The Utilities Regulation and Competition Authority (URCA) has agreed to split the utility fuel charges requested by Baker’s Bay Utility Limited (BBUC), agreeing to a pass-through fuel rate and a $0.36 per kWh non-fuel tariff rate.
There was some pushback from residents on the rate increase, with at least one resident, Gary Kosinski, questioning why BBUC costs are higher than most utilities in the Western Hemisphere and significantly higher than Bahamas Power and Light (BPL).
BBUC has said that the driving force behind the operational expenses that drive the tariff rate is the lack of scale that Baker’s Bay is able to achieve with its existing customer base.
“BBUC proposed $0.3686/kWh for the non-fuel tariff rate and modification of BBUC’s tariff structure, by splitting the electrical rate and method of billing into two parts, including a pass-through fuel rate and a non-fuel/tariff rate. It was reviewed and assessed by URCA, guided by the procedures outlined in the Tariff Review Framework, Guidelines and Procedures for Public Electricity Suppliers document, issued by URCA on July 1, 2021,” URCA said in its recently published final determination.
“Based on the information submitted by BBUC, URCA determined that BBUC decouple its existing pricing structure and method of billing into two parts, including a pass-through fuel rate and a non-fuel/tariff rate. BBUC’s non-fuel tariff rate is $0.3685/kWh predicated on an assessed revenue requirement of $ 5,201,798 and billed sales of 14,107,103 kWh. BBUC fuel rate shall be a pass-through.”
BBUC further argued that, “The largest factor impacting its electric rates is the operation of a fully licensed and regulated electric provider operating over a relatively small number of customers, which results in a higher cost rate to achieve the level of performance and reliability that the members require. Comparatively, BPL can gain scale efficiencies in its costs (notably in fuel volume pricing and non-fuel operating expenses) while applying those costs over a very large customer base.”
URCA said splitting utility charges will allow BBUC the flexibility to align its price structures with the structure of its costs.
“URCA has determined that the revenue BBUC derives from its tariff shall be sufficient to cover its costs, including a reasonable return on capital. In addition, BBUC should be incentivized to improve its efficiency. URCA gives notice that the weighted average tariffs derived from expected sales shall be adjusted annually, at a time to be determined in the future, using an adjustment mechanism… This will allow the BBUC tariff to escalate based on movements in inflation with an offset for efficiency,” the regulator said.
