problem?”
Lynn Young
”Yes, there is a problem. Not many people are converting their
diesel plants to use the crude oil. As you know, when you take oil out
of the ground it’s not processed, it has a bit of everything in it. The
oil that’s coming out of the ground in Belize, from the tests we have
seen so far is very good crude, but it’s still oil out of the ground.
There’s a lot of gas in it, there’s a high percentage of gasoline in it,
and even though it’s very similar to diesel, that gasoline has lowered
the flash point of that oil to about twenty degrees or so and when it’s
not in the diesel engine it’s going to be a problem because the gas will
pre-ignite. So we’ve tried running the fuel in a couple of our engines
in some of the old engines that we have just as a test basis and it
cannot work. We’ve spoken to the manufacturers and they’ve said no it
cannot work without processing. The other option we have, which is the
more exciting option is the gas turbine because we’re using diesel in
the gas turbines and the gas turbines is just burning to fuel to create
heat to expand the air through the turbines. So the people who are
producing the oil, they are looking at the possibility to brining in
what they call a micro refinery to do the processing and other than that
we are talking to the manufacturers of the gas turbine to see if we can
get equipment and we can process the oil to a level where we can burn it
in the gas turbine.”
On July first, consumers will also face the grim likelihood of
even higher light bills caused by the implementation of the G.S.T. It is
unclear at this time, however, exactly how much the new tax will add to
electricity prices as the details of exemptions and zero ratings for
B.E.L. have yet to be finalised.
In related news, it was announced today by the Governor General that
Lynn Young has been awarded an O.B.E. by Queen Elizabeth the Second for
service to business and industry.
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