The Barbados Light & Power Company Ltd

• Jurisdiction: Barbados
• Court: Fair Trading Commission (Barbados)
• Judge: Dr. Donley Carrington,John Griffith,Ruan Martinez,Dr. Ankie Scott-Joseph,Samuel Wallerson
• Judgment Date: 12 May 2023
• Docket Number: FTCUR/BLPCMTNRVDEC 01/2023-20230307

In the Matter of the Fair Trading Commission Act, Cap.326B of the Laws of Barbados;

And in the Matter of the Utilities Regulation Act, Cap. 282 of the Laws of Barbados;

And in the Matter of the Utilities Regulation (Procedural) Rules, 2003 and the Utilities Regulation (Procedural) (Amendment) Rules, 2009;

And in the Matter of the Application dated the 30th day of September, 2021 by the Barbados Light & Power Company Limited for A Review of Electricity Rates (the ‘Application’);

And in the Matter of the Decision of the Fair Trading Commission on the Application dated and issued 15th February 2023 and numbered 01/2023.

The Barbados Light & Power Company Limited

Applicant

Before

Dr. Donley Carrington Deputy Chairman

John Griffith Commissioner

Ruan Martinez Commissioner

Dr. Ankie Scott-Joseph Commissioner

Samuel Wallerson Commissioner

FTCUR/BLPCMTNRVDEC 01/2023-20230307

THE FAIR TRADING COMMISSION

DECISION

BACKGROUND

1 On 4 ^th October 2021, the Barbados Light & Power Company Limited (the “ Applicant”) made an Application for a Review of Electricity Rates, dated September 30, 2021 ( “Application”). The Fair Trading Commission (the “Commission”) gave its decision on the Application on 15 ^th February 2023 (‘the Decision’). On 7 ^th March 2023, the Applicant filed a Notice of Motion for Review and Variation of the Commission's Decision (the “ Notice of Motion”), supported by an affidavit of Mr. Roger Blackman, the Applicant's Managing Director. One of the orders which the Applicant seeks in the Notice of Motion is for the Commission to delay the implementation of several of the orders of the Commission made in its Decision (hereafter referred to as the “request for a Stay”).

2 The orders which the Applicant has requested be stayed, as set out in the Notice of Motion are as follows, namely that the Applicant:

• “(i) Declare a regulatory liability of $99.5 million in connection with the SIF fund; 1

• (ii) Declare a regulatory liability of $9.5 million in connection with deferred tax liability; 2

• (iii) Revisit its accumulated depreciation expense; 3

• (iv) Use base revenue, customer count, usage and demand values from the period ended June 30th, 2022 for purposes of making an

  adjustment to test year revenues and within the cost of service study; 4

• (v) Use a financial capital structure of Equity 55% and Debt 45% for rate making purposes in the determination of the rate of return; 5 and

• (vi) To modify the as filed test year expenses in the development of the revenue requirement in respect of utilizing the 2020 reported insurance expense of $8,198,082.” 6

(These orders are hereafter referred to as (the “ Challenged Orders”).

3 The Commission issued a Procedural Directions order on March 16 ^th, 2023 which invited approved intervenors in the Application to reply to the Applicant's request for a stay. The intervenor team of Ms. Tricia Watson and Mr. David Simpson (the “ Simpson/Watson Team”), Mr. Ricky Went, Barbados Renewable Energy Association (“ BREA”) and the Barbados Sustainable Energy Cooperative Society Ltd (“ BSECSL”) filed responses to the request for a stay.

THE ARGUMENTS

The Applicant

4 Mr. Blackman, in his affidavit dated March 7 ^th, 2023, deposed as to the irreparable harm the Challenged Orders are likely to cause the Applicant if not stayed. He contended that the irreparable financial harm which the Applicant is likely to suffer cannot be remedied by any subsequent award of damages, even if the same were available. Mr. Blackman identified various ways in which the Applicant's financial position is likely to be adversely affected by the Challenged Orders.

5 Mr. Blackman stated that despite the Commission's implied acceptance that the Applicant was in a state of ‘financial distress’ prior to and at the time of the issue of the Decision, the Commission nevertheless made a determination which imperiled the Applicant's financial viability. He further stated that if the Applicant is forced to implement the Decision before the hearing and determination of the review, its rate base will be reduced below acceptable levels and it will realise marginal profitability until the final determination of the disputed matters. Mr. Blackman contended that in making the Challenged Orders, the Commission acted contrary to its role and function under section 3(2)(b) of the Utilities Regulation Act, Cap 282 of the Laws of Barbados.

6 Mr. Blackman also submitted that unless the Challenged Orders are stayed, the operating income and Return on Equity (“ROE”) of the Applicant would continue to fall below accepted industry standards.

7 Mr. Blackman averred that the Commission's orders that the Applicant record (i) fifty per cent of its 2019 income tax gain as a regulatory liability and (ii) $99.5 million in a regulatory liability account, “… will contribute to an undue reduction in its approved rate base, and ROE below acceptable levels and will compromise its ability to maintain its plant and equipment and make necessary alterations and improvements to provide service to the public which is safe, adequate, efficient and reasonable as required by section 20 of the URA”.

8 Mr. Blackman also claimed that the Commission's order, which requires the Applicant to use base revenue, customer count, usage and demand values from the period ended June 30 ^th, 2022 for purposes of making an adjustment to test year revenues and within the cost-of-service study, while the Applicant has to maintain all other costs, expenses and other information from the 2020 test year, “… is likely to cause financial prejudice to BLPC in that it will be required to apply rates premised on unbalanced ratemaking, which does not appropriately account for updated Construction Work in Progress (CWIP), costs, expenses and other pertinent details from the period ended June 30 ^th, 2022.” Accordingly, “CWIP and operating and maintenance expenses from 2022 which should properly be included in this calculation, would therefore be unjustly omitted.”

9 In addition to the above, Mr. Blackman alleged that the Applicant will suffer irreparable reputational harm and harm to its goodwill because the Commission's Decision variously suggests that the Applicant “….was untruthful, lacked transparency, provided incorrect or deliberately opaque information, included unsubstantiated costs in its Application, made errors in its calculations, sought to mislead the Commission, failed to implement Orders or directions made by the Commission in its 2010 Rate Review Decision, engaged in self-dealing or misappropriation of assets and other allegations”. He further alleged that these suggestions are unsupported by the evidence led during the oral hearing and in the Application and are likely to cause irreparable injury to the Applicant's reputation and goodwill.

10 The Applicant, through Mr. Blackman, added that damages are not readily available for decisions or orders made by the Commission, and even if available, would be inadequate. It stated that the implementation of the Decision will further result in the erosion of debt and equity, disruption of investor confidence in the regulatory environment in Barbados and significantly undervalue the Applicant's asset base.

11 The Applicant identified the legal principles to be applied on a request for a stay, and set out the reasons in support of the grant of a stay of the Challenged Orders. The Commission does not think it necessary to recite the Applicant's submissions on the principles which govern the grant or refusal of a stay, since they are not in dispute in this case, and are summarized below in this decision.

Watson/Simpson Team

12 The Watson/Simpson Team filed written submissions dated March 31 ^st, 2023 opposing the request for a stay. The Watson/Simpson Team argued for a rigid application of the principles set out in AG Manitoba v Metropolitan Stores et al 7 and the decision of this Commission in Application by Cable & Wireless for Review of Decision on 30th June 2003 and 1st July 2003. The Watson/Simpson Team argued that the Applicant has not adduced any evidence of damage or costs and has failed to demonstrate that it has suffered or is likely to suffer irreparable harm. The Watson/Simpson Team contended that the interim rate increase, which remains in place, protects the Applicant from any harm.

13 The Watson/ Simpson Team disagreed with the Applicant's argument that the Commission impliedly accepted that the Applicant was experiencing “financial distress” by the grant of interim rate relief to the Applicant. The team suggested that the Commission refused to apply the “financial distress” test in deciding whether to grant or refuse interim rate relief.

14 The Watson/Simpson Team submitted that when considering the balance of convenience, the interest of the Applicant must be balanced against the interest of the intervenors and the public. They further submitted that the Commission must consider the irreparable harm that is likely to be done to one or the other party resulting from the grant or refusal of the request for the Stay. They reiterated that the burden is on the Applicant to prove irreparable harm. They argued that the public would be prejudiced by the continuation of the interim rate during the period of regulatory lag. They added that to stay the order in respect to the Self Insurance Fund would be against the public interest, and tantamount to the approval by the Commission of the Applicant's breaches of the Utility Regulation Act and the SIF Regulations. 8

15 The Watson/Simpson Team also challenged the Applicant's complaint that the Commission damaged its reputation by statements made in the Decision. They argued that the complaint is outside of the jurisdiction of the Commission.

Barbados Renewable Energy Association (BREA)

16 BREA, in its letter dated March 30 ^th, 2023, supported the Applicant's request for the stay of...