BELCO: New facilities charge provides no additional revenue (Update)

THURSDAY, MAY 22 UPDATE: 

The change to BELCO's Facilities Charge from a fixed $33.00 per month fee for all residential customers to a graduated Facilities Charge based on usage was made after an extensive analysis of BELCO's residential customers' consumption over a year's period.

The analysis was performed in conjunction with u.s. based experts who specialize in utility rates and cost of service. The table below which is included in the press statement, other media, and letters being sent to residential customers, uses round numbers for demonstrative purposes, so that customers can easily see the changes.

Graduated Facilities Charge Based On Annual Rolling Average of kWh Consumed Monthly

*Projected average for each tier of customer usage, individual results will vary.

Further detail, including a breakdown of the actual numbers can be seen in BELCO's official filing to the Energy Commission. A link to the filing is at the bottom of the new release on BELCO's website. Page seven of the filing to the Energy Commission includes a table titled "Projected Impact of Proposed Graduated Facilities Structure", where the actual calculations determine that the change will result in BELCO earning approximately $16,000 less in revenue.

The Facilities Charge covers the cost of specific infrastructure and business services required for each metered connection. The revised graduated Facilities Charge that will be implemented next month is in response to the call to assist lower income customers who struggle to meet monthly bills during these difficult economic times. In addition, a graduated Facilities Charge should also encourage electricity conservation as residential customers may strive to move to a lower cost tier or conserve to ensure that they do not move to a higher cost tier.

All residential customers now pay a fixed $33 per month Facilities Charge regardless of their energy usage. The revised graduated Facilities Charge will go into effect on 1 June, 2014 reducing costs for lower usage residential customers and slightly increasing the overall cost for those who consume the highest number of kilowatt hours (kWh) per month. All residential customers should soon receive individual letters advising them of how they will be affected based on their prior kWh usage.

As a result of the approval of the graduated Facilities Charge, 44% of BELCO customers will see reductions for this charge in their monthly electricity bills; 28% will be unaffected, and 28% of the highest energy users will see their overall monthly electricity bills increase slightly due to a higher Facilities Charge. The total amount of a customer's overall monthly electricity bill is dependent upon energy consumption.

The graduated Facilities Charge is based on each customer's average daily kilowatt hour (kWh) consumption over the previous 12 month period, which will be reassessed monthly updating the Annual Rolling Average.

The only exception to the graduated Facilities Charge is for residential customers who have renewable energy generating systems and are on BELCO's Net Metering Programme. The Facilities Charge for these residential customers will remain fixed at $33 per month. Customers on the Net Metering Programme draw energy from the grid when needed and intermittently sell excess power back to the grid when their consumption is less than what is being produced by their personal renewable energy systems.

The cost of Net Metering is subsidised by all rate payers, including the lower usage customers whom the graduated Facilities Charge is targeted to help.

Graduated Facilities Charge Based On Annual Rolling Average of kWh Consumed Monthly

*Projected average for each tier of customer usage, individual results will vary.

It is important to note that the revised Facilities Charge is revenue neutral to BELCO and will not provide any additional profit to the utility, as the increase in revenue from higher usage customers is offset by the reduction in revenue from customers who use less electricity and who will be charged a lower amount.

How Can Customers Monitor Their Average Daily kWh Consumption and Annual Rolling Average? An additional line will be added to residential customers' monthly statements. At the top of the monthly BELCO statement, under the heading Consumption Comparisons, the Annual Rolling Average will be added to the information. Customers will be able to review their Annual Rolling Average on a monthly basis, in addition to the existing Current Month, Previous Month and Same Month Last Year consumption information. This information provides individual customers' usage trends which can be monitored and tracked, and efforts made to move to a lower paying tier.

The revised Facilities Charge also encourages conservation at the higher-use levels, as those placing the greatest demand on the system will be paying a higher overall cost. In addition, the graduated Facilities Charge structure is also more aligned with Government's White Paper objective to encourage conservation as it allocates the greater cost to those with the largest carbon footprint.

This change does not affect Energy Charges (cost per kWh), or the Fuel Adjustment Rate that is calculated on a monthly basis and approved by the Energy Commission to cover the cost, above $30.00 per barrel, of fuel used in the production of electricity. BELCO makes no profit on the Fuel Adjustment Charge and is actively working on initiatives for alternative fuel options, newer and more efficient plant and equipment, renewable energy, efficiency and conservation.

Why Can't BELCO Just Lower Its Rates? Maintaining revenue neutrality is essential for BELCO to be positioned to successfully access capital markets for investment in new plant and equipment which provides opportunities to move to more efficient technologies, including alternative fuel options and longer-term improved affordability.

This change in the Facilities Charge follows in the wake of several substantial actions BELCO has taken since the beginning of the recession to reduce operating costs while maintaining a system with a 99.9% reliability rating. These steps include voluntarily waiving a rate increase, cutting staff and reducing pension costs.

BELCO waived an approved 1.5% rate increase due to take effect at the start of 2011. That same year, the company achieved the equivalent of an 8-9% staff reduction through the early retirement of 26 employees. The company froze its Defined Benefits Pension Plan and moved all employees to a Defined Contributions plan effective 1 January, 2012. Although BELCO incurred a significant one-time expense, the change provides sizable future cost reductions.

BELCO will continue to reimburse Government directly for the Facilities Charge paid by customers on Financial Assistance. This programme, which has been in effect for over a decade, has more than doubled in cost to BELCO over the past five years. In 2013, the programme cost BELCO $274,000 in revenue for which the company seeks no revenue recovery.

BELCO provides energy savings tips through the media, on its website www.belco.bm and in customer mailings.