WITH AN electricity rate review looming, the Trinidad and Tobago Electricity Commission (T&TEC) has requested an extension from the Regulated Industries Commission (RIC) to provide its business plan, which is a prerequisite to begin the process of a rate review.
The RIC has already outlined how it will approach the rate review in its public document, “Framework & Approach for the Price Review for the Electricity Transmission & Distribution Sector (T&TEC) 2021-2026 Regulatory Control Period”.
The RIC noted that it will be the second time that the prices for the electricity transmission and distribution services will be reviewed under the incentive-based (price-cap regulation) approach.
“The RIC is required to assess T&TEC’s submission of its business plan for the price review against the principles contained in the RIC Act. Specifically, Section 6 (c) of the RIC Act requires the RIC to ensure that “the service provided by a service provider operating under prudent and efficient management will be on terms that will allow the service provider to earn sufficient return to finance necessary investment”. The RIC must also be satisfied that the interests of customers are taken into account and that prices provide appropriate signals about the cost of providing service.
“T&TEC’s business plan is expected to fully detail its forecasts of expenditure and revenue requirements for the regulatory period. These must reflect efficient costs of supply, and the proposed programme of capital works must be deliverable over the regulatory control period. Further, its forecasts of demand must be reasonable and reflect the best available information,” the document said.
“The draft business plan will inform the early stages of the review process and allows initial analysis of T&TEC’s submission. This plan sets out detailed descriptions of the information that the RIC requires, including financial information, information on the proposed investment programme and expected outcomes. The RIC will review in detail the information provided and will provide further guidance, if necessary, for the submission of T&TEC’s final business plan which will constitute T&TEC’s principal submission for the review of charges and will ultimately form the basis of the RIC’s assessment of the revenue requirement of T&TEC for the regulatory control period. In summary, T&TEC’s business plan is a statement of its strategy for the future, and it identifies the objectives and outputs to be achieved,” it said.
For its part, T&TEC was supposed to have submitted a plan for public consultation by the end of January.
A board-level T&TEC source, who requested anonymity because of not being authorised to speak for the Commission, told Express Business that the State utility has requested an extension of its submission of its business plan to the RIC.
Speaking at a news conference last Wednesday, after outlining the over $3 billion Government spends annually on WASA and T&TEC, Finance Minister Imbert said: “We also expect that the Regulated Industries Commission will adjudicate on appropriate levels of water and electricity rates in 2021.”
The raw material for electricity, in T&T, is natural gas with T&TEC being tied into take or pay contracts for its supply of natural gas.
To put in perspective, TTEC’s contracted capacity is 1,758 megawatts and its peak demand is 1,370 megawatts, which means there are 400 megawatts on the national grid for which the company still has to pay.
So T&TEC faces two issues- debt and whether its resources are being used efficiently.
The issue of T&TEC’s debt has long been in public domain.
Since 2014, a figure of $2.5 billion was given to Parliament’s Public Accounts Committee (PAC).
“The main reason for that is our cash flow situation. Whenever we fall short we hold back in paying NGC,” T&TEC’s general manager Kelvin Ramsook had told the PAC, adding that the company also owed some $665 million to Trinidad Generation Unlimited (TGU).
The Commission had said, in 2014, it would move to increase electricity rates as it was operating at a loss.
By February 2018, it was again revealed in Parliament that the company had been operating at a loss since 2011, with hefty wage and overtime bills.
Ramsook had said the company was paying for excess electricity which is not being used.
In responding to questions from Express Business, T&TEC said the Covid-19 pandemic has affected the electricity company in two main ways.
“The closure of several of T&T’s large industrial customers has certainly reduced demand for electricity and has created additional capacity on the grid but The total energy consumed in 2020 was higher for domestic accounts, most of which appears to be as a result of the stay-at-home measures prompted by Covid-19. However, the demand by Commercial and Industrial customers also dropped significantly over the period.”
T&TEC remains heavily indebted to the National Gas Company (NGC).
The company did not quantify this in response to questions from the Business Express.
“We are unable to divulge the details of our financial arrangements with the NGC, but we can confirm that we are in regular dialogue with the NGC, the Ministry of Public Utilities and the Ministry of Energy on the issue of the outstanding debt to the company,” communications manager Annabelle Bransnell responded.
As for the state of the company’s finances, she said: “T&TEC’s financial statements are submitted to the Ministry of Public Utilities for laying in Parliament when due. Audits on our 2019 financial statements have been completed and submitted to the Ministry. Additionally, we continuously work with the Ministry to address all matters where we are unable to meet any of our financial commitments.”
The Government has had to provide financial support to T&TEC by paying its debt to the National Gas Company for natural gas.
“T&TEC does not pay the NGC for gas. It simply does not pay and has not paid for years. And it says it can’t pay. That when it looks at its revenue from electricity bills and so on, and it looks at the expenditure, it can’t pay for gas,” said Finance Minister Colm Imbert in his contribution to the Spotlight on Budget forum..
“So the Government was required to enter into the arrangement to borrow in excess of $5 billion, so that we could give that money to the National Gas Company (NGC) otherwise, natural gas company would collapse because they’re carrying that on the books all the time, as income, but they’re not getting it. So we had to resolve that,” Imbert had said.
So how will the Government’s thrust toward solar and renewables affect the company?
“T&TEC has long been prepared for the introduction of new generation technology onto its grid. Testing commenced in 2011 and we have successfully completed technical feasibility studies for the interconnection of individual renewable energy sources to the grid (i.e. rooftop solar panels). This resulted in the creation of the Draft Wiring for Renewable Energy, an updated version of our Wiring for Light and Power, which is a technical guide for wiring buildings according to T&TEC, TTBS and the Electrical Inspectorate’s safety standards. Final approval for customers to feed back to T&TEC’s grid requires the completion of a Feed-in Tariff Policy and possible legislative changes, which are being addressed by the Ministry of Public Utilities and the Ministry of Legal Affairs.
“T&TEC is presently in negotiations with a supplier to add 112.2 MW of renewable energy onto the grid which, once successful, is expected to provide first power by 2023/2024. While the proposed large-scale ‘clean’ (solar) project is not dispatchable, i.e. it will not always be available when immediately required, it will have no negative impact on T&TEC’s operations from a technical point of view as the Commission has completed technical plans for the interconnection by that Independent Power Producer (IPP) to our grid. The existing traditional IPPs also will remain in service.It should be noted that planning for electricity generation in Trinidad and Tobago falls under the purview of the Ministry of Energy. The Ministry determines the strategic approach to power production,” Brasnell responded.
This is a summary of the 2019 Annual Performance Indicator Report for the Trinidad and Tobago Electricity Commission (T&TEC) done by the RIC
The RIC said that T&TEC showed notable improvement in its performance of some of the indicators.
• For example, T&TEC’s sales per employee ratio increased by 2.1 per cent to 2,808,950 kWh, while its customers per employee ratio increased by 5.1 per cent to 165.
• With respect to equipment maintenance, T&TEC had 39,779 pole-mounted transformers in service at the end of 2019, which represented a 0.8 per cent increase from the previous year. The percentage of these transformers inspected/serviced by T&TEC rose to 53.1 per cent, thus exceeding the minimum target of 20 per cent set by the RIC.
• In addition, T&TEC’s 7-day repair rate for reports of street lighting failures from customers and/or members of the public increased from 19.9 per cent in 2018 to 22.2 per cent in 2019.
• While some aspects of T&TEC’s performance improved in 2019, certain operational areas require further attention. For instance, total system losses rose to 9.22 per cent and failed to meet the target of 6.75 per cent set by the RIC.
• Also, T&TEC received 52,296 customer complaints in 2019, which represented a 6.2 per cent increase from 2018. The resolution rate for such complaints declined to 95.2 per cent in 2019.
• In addition, the number of transmission trips and interruptions on the network increased to 45, while the restoration rate for these trips declined to 93.3 per cent . The overall impact was a lower level of reliability in the electricity supplied to customers over the period.
• Lastly, T&TEC’s financial performance worsened, as shown by a weakening in the performance of the debt financing and liquidity indicators, including the gearing ratio (56 per cent ) and collection rate (47 per cent), respectively. The indicators for profitability, however, showed some stability over the period.