The Barbados Light and Power (BL&P) has been given the nod of approval from the Fair Trading Commission (FTC) to recover almost $23 million for the cost of the 5MW Energy Storage Device (ESD) through the Fuel Clause Adjustment (FCA).
Approval of the application, submitted in August 2017, was announced by the FTC on Monday. The ESD carries an operational warranty of 10 years and capital cost of BDS $19.5 million; the BL&P sought to recover BDS $22, 947, 770 - the full cost of the ESD, as well as a return on capital over its warranty lifetime. In addition, the BL&P proposed to share a minimum of five percent of the fuel savings with customers each year.
The FTC noted in the analysis of the application they considered intervenors’ submissions, responses to interrogatories submitted and the findings of its own research.
"The Commission acknowledges that there are varied approaches for the cost recovery of nascent technology assets, such as an ESD and notes that approaches will differ depending on specific objectives, circumstances and the applicable operating environments.
It maintains that the nature of regulation is not static or rigid and that an organisation/regulator must be allowed the flexibility to utilise cost recovery strategies that best address the issues and attendant circumstances before it."
The FTC also noted the FCA is an acceptable mechanism to recover the costs of the ESD; heat rate targets are introduced as a strategy to incentivise the utility to ensure that fuel is more optimally utilised in its production of electricity - heat rate targets are appropriate and shall be reviewed and amended as warranted.
In addition they noted that all financial inputs of the FCA related to the recovery of ESD costs shall be audited by a representative of the Commission to ensure its value is correctly determined.
Recovery of the ESD’s costs is approved for a period of three years, commencing from September 1, 2018. Six months prior to the expiration date, a review shall be conducted to assess the continued appropriateness and applicability of the recovery mechanism.