The Fair Trading Commission’s (FTC) electricity rate decision is on “solid ground”, contrary to the arguments of Barbados Light & Power Company (BL&P).
This is what King’s Counsel Alrick Scott, representing the FTC, told the court yesterday, and he believes that unless BL&P can prove the regulator erred in law, its appeal should be dismissed.
“Unless BL&P can show demonstrated error, then the appeal should be refused,” he told Justice Barry Carrington on Day 2 of BL&P’s appeal trial in the No. 12 Supreme Court.
Scott disagreed with the argument of BL&P counsel Ramon Alleyne SC, that the FTC relied on its “implied powers” to make decisions on the self
-insurance fund (SIF), deferred income tax and accumulated depreciation.
In its February 2023 ruling, which was maintained in the November 2023 motion to review decision, the FTC ordered BL&P to declare a regulatory liability of $99.5 million in connection with the (SIF); declare a regulatory liability of $9.5 million in relation to deferred tax liability; and revisit its accumulated depreciation expense.
“The FTC did not rely on any implied powers. The FTC relied on specific statutory powers. We say undoubtedly that the FTC . . . has jurisdiction to treat to the SIF, to treat to deferred income tax and to treat to accumulated depreciation,” Scott said in
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FTC ‘not encroaching’ on Financial Services Commission
his submission to the court.
He maintained that sections 3 (2), 3 (3), and 10 of the Utilities Regulation Act and sections 4 (2), 4 (3), and 4 (5) of the FTC Act all gave the FTC jurisdiction to interpret its powers broadly and generously, including with the orders BL&P wants the court to reverse.
Scott also told the court that in exercising its own legislative powers as it was permitted to, the FTC was not “trampling” on the separate authority of the Financial Services Commission.
Citing case law from other jurisdictions, Scott said that where there was under-collection or overcollection of revenue, which meant that the rate of return was not fair to consumers or the utility, the regulator had the jurisdiction to take action.
He reminded that when BL&P applied for an interim rate a few years ago because its rate of return was below the ten per cent allowed in the 2010 electricity rate application decision, the FTC permitted an interim rate.
“Any time the rate is not fair and reasonable, the regulator can treat to that,” he said.
Outside of the legislative powers, Scott said the FTC’s jurisdiction relied on “settled regulatory principles”. One was that the utility should recover its costs “dollar for dollar” and should not substantially over-earn or under-collect revenue.
Another of the regulatory principles he referenced was that BL&P as a utility should receive its revenue based on the “return on and of capital” and not on operating expenses.
Scott said BL&P was a custodian of operating expenses, including those
related to its customers like the SIF and income tax and that regulators could not allow utilities to “cut corners” to boost their revenue.
The FTC counsel said the regulator had the right to instruct BL&P to establish regulatory accounts related to the SIF and deferred income tax, both areas of operating expenses.
“The SIF was not funded by the shareholder, the SIF was funded by the rate payers,” he argued.
Scott also disagreed with BL&P’s position that the FTC was engaging in retroactive rate-making.
He said the FTC was on “solid ground” in its orders to the utility company to establish regulatory accounts, also known as deferred accounts. He acknowledged that the recent rate case decision was the first time the FTC ordered the use of such accounts.
“The reality is that these are within the regulatory tool box of regulators. The use of deferred accounts is not retroactive rate-making,” said the senior counsel.
BL&P’s appeal against the FTC’s electricity rate decision is the first time the company has taken its regulator to court over one of its decisions.
Scott said the FTC is not a “traditional adversary” and that its role at the appeal was to explain the decision, show how the ruling was reached and assist the court in arriving at the correct public law decision.
The trial will resume on January 20 before Justice Carrington. (SC)
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