fp Turks and Caicos

Changes proposed for electricity regulation in the Turks and Caicos Islands would revise the rate and fuel factor system, modernize regulations and make provisions for renewable energy.

An eight-page proposal released this month by the Electricity Commissioner’s Office makes eight recommendations drawn from reports from consultants Castalia and Oxera, meetings with the two electricity service providers, and a number of prospective renewable energy generators.

The U.K. paid for Castalia to develop a National Energy Conservation Policy and Implementation Strategy for the country, while Oxera was hired by the interim government to review the regulatory framework in support of that policy.

Currently the governor has the authority to make decisions about FortisTCI and Turks and Caicos Utilities (TCU), but the report says that leaves the process open to political influence. The report recommends an independent regulator to ensure “having to pay no more than is needed to provide reasonable revenues to the companies.”

The hot topic of the fuel factor power bill adjustments also is among the areas recommended for change.

Power companies now can adjust rates monthly with changes to the fuel factor surcharge that fluctuates with market conditions, but that doesn’t take into account improvements in efficiency. “The utilities therefore, have received ‘over compensation’ for fuel price increases which must be addressed going forward,” the proposal says.

Replacing the fuel factor with an energy charge adjusted every three or six months would stabilize energy costs and make it easy to account for power that utilities purchase from renewable generators. Utilities that don’t meet efficiency performance targets would not get the full recovery of fuel costs.

The commissioner’s report recommends changing the electricity rates and tariff review period from one to three years, which is more in line with industry practice and would allow more time for rate review and assessment to ensure the necessary detailed analysis.

People have been calling for the ability to use renewable energy and sell their excess production back to power companies, but there is no code to specify how to do that. Power companies would have to establish the rules for that, which could reduce the quantity of diesel fuel that is imported, stabilize electricity prices and ensuring a more sustainable energy supply and energy security.

Power companies don’t have to submit their capital expansion plans and justify their expenses, which can lead to idle assets. The proposal would require utilities to submit capital investment plans every six years to coincide with every second three-year rate review.

Providers can also earn a return on all of their assets, but it is proposed that the independent regulator evaluate and allow or disallow items or costs from the regulatory asset base.

Both FortisTCI and TCU argue that they are entitled to earn 17.5% and 15%, respectively, returns on their asset bases. It is proposed that those rates be replaced by a widely accepted formula to calculate a weighted average cost of capital.

The proposal also would require more transparency and information access for the independent regulator and the public, and set quality of service and performance standards.

Government plans to retain an advisor to oversee the changes which are expected to be implemented by December.

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Click here to read the proposal

Click here to read the Castalia report

Click here to read the Oxera report