BELCO’s Income Down, Rate Increase Declined
BELCO’s net income declined $1.49 million to $14.54 million, as compared to $16.03 million in 2010, and Minister Marc Bean has rejected an appeal by BELCO to increase basic tariff rates.
In February 2012, BELCO received notice from Government’s Energy Commission that its October 2011 submission to increase basic tariff rates with effect from 1 January 2012 had been rejected.
“The rates increase is essential for BELCO to secure financing for the North Power Station project,” said BELCO.
“The Commission’s decision was appealed by BELCO to the Minister of Environment, Planning & Infrastructure Strategy and on 9 May 2012, BELCO received notification that the appeal had been rejected by the Minister with respect to the basic tariff rates increase.”
BELCO said they are considering their legal options, as if the Minister’s decision stands, then the North Power Station project will not proceed, leaving BELCO with “no choice but to continue to meet Bermuda’s future energy demand with older, less efficient and less reliable generation plant.”
The rejection of the rates increase will also have an impact on other capital projects, BELCO said.
Speaking on their declining income, the Company said the “significant decrease of 11.58 million kWh is directly related to the economic downturn, as the number of active, metered residential units has declined due to a weak economy and increased numbers of non-Bermudian work permit holders leaving the Island, as some businesses either moved operations out of Bermuda or reduced staffing levels.”
Sales in the commercial sector were down 1.3%, which BELCO said was due to “business closures, reduced hours of operation, lower occupancy levels and concerted efforts by many businesses to reduce operating costs through energy conservation, due to the Island’s economic downturn.”
The relevant portion of the Ascendant Group’s press statement is below:
BELCO’s net income declined $1.49 million to $14.54 million from 2010 results of $16.03 million. Sales of electricity, net of fuel adjustment income, decreased $3.22 million in 2011 to $150.75 million, down from the $153.97 million achieved in 2010. Basic tariff rates and facility charges remained unchanged from 2010, following management’s decision, which was ratified by the Board of Directors, not to increase these rates due to the economic downturn, although entitled to do so, given prior approval from the Price Control Commission in 2006.
Residential kilowatt hour (kWh) sales decreased 4.2% in 2011, following an increase in 2010 of 1.9%. Average consumption per customer decreased 4.2% during the year to an average monthly consumption of 678.5 kWh. A significant decrease of 11.58 million kWh is directly related to the economic downturn, as the number of active, metered residential units has declined due to a weak economy and increased numbers of non-Bermudian work permit holders leaving the Island, as some businesses either moved operations out of Bermuda or reduced staffing levels.
Sales in the commercial sector were down 1.3%, or 4.17 million kWh, compared to a decrease of 1.9% in 2010. Primary factors responsible for the reduction are business closures, reduced hours of operation, lower occupancy levels and concerted efforts by many businesses to reduce operating costs through energy conservation, due to the Island’s economic downturn.
Fuel is BELCO’s most significant expense. In 2011, total fuel costs increased $14.71 million from $107.34 million in 2010 to $122.05 million. This increase is due primarily to a 17.7% increase in the average cost of fuel or an additional $18.05 per barrel, up from $101.83 per barrel in 2010 to $119.88 per barrel in 2011. The increase in fuel costs resulted in an additional $18.12 million being spent on fuel during the current year. The increase was also due to a 34.0% increase in the average price paid to the Bermuda Government for kWh generation received from the Tynes Bay incineration plant during the year as BELCO paid $1.79 million for 11.94 million kWh (2010: $1.39 million for 12.36 million kWh).
Increases noted were offset in part by improved Central Plant efficiency and decreased generation volumes related to lower kWh demand. Average efficiency for 2011 was 702.5 kWh per barrel of fuel consumed, as compared to 689.9 kWh per barrel in 2010. This translates to 18,295 fewer barrels consumed and fuel savings of $1.86 million. BELCO tries to take advantage of temporary declines in world fuel prices by purchasing fuel shipments ahead of their delivery date. In 2011, these forward purchases of fuel resulted in savings of approximately $5 million in comparison to what would have been paid had the fuel been purchased at contract prices. Also during 2011, BELCO entered into a new contract with a new supplier of fuel oil for its generation plant, resulting in fuel cost savings of $2.54 million. The total savings of approximately $7.54 million enabled BELCO to charge its customers a lower fuel adjustment rate.
BELCO invested $21.7 million in capital projects in 2011 compared to $29.5 million in 2010.
Included in the 2011 amount was some $3.6 million, for the North Power Station project. This project was budgeted to cost approximately $70 million over four years, involving the design and construction of three 14 megawatt (MW) diesel generating units plus associated work. These engines were scheduled to begin commercial operation in July 2013 and formed an integral part of a multi-phase Central Plant development plan that supported the future introduction of large-scale renewable energy obtained through wind, solar and waste-to-energy production.The introduction of these engines is essential to meet Bermuda’s future energy demand, as three less efficient existing engines are scheduled for retirement in 2013, as are all East Power Station Phase I engines in 2017. However, in February 2012, BELCO received notice from Government’s Energy Commission that its October 2011 submission to increase basic tariff rates with effect from 1 January 2012 had been rejected. The rates increase is essential for BELCO to secure financing for the North Power Station project. The Commission’s decision was appealed by BELCO to the Minister of Environment, Planning & Infrastructure Strategy and on 9 May 2012, BELCO received notification that the appeal had been rejected by the Minister with respect to the basic tariff rates increase.
At the time of writing, BELCO is considering its legal options. If the Minister’s decision stands, then the North Power Station project will not proceed, leaving BELCO with no choice but to continue to meet Bermuda’s future energy demand with older, less efficient and less reliable generation plant. The rejection of the rates increase will also have an impact on other capital projects. For example, in 2011 BELCO commenced logistical work in preparation for the Prospect-to-Flatts transmission cable replacement in 2012; however, as a result of the Minister’s decision this project has been deferred. This project is considered extremely important, as it would allow very old, problematic and operationally expensive 22 kV cables on the eastern portion of the Island to be retired, providing a more secure link to the Flatts substation and mitigating possible overloads on Fort Hamilton feeds to Flatts.
Fuel adjustments make up the difference .
Posting massive profits for decades and declaring healthy dividends to shareholders while ignoring calls to upgrade the plant has finally backfired on the greedy bastids…..about time the commission stood up to them. Why should we pay for BELCOs excessive greed and neglect.
(-;
Kinda like we’re now paying for this government’s “excessive greed and neglect?”
I’m not for government either Frank….greed and neglect has no bounderies
Well done Marc Bean. Now stick to your wicket!!! I don’t want to see no flip flops!!!!!!!!!
Tell BELCO to go back to their shareholders who have made millions in dividends over the years to fund their expansion. Why should the working people have to shoulder the burden of your plans. You made 14 million in profit, defer your dividend, invest in new technolgy and return profits to your shareholders.
Stop taking the people for granted, and PLP don’t give in to this economic blackmail by these BELCO lot.
Maybe you need to find out who has hands in the board should be interesting.
LOL
Yeah, my income is down too. Welcome to the club.
LOL…….I love your response…..my first chuckle of the day…….That’s exactly how I would have responded…..you beat me to it…….
Thank you Marc Bean … Hold tight to ya decision!!
Oh, I see, those who invest, putting money at risk, in companys don’t deserve a return on their investment do they. BELCO is a publically owned company belonging to literally thousands of Bermudians. Anyone wishing to own a piece of BELCO is free to do so.
I suspect the value of BELCO shares will take a serious drop, meaning a loss to the worth of those Bermudian owners who at this time have already seen their homes plummet in value.
Lets see what the ‘let them suffer’ bloggers feel when that old equipment breaks down & they don’t have power to charge their smartphones or laptops.
I think those shareholders have been getting plenty in return! We are all suffering and Belco MUST understand that they too will suffer a bit as ALL businesses have taken a decrease since 1,000′s have left the island and many have lost power all together. Why hasn’t the company been putting money aside to invest in their infrastructure with their record profits from years past? Have they been spending away like our government?
I agree! Even if every resident in Bermuda use as little as $100 worth of energy monthly which I’m sure is quite low from the real amount BELCO would receive a profit of about 77 million yearly. This is more than enough fore shareholders & repairs.
Besides they owe Bermuda since they are one of the reasons for the pullout of IB in Bermuda because with recession cutbacks no business want’s to pay a monthly electric bill of $1000 plus. This is why Sir John had his bauhaus style building made because he realizes he can’t entice a international business to rent an office where they pay an arm & leg for electricity. Now the majority of Sir John’s big time renters have moved from his old buildings to this new one & he is still in the real estate business while other landlords are losing profits & getting out.
TD is not being rational (I suspect he’s part of the elite). Yes its a private company but it has enjoyed a century of being a monopoly utility company. Surely they should have the cash reserves to upgrade the plant instead instead of raping their customers again…..If BELCO find it necessary to upgrade their plant the better option is to put several million new shares up for sale or offer bonds.
AMEN!
I expect the discount program to be abandoned entirely .
Is Marc Bean the only one within the PLP that can make sound decisions? Sure seems so. As for BELCO – serve your a$$ right.
I agree we need more like minister Bean.
wow…pepper is that you? I’m so proud of you at least your vision isn’t clouded by politics like many others
Good decision Minister Bean! BELCO is not the only company or lot seeing a decline! Welcome our world!! Ironic – because the monthly bill rates haven’t declined – we (without solar power) all still have to pay a crazy amount. Maybe this is one period where sharesholders can defer dividend – i’m quite sure # of shareholders even if in ‘thousands’ still do not amount to the many more thousands of residents who pay crazy monopoly of BELCO rates. Time for competition (not gonna happen huh)and/or in the form of bio power/alternate energy fuelling!! Save our earth not the BELCO’s need to increase rates at others expense.
Hey Belco, rather than sticking it to the little guys, how about you issue a bond to provide funding for capital projects.
Thank you Marc Bean. Some one who just didn’t roll over for the big wigs.
Thanks Marc Bean the rates are high enough now. Finally a politician who is thinking about the average Joe and not big business. How much dam higher do they wanna go? Soon we gonna have electricity but no food no rent etc. We want be able to afford it. A move like that would get my vote every time.
I think the decision to turn down the rate increase is due primarily to the election looming. It wouldn’t be wise to further piss off voters by allowing a rate increase just before an election. I think this decision is more about maintaining the Govt than it is about the welfare of Bermudians.
Self preservation.
Could not agree more with you. Its all about the election. People, don’t be fooled..
What a compliment to minister Bean from you two. His decision must be sound as your only complaint is that it must be electioneering! If that was the case, please explain, as we all know that the UBP/OBA have a 45 percent block vote, which would mean that almost have of the public who will vote against the PLP will still benefit like everybody else………from the Ministers decision…….so yes, good work Minister Bean, you are a great example of an evolving PLP. And yes, with this and other examples, the PLP will get my vote…….!
Half……sorry
lol, and one day very very you’ll be kicking yourself for voting that way. Look at your island. Are you blind? Must be.
I applaud his decision on a personal level because I am out of work and was not able to get financial assistance despite having a zero bank balance and borrowing money to pay my bills (thanks current government) and being turned down for every job I apply to (I’m college educated as well, so don’t think I’m stupid)
However, if you can’t open your eyes and see what this government is doing to us/has done, and that all these last minute “great things” are just a voters ploy, I seriously suggest you please not pro-create If you haven’t already.
Only the smart are going to survive the stupidity of hard core PLP voters.
With spin that good I hope you represent Bermuda in our next 20/20
.
To your point, yes the people of Bermuda will reap a short term savings …in order to allow the PLP to win the Govt for another 5 years. I suspect that soon after the election (if they are successful) they will allow the rate increase.
PLP first, people second, as usual.
Nationalize it!
If that happened we’d be in BIG trouble.
I agree star man, that is truly the road to destruction
The PLP will do & say ANYTHING to get re-elected!
That’s the “prize” Prem. Cox talks about.
I applaud Marc Bean….He is doing a great job thus far, maybe he will set the path for a better Bermuda…..We just need to stand firm…If we as a community dont stand for something We wil fall for everything….Like we’ve been doing thus far with all the “for self politicans” that have been leading this island.
Time will tell if this is an election ploy or not. Maybe we need to use Marc Bean like he is using the voters. There should be a general election every year. It seems things get done during election time.
$100 of energy monthly? So they would have to live with no lights on ever then. I’m sure running a fridge alone sucks up $100. I was paying $450 for a TINY 1 br apt with everything unplugged when not in use and running the AC only at night.
@Back to the US. You were paying someone’s bill along with yours,simple. Thar’s Red Flag billing and you should have did a serious check. For example,my bill was high and I noticed that the sensor lights would come on whenever it was windy and stay on for the duration of the night. Turned them completely off and saved $$$$,small change but good savings.
Profits are down because people are doing what they can to save money on their BELCO bill to use elsewhere along with there being less customers.