RA Updates On BELCO And Electricity Sector

November 9, 2017

[Updated] The Regulatory Authority announced that “following necessary amendments to the Electricity Act receiving Royal Assent on October 27, 2017, BELCO and the Government’s Tyne’s Bay power generation facility have been issued with electricity sector licenses.”

“The Authority was given oversight of the electricity sector in October 2016 and the Electricity Act mandated that companies such as BELCO would have to be issued with licenses which specify the basis upon which they will be regulated, including assessments of proposed retail tariffs,” the RA said.

“There are three types of license – covering renewable and non-renewable bulk power generation as well as transmission, distribution and retail [TD&R]. BELCO has been issued a license for bulk generation and is the only TD&R licensee [as per the Electricity Act requirements].

“BELCO’s licenses have now been issued which will allow the Authority to start regulating the company, this includes the assessment of, and decision on, the level of retail prices.

“One of the Authority’s most important roles is to look after the best interests of the consumer. With the licensing of BELCO, we are now able to investigate and regulate prices as necessary.

“We will also be able to assess and decide the feed-in tariff between BELCO’s generation activities and its transmission activities [provided via the TD&R license].

“This will be highly relevant to the future level of retail prices, as BELCO may be one of various competing generators selling electricity to the transmission grid.”

The spokesperson said other license applications from companies wanting to enter the electricity market had also been received and were in the process of being evaluated.

The spokesperson added: “It is important to note that what BELCO decides to do with regards to replacing its ageing turbines is a business decision for BELCO. Ultimately, BELCO has to be competitive, and prove it can be competitive, in the supply of electricity to the transmission grid, this being consistent with the regulatory and licensing framework.”

The RA has released a report, from June, called ‘Generation Asset Lifestyle Review’, which was commissioned to provide the Authority with an independent review and understanding of:

  • The current condition of BELCO’s existing generation assets to help inform the RA during the period of formulating, and consulting on, the license regime for electricity, and
  • Identifying the potential generating capacity that could be provided by alternative generating companies.

The review found that “new generation capacity is required as a matter of urgency to replace the BELCO generating units that are planned for retirement in the next two to three years”.

The review noted that BELCO’s maintenance of the generation units was generally well-managed and that “regular services and overhauls are conducted on the units in accordance with the manufacturers’ recommendations”.

“The review finds that there is limited scope to extend the life of units that are planned for retirement, but additional investment would be required to address existing issues.”

“Now that BELCO is licensed as a bulk generator, the Authority expects the company to address the significant issues that relate to its existing generating plan.”

The Authority said they expect to provide further updates on electricity regulation shortly.

Update 5.40pm: A BELCO spokesperson said, “Bermuda Electric Light Company Limited [BELCO] has recently been issued its transmission, distribution and retail, and bulk generation [Bulk] licences and hopes to soon be in a position to implement its plans to replace aged generating assets. BELCO is confident that the marginal cost of its replacement generation will be competitive and will result in stabilised or lower cost electricity for Bermuda over time.

“What BELCO decides to do with respect to replacing its ageing generating assets is, unfortunately, not simply a business decision for BELCO. BELCO’s Bulk licence requires Regulatory Authority [Authority] consent prior to disposing of, or replacing, generating assets.

“BELCO has notified the Authority of its intention to decommission a portion of its generating assets between the end of 2018 and March 2020 and, as required under BELCO’s Bulk licence, has sought the Authority’s consent to dispose of such assets following the decommissioning.

“BELCO will next issue the Authority with a proposal to replace generating assets, as required under its Bulk licence. As the Authority has publicly stated that it expects BELCO to address the significant issues relating to its existing generation, BELCO trusts that the Authority will consider the proposal immediately and will act reasonably and in a timely manner, to provide BELCO with the consents that are required before BELCO will be able to proceed.

“In addition to replacement generation, improvements are required in transmission and distribution assets and infrastructure in order to facilitate the distribution of generation from other sources.

“BELCO understands that the Authority is considering guidelines to establish the generation transfer pricing to be incorporated into the methodology for setting the retail tariff. BELCO is hopeful that such guidelines and methodology will be determined as soon as possible.”

The  Generation Asset Lifecycle Review Report follows below [PDF here]:

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Comments (5)

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  1. What? says:

    BELCO addressed the issue with the aging plant several years ago and all you said was no….They submitted plans for a new plant and you said no… #FACT

  2. Kathy says:

    And the kicker line in the report is…

    “The analysis and discussion provided in this report relies on information provided by the Utility in the form of data and in discussions. The site tours allowed for visual inspections of a cursory nature, but were not sufficient to verify the information provided by the Utility.”

    So, basically, BELCO wrote its own report, and it was signed off and paid for by the RA (the Bermudian people). Let the monopoly continue……!

  3. George says:

    Another disaster from the RA. How long did they take to issue this? Belco were waiting nearly a year. I pity the new CEO of Belco, we will end up driving him away due to our incompetence.

    • alistair maclean says:

      belco has made its own bed, why are so many of its generators about to give up – that hasn’t just happened, that has happened over years and years and years – why didn’t belco do something earlier, where was its five, ten., 15 year plan to replace ageing equipment? why do they want us to rely on LNG – where are Belco’s forecasts about how much that would REALLY cost with all the necessary infrastructure changes? Don’t blame the RA for belco’s long-running failures. It’s enjoyed being a monopoly for way too long and at last is being challenged and it does not like it – well, tough! The sooner we get competition for electricity the better!

  4. Reuben says:

    Makes sure they don’t raise the prices to pay for all these upgrades.