Motion to Review the Renewable Energy Rider

• Jurisdiction: Barbados
• Court: Fair Trading Commission (Barbados)
• Judgment Date: 25 July 2016
• Docket Number: Document No.: FTC/UR/MTNDECRER 2016-03

Motion to Review the Renewable Energy Rider

Document No.: FTC/UR/MTNDECRER 2016-03

FAIR TRADING COMMISSION

DECISION

TABLE OF CONTENTS

Executive Summary	4
SECTION 1: Introduction	6
SECTION 2: Legislative Framework	8
SECTION 3: Submissions:
Credit Floor vs Fixed Credit	10
Main Approaches	12
SECTION 4: Analysis	14
SECTION 5: Determination	22

EXECUTIVE SUMMARY

On April 22, 2016, the Fair Trading Commission (The Commission) commenced a Motion to review and vary the August 8th, 2014 Decision on the Renewable Energy Rider (RER), regarding the determination of the RER credit and expansion of the eligible capacity limit. This was done in accordance with Section 36 of the Fair Trading Commission Act, Cap. 326 (FTCA) and Section 16 of the Utilities Regulation Act, Cap. 282 (URA) of the Laws of Barbados. These sections state that the Commission may, on application or on its own motion, review and vary or rescind any decision or order made by the Commission and, where under this Act a hearing is required before any decision or order is made, such decision or order shall not be altered, suspended or revoked without a hearing.

The Commission initiated this Motion by way of a written consultation, in accordance with the principles of natural justice. The written consultation is a means of ensuring that there is transparency in its review of the Decision on the RER. Service providers, representatives of consumer interest groups, renewable energy (RE) installers and any other parties that have an interest in the matter were invited to and accordingly submitted written responses to the consultation.

Whereas many respondents argued for the establishment of a price floor, the Commission is of the view that the harm which this Motion is seeking to alleviate may be best addressed with the introduction of a fixed credit, as it affords a level of price stability and certainty not facilitated by a price floor.

Having reviewed and analyzed the submissions, the Commission has determined that:

• I. The eligible capacity limit should be increased to 500 kW. This allows for greater participation in the programme.

• II. The most appropriate approach for the determination of the RER credit is the resource cost approach, as it adequately disaggregates RE costs from the cost of fossil fuels.

• III. The temporary RER credit is set at $0.416/kWh for solar photovoltaics (PV) and $0.315/kWh for wind, for all units supplied to the grid, until such time as a permanent rate may be established. This credit will apply to RE suppliers with capacities up to 500 kW and is subject to Section 13 of the Electric Light & Power Act (ELPA) 2013–21 and Section 46 of the FTCA.

SECTION 1: Introduction

1 The Renewable Energy Rider (RER) was approved by the Commission on August 8, 2014, as a scheme to facilitate the sale of surplus electricity generated from the Barbados Light & Power Co. Ltd.'s (BL&P) customers' distributed Renewable Energy (RE) systems. The low value of the RER credit, as occasioned by low international fuel prices, raised concerns about the viability of the RE sector. Following discussions with relevant stakeholders, including RE installers, the Minister of Industry, International Business, Commerce and Small Business Development, the Minister of Energy and Telecommunications and the BL&P, at a meeting on February 29, 2016, it was proposed that the RER should be revised, specifically as it relates to the RER credit, and the Commission has set out to do so.

2 The RER programme was initially formulated to facilitate a payment of an RER credit of 1.6 times the Fuel Clause Adjustment (FCA) and applicable to those RE suppliers with the capacity range of 1.5 times their average usage, up to a maximum of 150 kW.

3 The primary purpose for the review of the RER, at this time, is to address the concerns of current and prospective RE suppliers and installers who have advised of the current un-competitiveness and lack of economic viability of the RER credit. This is due to the low value of the RER credit, which is occasioned by the general low oil prices on the international market. Additionally, the Motion considers the expansion of the RER programme to allow it to be accessible to suppliers with generating capacities up to 500 kW.

4 This Motion is focused on the temporary establishment of an RER credit that will offer RE suppliers a level of compensation such that RE generation remains economically viable in an environment of low oil prices. This approach deviates from what currently obtains, as the existing RER credit is directly linked to the fuel clause adjustment (FCA), which is based on the BL&P's oil purchase price and varies from month to month, without a specified minimum rate. The present approach renders RE suppliers completely vulnerable to the vagaries of the international oil market. It provides no protection to this new industry, one that is being developed and positioned by the Government to contribute significantly to the transformation of this country's future security of supply status and reduce the outflow of foreign exchange.

5 The Motion to review and vary the RER was conducted by way of a written consultation. The consultation commenced on April 22, 2016 and concluded on May 13, 2016. Eleven responses were received.

SECTION 2: Legislative Framework

6 The Commission has the authority to initiate the Review of the RER proceedings by way of Motion under Section 16 of the URA and Section 36 of the FTCA.

Section 16 of the URA states:

“Where the Commission has not fixed a period of time in accordance with section 15(1) the Commission may on its own initiative or upon an application by a service provider or consumer review the rates, principles and standards of service for the supply of a utility service”.

Section 36 of the FTCA states:

“The Commission may on application or on its own motion review and vary or rescind any decision or order made by it and, where under this Act a hearing is required before any decision or order is made, such decision or order shall not be altered, suspended or revoked without a hearing”.

7 This review of the RER programme will in effect bring it in conformity with the general tenets of the ELPA.

8 According to Section 13(3) of the ELPA:

“The public utility shall purchase electricity from a licensee or other person referred to in subsection (1) at such rate as may be agreed by the parties and approved by the Commission”.

In view of the fact that the mandate of the Commission, under Section 13(3) of the ELPA, is to approve rates which were agreed to by the BL&P and RE suppliers, it is evident that the ELPA envisages a form of rate negotiation occurring between these parties. Moreover, the ELPA, affords RE suppliers with generators of all sizes, an opportunity to enter into an agreement with the BL&P for the supply of electricity at an agreed rate which has to be approved by the Commission.

9 It should be noted that if the parties do not agree on the terms and conditions of such agreement or a dispute arises, then, pursuant to Section 13 (4) of the ELPA, the dispute will be resolved by the Commission, subject to Sections 46 (1) and (2) of the FTCA.

Section 13 (4) of the ELPA states:

“Where parties fail to agree on the terms and conditions of an agreement referred to in this section or a dispute arises in respect of such an agreement, any party may, in writing, refer the matter to the Commission for determination.”

Section 46 (1) of the FTCA states:

“ The costs of and incidental to any proceeding before the Commission shall be in the discretion of the Commission and may be fixed at a sum certain or may be taxed”.

Section 46 (2) of the FTCA states:

“ The Commission may prescribe a scale under which costs shall be taxed and may order by whom the costs in any proceedings are to be taxed”.

SECTION 3: Submissions

10 The aforementioned responses to the written consultation were in the form of submissions from various interested parties, including RE installers, nongovernmental organizations and the BL&P. These submissions outlined concerns regarding the state of the RE sector and provided proposed solutions to the issues of the RER credit and the eligible capacity limit.

Credit Floor vs Fixed Credit

11 Under the pilot phase of the RER, which commenced on July 1, 2010, a credit floor of $0.31 was applicable. The offer of a credit floor was discontinued in the BL&P's application for the permanent implementation of the RER. It should be noted that this occurred in an environment of high and increasing oil prices (US$100+/ barrel) and at a time when the prospect of a US$30/barrel oil price was inconceivable. Representatives of the RE sector, at the February 29, 2016 meeting, tabled the implementation of a credit floor to mitigate the negative economic impacts that have been precipitated by persistent low oil prices and to offer a level of price security/stability. It was considered that this would act as a minimum credit that could be paid to suppliers and would operate in conjunction with the already established variable RER credit,...