Power companies in The Bahamas would like to implement a structure establishing a hurricane recovery fund as a part of their revenue requirements, a factor that would determine new tariff rates. This was revealed in the Utilities Regulation and Competition Authority’s (URCA) recently completed tariff review framework, which requires public electricity suppliers to detail their revenue requirements so that a rate of return may be established and a viable tariff adjustment can be determined.
Bahamas Power and Light (BPL), in its response to URCA’s consultation questions on the framework, noted that the consultation document did not address a hurricane recovery mechanism for non-insurable assets.
“BPL is of the view that this is a significant exposure to the company and we would like consideration for a hurricane fund to be established that would build up over time and be used when needed. BPL can provide further details as discussions progress,” the company states in its response.
RAV Bahamas, a Bimini-based electricity provider, said, “It seems prudent for each utility to establish reserves for the anticipated cost of recovering from hurricanes, which are common to The Bahamas. RAV believes that revenue requirements should include the annual cost of establishing an appropriate reserve based on the size of the utility’s service area.”
Noting the difficulty of public electricity suppliers (PES) obtaining insurance for transmission and distribution, especially given that if it is available the cost makes it prohibitive, URCA stated it agrees with the concept of “self-insurance” but the exercise is best done outside of the tariff framework.
“However, URCA believes that the requirement to establish such reserves for the anticipated cost of recovering from hurricanes will require more comprehensive study to determine the appropriate level of reserve and the establishment of rules governing such funds,” URCA states.
“The level of reserve and the rules governing how these funds will be regulated may differ for PES. Also, the benefit/cost of establishing such reserve funds when compared to available options will have to be examined for each PES. This exercise is best done outside this tariff framework. In this regard, URCA will welcome BPL’s proposal on how BPL proposes to insure its assets.”
An official assessment by the Inter-American Development Bank (IDB) on the impact of Hurricane Dorian in 2019 found that total damage in the power sector was estimated at $131.3 million, of which $8.4 million was from damage to the transmission and distribution networks on Abaco and $21 million was from damage to the flooded power generation plant on Grand Bahama.
The IDB also estimated losses from power not sold amounted to $68.9 million.
In January, Prime Minister Dr. Hubert Minnis said it would cost the government $90 million to restore power on electricity, having up to that point spent approximately $30 million.
The post BPL proposes creation of hurricane recovery fund appeared first on The Nassau Guardian.
source https://thenassauguardian.com/bpl-proposes-creation-of-hurricane-recovery-fund/
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