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RATES REVIEW

RATES REVIEW

FortisTCI’s Proposal for Revised Electric Rates and Request for an Independent Inquirer

FortisTCI submitted a proposal for revised electric rates to Her Excellency the Governor on February 14, 2024. The proposal was for a 6% rate increase across the Company’s service territories. For the majority of residential customers, this could mean an increase of $2 to $15 dollars per month on their electricity bills.

The proposal for revised electric rates was supported by substantial information. As part of the rate review process, Her Excellency the Governor requested additional information and the Company has been responsive to all additional requests. This proposal was subsequently denied.

The Company has reviewed its options and has now requested Her Excellency the Governor to appoint an independent inquirer to examine the reasonableness of the request for revised electric rates.

FortisTCI understands that customers have questions regarding the request for revised electric rates, and the independent inquiry process. We take the opportunity to provide answers here, to the most frequently asked questions and comments.

Additionally customers can learn more at public information meetings, which FortisTCI will hold across the islands. These meetings will also allow customers to have their questions answered. The schedule of meetings will be published here and on FortisTCI’s social media pages.

1: Why does FortisTCI need an increase to electric rates?

Turks and Caicos has one of the most reliable electricity systems in the Caribbean, which supports economic development. Over the past few years, the TCI economy has experienced robust growth. This has led to an increased demand for electricity. The rising demand requires expansion of the electricity system to ensure continued reliable service to customers. This, together with high inflation and rising interest costs, are the primary reasons for the electricity rates review.

2:FortisTCI’s proposal for revised electricity rates was denied. Why is the Company requesting an inquirer to review its proposal?

Following the denial of its proposal for revised electricity rates, the Company has reviewed its options and has now requested Her Excellency the Governor to appoint an independent inquirer to examine the reasonableness of the request for revised electric rates.

The appointment of an inquirer forms part of the rate review process outlined in the Electricity Ordinance. It allows for an independent review of the Company’s submission. Interested persons can make representation during the inquiry. Once completed, the inquirer provides a report to FortisTCI as the public supplier, and to Her Excellency the Governor, with its recommendations.

FortisTCI maintains that its proposed revised rates are necessary at this time. The robust growth that the Turks and Caicos economy has been experiencing over the past few years has led to increased demand for electricity. The rising demand has made it necessary to expand the system to ensure continued reliable service. This, together with high inflation and rising interest costs, are the primary reasons for a review of electricity rates.

3:The Company also had an inquirer for its rate review in 2018. How did the inquirer determine then that the Company’s rate application had merit?

Prior to the current submission of revised rates, the Company had requested one general rate review in twenty years. This was to recover significant investments made after Hurricanes Irma and Maria in 2017. An inquirer was appointed to examine the reasonableness of that rate request. Following review of the extensive information provided by the Company and the conclusion of the inquiry process, the inquirer determined that the Company’s request was necessary and reasonable, and the rate increase was subsequently granted. The inquirer’s report also highlighted that the Company had prudently managed its costs and operation.

4:Can the Governor deny the appointment of an inquirer?

Under the Electricity Ordinance, the Governor can approve or deny the request to appoint an inquirer.

5:What does expansion of the electricity system mean?

The electricity system is complex and consists of various components such as generating units, solar panels, transformers, poles and wires. Together, they make up the system, which is required to generate, transmit and supply electricity to customers.

6:How would the proposed 6% in electric rates affect my bill?

The recent revised electric rates proposed a 6% increase across all service territories. Electric rates are outlined in the electricity regulations and vary across customer classes and your island of residence. For example, residential customer rates are different from commercial customers and medium or large hotels. With the proposed increase, residential customers who use up to 900 kWh per month would see a difference of between $2 to $15 per month on their electricity bill.

7:What factors influence the cost of electricity and what is FortisTCI doing to help reduce the cost?

FortisTCI is diversifying the energy mix through rooftop solar energy systems and utility-scale microgrids with battery energy storage. The goal is to achieve a well-balanced energy mix with traditional and renewable sources to ensure our energy supply can sustain the country’s growing energy demand.

Several other factors impact the cost of electricity. The fuel factor rate and energy usage primarily drive changes in electricity bills. The fuel factor rate increases and decreases with global fuel prices, and these changes are beyond our control.

Geographically, the absence of a deep-water harbor in Providenciales makes it necessary for fuel suppliers to ship fuel from the Gulf of Mexico via the Bahamas to the TCI. This, along with other related logistical costs and fees, adds to the overall cost of electricity. FortisTCI also operates four independent electricity systems across multiple islands, compared to a single electricity system.

8:The TCI Government has identified a need for regulatory reform of the utility sector and has announced that it has formulated a policy to establish a Multisector Public Utility Regulatory Agency and is conducting public consultation on the policy. How does FortisTCI view this development and is the Company in support of such an agency?

As the licensed public electricity supplier in the TCI, FortisTCI has consistently advocated for holistic reform of the electricity sector. Recognizing that the energy landscape has been changing rapidly, a new regulatory framework is necessary to ensure a balanced and equitable integration of alternative energy sources, while providing least-cost energy and delivering high-quality, reliable service to drive economic development. FortisTCI believes that a comprehensive reform of the regulatory framework could yield benefits to customers.

As such, in 2021, the Company submitted a proposal to the TCI Government for comprehensive regulatory reform. Among the provisions in the proposal, were a defined process for meeting energy demand through integrated resource planning, establishing a transparent mechanism to set and revise customer rates, and integrating customer renewable energy. The proposal also addressed the role of the regulator and the importance of independent and objective decision-making on regulatory matters.

The Company remains open to working with the Government and the Energy and Utilities Department on energy sector regulations that benefit all customers.

Staying Ahead of Growth

System planning and strategic investments to modernize, expand, and maintain critical infrastructure and services are essential to keep pace with the country's robust growth and meet customer needs.

TCI has one of the most reliable electricity systems in the Caribbean, and we want to keep it that way. FortisTCI must continually invest in the system to ensure quality of service and to meet the electricity demands of customers as the economy grows.

Growth is triggered by record-high tourism numbers, the budding real estate market, and construction activity, which has ushered in a new wave of hotels, villas, homes, and other developments. This and other key economic indicators influence the high-growth environment.

FortisTCI investments are in line with the Resilient National Energy Transition Strategy (R-NETS), jointly developed and approved by TCI Government and FortisTCI in 2019.

 

Staying Ahead of Growth

 

 

Customer Bill Impact

FortisTCI understands the difficulties that customers can face with electricity bills.For this reason, the Company works hard to ensure that electric rates remain as stable as possible. Here’s an overview of how the proposed 6% increase to revised electric rates would impact residential customer bills.

Customer Bill Impact

As of February 2024, residential customers use an average of 592 kWh. 46% of residential customers use 300 kWh or less. 2% of customers use more than 900 kWh.

Customer Bill Impact
ABC’s of Electricity Rates

A: Electric Rate:

  • This rate is fixed and helps to cover operational costs and recover investment costs to provide safe and reliable electricity to customers. It is charged per kilowatt hour of electricity used.
  • Each customer class, for example, residential,commercial, etc., and service territory, has a fixed rate as set out by law.
  • Electric rates for residential customers currently range from 26.0 cents to 28.9 cents per kilowatt hour.
  • FortisTCI has only sought a general increase to the electric rate once over the past 20 years.
  • An increase of 6% to current electric rates has been proposed due to TCI’s robust economic growth triggering a need for system expansion, and the impact of rising inflation and higher interest costs on the operation.

B: Fuel Factor:

  • This rate rises and falls with fuel prices on the global market and is beyond the Company’s control. It is charged per kilowatt hour of electricity used.
  • The rate is calculated as set out by law, and there is no markup by FortisTCI on the cost of fuel.
  • The calculation of the rate is authenticated each month by the Government’s Energy and Utilities Commissioner’s Office before the release of bills.
ABC’s of Electricity Rates

PROPOSED REVISED ELECTRIC RATES:

FortisTCl received notification from Her Excellency the Governor of her decision to deny the Company’s proposal for revised electric rates submitted on February 14, 2024. The submission proposed a 6% increase in electric rates across service territories. The Company maintains that the proposed revised electric rates are necessary and warranted.

FortisTCl is currently reviewing this latest development within the provisions of the rate review process and will provide further information to customers in due course. We’ve provided answers to some common questions surrounding the submission, to ensure you are factually informed.

1: What is the electric rate?

As set out by law, FortisTCl electricity bill has two rates — a fixed electric rate and a variable fuel factor rate, which together, reflects your total bill. The electric rate helps to fund the operation, maintenance and expansion of the electricity system and recover investment costs. It is charged per kilowatt hour of electricity used by a customer. Each customer class, for example, residential, commercial, etc., and service territory have a fixed rate.

2: Why does FortisTCI need an increase to electric rates? 

Turks and Caicos has one of the most reliable electricity systems in the Caribbean, which supports economic development. Over the past few years, the TCI economy has experienced robust growth. This has led to increased demand for electricity. The rising demand requires expansion of the electricity system to ensure continued reliable service to customers. This, together with high inflation and rising interest costs, are the primary reasons for the electricity rates review.

3: What does expansion of the electricity system mean? 

The electricity system is complex and consists of various components such as generating units, solar panels, transformers, poles and wires. Together, they make up the system, which is required to generate, transmit and supply electricity to customers. FortisTCI must continually invest in the system and maintain existing assets to ensure quality of service and to meet the electricity demands of our customers.

4: How important is it for FortisTCI to deliver reliable electricity to customers? 

Reliability is a direct reflection of how well a company invests and maintains its infrastructure. In the TCI, electricity service has been available to customers 99.97% of the time for the past three years. The Company also received a 94% rating for reliability in an independent customer satisfaction survey last year. Reliable electricity is the cornerstone of the economy, powering everyone, everywhere, including critical sectors such as healthcare, education, security, telecommunications, financial services, aviation, tourism, businesses and more.

5: What is the process for changing customer rates? 

Proposed changes to electric rates must be submitted to the Governor for review and response. FortisTCI’s recent proposed revised rates submission includes comprehensive data to support the reason for a rate change.

6: When can a public inquiry be held to determine if a rate review is reasonable? 

Based on the Governor’s response, the Company can request a government-appointed independent inquirer to determine if a rate review is reasonable. The provision for a public inquiry is included in the Electricity Ordinance.

FortisTCI received notification from Her Excellency the Governor of her decision to deny the Company’s proposal for revised electric rates submitted on February 14, 2024.

7: Doesn’t FortisTCI receive a guaranteed rate of return of 17.5%? 

While a 17.5% return on rate base is allowable by contract, the average return on rate base for the past five years was 3.9%, with the highest being 5.1% during this period. Yet the Company has only sought one general rate increase in the past 20 years. The Company has also invested heavily to modernize and maintain the electricity system, and provide reliable service to customers.

8: FortisTCI has proposed revised electric rates. How would a 6% increase aect my bill? 

The recent revised electric rates proposed a 6% increase across all service territories. Electric rates are outlined in the electricity regulations and vary across customer classes and your island of residence. For example, residential customer rates are different from commercial customers and medium or large hotels. With the proposed increase, residential customers who use up to 900 kWh per month would see a difference of between $2 to $15 per month on their electricity bill.

9: What factors influence the cost of electric electricity and what is FortisTCI doing to help reduce the cost?

FortisTCI is diversifying the energy mix through rooftop solar energy systems and utility-scale microgrids with battery energy storage. The goal is to achieve a well-balanced energy mix with traditional and renewable sources to ensure our energy supply can sustain the country’s growing energy demand.

Several other factors impact the cost of electricity. The fuel factor rate and energy usage primarily drive changes in electricity bills. The fuel factor rate increases and decreases with global fuel prices, and these changes are beyond our control.

Geographically, the absence of a deep-water harbor in Providenciales makes it necessary for fuel suppliers to ship fuel from the Gulf of Mexico via the Bahamas to the TCI. This, along with other related logistical costs and fees, adds to the overall cost of electricity.

FortisTCI also operates four independent electricity systems across multiple islands, which naturally increases operating costs, compared to a single electricity system.

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