The blogmaster inquired from Chris Halsall how would a distributed power generation model affect BL&P’s profit and loss in the aftermath of last week’s catastrophe –Barbados Gone Dark.
He responded as follows:
ROK (RIP) and I relied on Douglas Skeete during the rate hearings for the financial dimensions, but my understanding is moving to a distributed generation model would have no impact on the BL&P revenue model. No changes to the equations, simply the variables.
BL&P is allowed to earn up to 10.48% based on the Rate Base. The Rate Base is the amount of capital invested in “plant” that is directly responsible for power Generation, Transmission and Distribution. As this is amortized over time, what this actually means BL&P is allowed to make less profit unless they reinvest in the plant.
BL&P will always be needed by Barbados to invest in, maintain and manage the T&D. It’s a “natural monopoly” (and unbelievably complex) — you don’t want multiple different providers each erecting their own poles and then stringing cables. BL&P will also always be responsible for a large percentage of the generation.
It is important to note that this is not going to happen overnight. And there are legitimate concerns by BL&P — it might have to carefully manage an environment where they don’t control all of the generation capacity that the country might need at any given time, but would still be responsible for getting the electrons from where they’re being generated to where they’re needed.
And, the transmission network might require upgrading, if, for example, large generation capability is planned to come online somewhere where appropriate capacity doesn’t already exist. Who would pay for that, the BL&P (and, thus, the power consumer), or the private generation provider?
This is a non-trivial problem space, with many, many dimensions.
The blogmaster will add to Halsall’s view on the obligation of BL&P given the permission by the regulator to earn a 10.48% Rate of Return on Rate Base.
Prime Minister Mia Mottley indicated in one of her take charge interviews last week that the time will come to hold actors in last week’s fiasco responsible – the priority now is to stabilize the power supply to the country. Sorry Prime Minister, the blogmaster does not agree, we can do both at the same time especially if we are confronted by negligence, greed and incompetence.
There is one observation those who followed the press briefings must be concerned about – Managing Director of BL&P Roger Blackman boldly stated one of the reasons for not replacing old problematic diesel equipment was heavily influenced by government’s decision at the time to allow Cahill Barbados to operate a plasma gasification plan in Barbados.
The other issue that triggered concern was the feedback from BL&P that unwanted contaminants were discovered in the fuel supplied by Barbados National Oil Company Ltd (BNOCL). The obvious question is what responsibility does BL&P have to ensure the fuel supplied by BNOCL meets the specifications to ensure the old diesel engines do not have a bad reaction.
The local media should join Barbados Underground to question the quality of BL&P’s decision which has led to the current perilous state of affairs. Should citizens take comfort in the fact the regulator – Fair Trading Commission – has launched a probe? For years the BU family has raised concerns about energy generation in Barbados. It reached a peek during the Cahill saga. How does being reactive get us anywhere?