The Trinidad and Tobago Electricity Commission (T&TEC) is proposing stiff rate increases over the next five years as the utility seeks to become more efficient and pay off its almost $2 billion debt.
T&TEC’s proposed rate increases, which are watermarked DRAFT, are contained in its business plan for the period 2022 to 2026, which was submitted to the Regulated Industries Commission (RIC) earlier this year. The RIC was established in 2000 to regulate the cost and service quality of four utilities, comprising T&TEC, the Water and Sewerage Authority, PowerGen and Trinity Power.
For residential customers, T&TEC is proposing rate increases of between 40 to 65.75 per cent in the price of electricity over the five-year period.
For example, a $100 electricity bill could be as much as $165, a $500 electricity bill could be $825 and a $1,000 electricity bill will increase to $1,650.
For commercial and industrial customers, the utility is proposing a massive increase of 128.5 per cent.
For streetlighting and recreation grounds, T&TEC proposes a 134 per cent increase in cost.
T&TEC proposed to have the increase staggered over a five year period for residential, commercial and industrial customers.
The plan was submitted earlier this year to the RIC for a rate review.
The RIC is expected to hold consultations on the proposed rate increases, similar to what is currently being undertaken for the rate review of WASA, before they are finalised.
Proposed rate increases
For residential customers:
Year 1 – 20% to 33%
Year 2 – 10% to 16.50%
Year 3 – 5 to 8.25%
Year 4 – 2.50% to 4%
Year 5 – 2.50% to 4%
For commercial customers:
Year 1 – 68.50%
Year 2 – 34%
Year 3 – 15%
Year 4 – 10%
Year 5 – 5%
For industrial customers:
Year 1 – 68.50% (except C1-C4)
Year 2 – 34%
Year 3 – 15%
Year 4 – 10%
Year 5 – 5%
Year 1 – 70.49%
Year 2 – 34.00%
Year 3 – 15.00%
Year 4 – 10.00%
Year 5 – 5.00%
Further, T&TEC will introduce service deposits, which it said would be required to minimise the risk of financial loss associated with bad debts arising from the non-payment of bills by customers.
“Such deposits are therefore normally linked to the average size or value of customer bills and is common in the sector in many jurisdictions,” it said.
“It is proposed that service deposits be increased to an average value of two billing periods based on an average monthly kWh consumption per customer (Dec 2020) of 627kWh and 1,361 kWh for residential and commercial customers respectively, and be revised in step with subsequent rate changes or three to five-year intervals,” the plan said.
For residential customers, that could look like $580 (two monthly bills) and for commercial customer, $2,220.10 (two monthly bills).
For industrial customers, it said: “The higher of 75 per cent of the reserve capacity and the minimum consumption of KVA units, to twice this sum.”
Fuel and exchange rate adjustment
Among the new fees, the Commission is also proposing the reintroduction of the fuel and exchange rate adjustment charges to mitigate against the financial risk of the significant impact these charges have on our bottom line and cash flow requirements.
“Fuel charge alone increases the operating cost by approximately $30 million annually as a direct result of the annual 3 per cent escalation in the price. Increases in the volume of gas further increases cost. This cost is not recovered, in the absence of annual rate reviews, with T&TEC being forced to absorb such cost.
“The exchange rate has depreciated since 2006 from $6.31 to $6.78 representing a 7.4 per cent depreciation since the charge was last applied. Again, representing millions of dollars in addition cost to be absorbed by the Commission when there is no rate increase,” T&TEC said.
The utility proposes to introduce a customer charge, which represents a fixed monthly amount to cover the cost of providing service to a customer’s location. “This charge includes the cost of metering, billing and providing customer service. It is applicable to all customers whether or not electricity is used. With the increase in customer service over the years and the need to more fairly allocate such cost over a larger customer base, customer charge is being proposed to be introduced to industrial customers for the first time, and adjustments made to other categories. This cost has increased by approximately 50 per cent over the period 2008 to 2017 from $74 million to $110 million,” it said.
While the RIC goes through the process of consultations, the Government will have to continue to subsidise T&TEC.
A rate review has been on the cards for many years but has been repeatedly delayed.
The plan noted that the last increase, for the period 2004-2008, followed two years of discussions with all stakeholders with the RIC issuing its final determination on June 1, 2006 for the five-year period 2006 – 2011.
Eleven years later, T&TEC will now embark on a new round of consultations.
T&T enjoys the lowest electricity rates in the Caribbean.
The cost of energy in various Caribbean countries range from as low as US$0.20/kwh to as high as US$0.37/kWh.
In T&T, however, the average subsidised cost, is US$0.05/kWh.
The last increase in electricity was implemented in 2009.
As another rate increase looms, the RIC 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 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,” said the RIC.