The Grand Bahama Power Company (“GBPC”) announced today its new tariff structure that is the result of the implementation of a new regulatory rate structure by its regulator Grand Bahama Port Authority (“GBPA”). The new regulatory framework for GBPC documents how electricity rates will be set for Grand Bahama.
Created with residents in mind, this new framework brings improved transparency to the rate regulation process. Additional performance evaluation metrics will be implemented in January 2014 that will hold GBPC accountable to customers.
According to Mr. Tony Lopez, Chief Financial Officer at the power company, both GBPA and GBPC recognized the need to add more structure and transparency to the tariff mechanism for customers. “We have been working with GBPA for months to develop a rate structure that would provide increased transparency for, and accountability to, our customers,” said Lopez. “The structure also gives the utility the opportunity to provide an appropriate rate of return on capital investments.”
The new regulatory process directs GBPC to submit an application to the GBPA every three years for Base Rates. The Rate Plan application will comprise a business plan for the utility; a three-year financial projection detailing forecasted operating costs, depreciation and capital investments; and GBPC’s five-year capital budget forecast.
Under the new rate structure, electricity rates include a base rate and fuel charge mechanism (FCM). The base rate reflects GBPC’s operating expenses, depreciation of capital assets, and a return on capital investment. The FCM, which is the actual cost of fuel used to generate electricity, is a full pass-through mechanism which generates no profit to the utility.
GBPC’s new rate structure will not result in an increase to customers’ all-in electricity rates. Mr. Lopez explained that the base rates will be increased by approximately 3 cents in large part to cover the $80M dollar investment in the new West Sunrise plant. However, Lopez wanted customers to note that all-in-rates will not increase because of the improved efficiency of the new West Sunrise Plant. “The new tariff enables the company to make investments to improve reliability without impacting customer rates. Although customers will see a slight increase in their base rates in the new rate calculation, the efficiency of the new West Sunrise Plant has lowered the fuel charge portion, resulting in no increase to the all-in rate.”
Mr Lopez further explained that if fuel remained constant, on average customers should see a reduction in their electricity rates of approximately 1.5 cents per kWh