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May 28, 2008

More blackouts sweep Belize; B.E.L. blames bad weather/luck

Story PictureFor the last five days the country has been subjected to repeated blackouts and while the leading suspicion is that the outages are intentional, this evening Belize Electricity Limited’s boss Lynn Young maintained that the power cuts are the result of bad weather and bad luck. The company says while trips in the Mexican feed caused the blackouts earlier this week, today’s outages were the result of faults on local transmission lines. B.E.L. says with the use of a helicopter, crews were able to locate the damaged insulator quickly and bring power back up within two hours. But the accumulation of dust and lightning storms continue to pose threats as demonstrated by the fact that a similar fault meant loss of power to the west earlier this evening. Young admits the timing of all this is very unfortunate given the comments by Fortis C.E.O. Stan Marshall that rotating blackouts would happen if B.E.L. was not granted a rate increase by the Public Utilities Commission. Young says while Marshall may have been blunt, his words reflected the company’s financial position in a fuel crisis.

Lynn Young, C.E.O., B.E.L
“People have been asking like okay the company made thirty million dollars last year. And it sounds—I don’t want to down play it—it sounds like a big amount of money but for a company that has four hundred and twenty-nine million dollars worth of assets, a thirty million dollar profit is—I think it’s not unreasonable but I do understand what people are saying. The country is going through some serious situations right now and we have had to, first of all we stopped paying dividends for this year. People are saying well why don’t you take it out of your profits. But last year when we had our rates approved it was forty-four cents per kilowatt hour. That was based on oil prices of sixty-five dollars a barrel. And for each ten dollars increase of oil, we have to find an extra six million dollars. So between last year and this year, and last week it was at a hundred and thirty-five dollars a barrel. If that holds, that’s seventy dollars a barrel increase in oil prices. So on an annual basis, we’re going to have to find forty-two million dollars extra to pay for that, just for the extra cost of power. This doesn’t include the fact that copper prices has gone up by two hundred and something percent. Aluminium prices has gone up triple, steel prices has gone up. So the company is faced—like everybody else—with some extreme cost pressures. And yes, I agree that in this kind of situation, you’re gonna have to look at everything. If it means that the P.U.C., which they’ve done, is coming back and say guys you’re gonna have to reduce your profits, we’re gonna have to look at that. We’ve put a freeze on hiring. It’s possible that we’re going to have to look at pay cuts in B.E.L.; if we have to do that, we have to do that. But at the same time, our operating expenses last year was twenty-one million dollars. Our salary, our payroll is about nine million dollars. So when you are faced with forty-two million dollars extra cash, there is not a lot you can do to avoid that.”

Janelle Chanona
“And you’re getting the best deal, you believe, from BECOL?”

Lynn Young
“BECOL, right now, is the cheapest source of power we have. We’re paying about eighteen cents per kilowatt hour and that goes on average on an annual basis with BECOL. We’re paying thirty-eight cents from C.F.E. That’s like more than double what we’re paying for hydro and for Diesel we’ve been doing about sixty-eight cents. Some people have been saying well why don’t we get a lower from BECOL. Really and truly, when you look at the numbers that we are faced with, how much more can we cut from BECOL because they also have to pay their bankers and they have to pay for their operating expenses etcetera? Chalillo has saved us a lot but it has just saved us enough that last year we didn’t have to ask for an increase. But between last year and this year, from sixty-five dollars a barrel to a hundred and thirty-five. So in six years it went up by forty dollars, in one year it has gone up by seventy dollars. And I think part of the problem that we are faced with is that nobody is appreciating the scale of the impact the oil prices is having—not just on B.E.L., because it’s having the impact on the entire country. This is not a B.E.L. problem or a Fortis problem, this is a worldwide problem and this is a country problem. I am very disappointed in some of the irresponsible way that some of the media has been presenting the problem because at the end of the day, B.E.L. is a Belizean company providing electricity for Belizeans. And this problem that we have, the government could buy back the company from Fortis or just take it from Fortis if they wanted to. But you know what? They would still have to raise electricity rates because how are you gonna pay CFE if you don’t raise electricity rates? So Fortis is not the problem and this perceived mismanagement by B.E.L., that’s not the problem either because the numbers are there to show that over the last seven years B.E.L. cut our costs, our operating cost per kilowatt hour has been cut by thirty-two percent. Our cost per customer has been cut. The only area in this company that we are dissatisfied with is the reliability. We really would like to see the reliability improved and to do that requires more investment.”

Earlier today Young met with independent expert Jonathan Lesser to put forward the company’s position regarding rate increases.

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