Consultants Needed To Review Fuel Clause Adjustment

admin News

The Fair Trading Commission (FTC) requires the services of consultants to assist in the review of the Fuel Clause Adjustment (FCA) administered by the Barbados Light and Power Company Limited (BL&P).

The review will include an assessment of the BL&P’s method of application of the FCA and examine the feasibility of utilising alternative approaches for the recovery of fuel costs for improved efficiency and transparency.

In assessing the application of the FCA for the Commission, the consultant should consider the impact of the charge from January 2008 to December 2011. The consultant should also assess the efficiency of operation of the BL&P with respect to fuel costs.

The FCA is a mechanism that is intended to allow the Company to recover the cost of fuel used in the generation of electricity. It is a direct pass-through charge, which allows the BL&P to recover the amount that was expended on fuel only. In view of the full pass through nature of the FCA, there is no specified incentive for the Company to be fuel efficient. This charge varies monthly and is based on the projected cost of fuels and projected sales for the month in question. Because of the requirement for some forecasting the Company may, at times, over or under-recover but by the end of the year imbalances are expected to be reconciled.

In 2006 the Commission undertook a study on the FCA which confirmed, among other things, that the Company was not systematically over recovering. A regulatory audit of the operations of the BL&P was also undertaken in 2006. The Commission intends to also consult with the public on the FCA.

BL&P’s purchase of fuel has risen, on average, from $164.83 to $198.82 per barrel between October 2010 and December 2011. With fuel constituting more than 60 per cent of the costs of the BL&P’s operations this increased expense is directly reflected in the bills of electricity consumers. The FCA has increased from 31.9795 cents in October 2010 to 45.8823 cents per kWh in December 2011. Given the current economic environment, the Commission is seeking to re-examine the basis of fuel cost recovery and explore whether a revision of the current approach to the recovery of fuel cost is warranted and whether the Company could be incentivised to optimally utilise its fuel and generating plant to ensure that fuel cost is minimised.

The project is expected to start on March 5, and be completed by April 20, 2012 with the submission of the final report.

Interested persons or companies may review the Terms of Reference on the Commission’s website at http://www.ftc.gov.bb/. For further information, persons may contact the Commission at telephone number 424-0260 or email info@ftc.gov.bb.??

cathy.lashley@barbados.gov.bb

Share this post with a friend...Email this to someoneShare on FacebookShare on Google+Tweet about this on TwitterShare on LinkedIn