Business

Belco and RA at odds over generator plans

  • Urgent: an independent report released by the Regulatory Authority finds that there is an urgent need for some of Belco's ageing generators to be replaced in the next two or three years

Belco has hit back over the Regulatory Authority’s claim that what the utility decides to do about its ageing generators is a “business decision for Belco”. Instead, the utility says it needs to get permission from the regulator before it can dispose of and replace the worn-out engines — and it hopes to get clearance for its plans “in a timely manner”.

The difference of opinion arose after the Regulatory Authority announced this morning that it can now start to regulate Belco’s pricing after new laws were put into place and licences awarded to the utility.

The regulator also released an independent report on Belco’s plant, which 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 report adds: “Without new generation capacity, the security and reliability of Bermuda’s electricity supply could be at risk in periods of high demand.”

A spokesman for the RA said: “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.”

In response, Belco stated that it had been issued transmission, distribution and retail, and bulk generation licences “and hopes to soon be in a position to implement its plans to replace aged generating assets” that would result in “stabilised or lower cost electricity for Bermuda over time”.

Belco added: “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 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 added that it would issue a proposal to the RA to replace generators being retired.

“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,” the utility added.

Improvements are also required in transmission and distribution assets and infrastructure, Belco said.

The RA, also the telecommunications regulator, was given the added responsibility for oversight of the electricity sector a year ago.

The Electricity Act, which was given Royal Assent on October 27 this year, mandated that companies such as Belco would have to be issued with licences which specify the basis upon which they will be regulated, including assessments of proposed retail tariffs.

The Bermuda Government’s Tyne’s Bay power generation facility has also been licensed.

A spokesperson for the RA said: “Belco’s licences 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 licence).

“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 licence applications from companies wanting to enter the electricity market had also been received and were in the process of being evaluated.

The RA said it had released a report, from June, called Generation Asset Lifestyle Review, commissioned to provide an independent review of the condition of Belco’s generators and the potential generating capacity that could be provided by other generating companies.

The review found that new generation capacity was required urgently to replace generating units that are coming due for retirement.

The report 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 five of the nine units that are planned for retirement, but additional investment would be required to address existing issues,” the report stated.

The report added that “when units reach a service life of between 20 and 30 years of age, replacement rather than repair tends to be the most cost-effective option”.

The RA spokesman added: “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.”