Belize comparative electricity rates for region. Highest of all!

Chalillo hydro dam has backed up a beautiful lake.


ELECTRICITY RATES IN BELIZE AND COMPARISONS

A recurring problem in Belize is the high rates for electricity. We have two hydro electrical dams and also a third one soon to come online. Private sector financing will supply all the electricity the country needs in private ventures. Lacking are the legislated incentives in some sort of guaranteed purchasing agreements for private sector electrical power producing investments. The REPORTER NEWSPAPER this week published the comparative costs of electricity around our region.

Mexico .12 cents a kw
Honduras .18 cents a kw
Guatemala .40 cents a kw
Costa Rica .16 cents a kw
Nicaragua .28 cents a kw
Belize .42 cents a kw

As you can see by the table, Belize has the highest electrical rates in our region of Central America and Mexico.
The management company for electricity in Belize and the distribution system is FORTIS a Canadian company and while they do a good job in supplying electrical service, are widely believed by the general public, to be cheating on the way they charge and make their profits. The Public Utilities Commission in this UDP government finally made them cough up for some (hic! ) accounting errors, last year. They squealed like a pig going to slaughter.
What is believed generally, is that the electricity produced from HYDRO power is over priced and that the system of separate entities, allows hydro power to be overcharged from BECOL to BEL the distribution company. Both controlled and run by the Canadian company of FORTIS, of Canada. What we have is a climate of proven mistrust between the public of Belize and the company of FORTIS.
Under the past PUP administration, again it was widely believed that a CABAL of senior political party members in the previous CABINET were on the TAKE from FORTIS in some manner of form. When the current UDP won the election, they promised to rectify the past ROBBER BARON mentality of the corruption under the PUP administration. This they have failed to do across the board. Nobody has gone to jail from the big ROBBER BARONS for smuggling out foreign exchange in the millions from Belize. Nobody from the previous administration has even been prosecuted, other than to do with some banking and GRANT money disbursements from foreign countries in foreign aid. It is all very disappointing and generally speaking the public is sick to death of the sanctimonious utterances of politicians in Belize.
Generally speaking, BECOL the hydro dam electricity produced here, is believed to be valued at .08 cents a kilowatt, to BEL the distribution system for electricity and the FORTIS managers. BEL however, are charging the consumer .42 cents a kilowatt. A differential of .32 cents a kilowatt. The PUC does not seem to have the technical expertise, or accounting skills to decipher the real costs involved with loans for the dams and production and operating costs. Nor for the differences in costs once it reaches the distribution system of BEL, the company next layer up in the system.
BECONGO, a local NGO is protesting and demanding that our UDP government and Public Service Commission present facts on the costs of electricity between BECOL at the hydro dam and BEL and give us the public, the break downs and justifications for such a high cost of electricity in Belize. The PUC are not doing their job.
The closest high price of electricity to us in our region is that of Guatemala, but that nation is a heck of a mountainous region with many mountain ranges, volcanoes, steep valleys and many remote towns and villages with a population of 7 million people. Guatemala could swallow Belize two dozen times over and more, inside their geographic area, yet while Guatemala rates are high, they are lower than ours. While our small country has the highest rates of electricity in the region.
Something smells here BACONGO keep saying, like dead fish in the bilge water under the floor boards of a fishing skiff after being out in the sun for a day or two. Where do we find politicians that would do something about transparency and accountability in Belize?

FORTIS, BELIZE ELECTRICITY RATES AND PUC

Fortis of Electric business
THE REASON BELIZE ELECTRICITY RATES ARE ALWAYS HIGHER

The major reason is that our bureaucrats and politicians are fiscally unsophisticated.
What is happening is that FORTIS is supposed to be a MANAGEMENT COMPANY handling our electrical supply and transmission grid, which facilities be owned by the people of Belize. For this management service, Fortis gets to keep any profit they can get out of the system of management. Usuually such a utility service gets a guaranteed profit, or an average profit.
What seems to be happening to me, is that our government has misunderstood the role of the utility management company concept. I may be wrong, but not far wrong. Fortis appears to be running like a for profit company BUILDING ASSETS, not for the citizens of Belize through our Government ownership, at the expense of Belizeans for its own wealth accumulation. As the years pass, the infra structure in electricity is owned by FORTIS, increasing their wealth, which can be sold in the future for gargantuan profits, in addition to the profits they earn from managing the electricity system on an annual basis.
From all appearances, under the PUP, FORTIS owned everything. This makes FORTIS a different kettle of fish in the style of a company building assets. The reason the PRICE of ELECTRICITY is high, is that FORTIS is forcing CUSTOMERS to build the electrical supply and transmission grid system. This in a PRIVATE for PROFIT company, would be the second long term profit in VALUE of the ASSETS, besides the ANNUAL PROFIT ( management fee ), Fortis is guaranteed for management services.
A PRIVATE for PROFIT company would be re-investing PROFITS to build ASSET VALUE. In the case of FORTIS up until this year, the price of electricity has been set artificially HIGH to the Belizean customers, to pay for expansion and investment in the system. We are paying for asset expansion with population growth, and higher electricity rates, not for increasing government wealth, but for increasing FORTIS wealth. If Belizeans owned the production of electricity facilities and the transmission grid this would be acceptable. But if FORTIS owns these increased expanded assets, then FORTIS should be paying for the increase in VALUE of the ASSETS out of their profits. The most glaring case I can remember is the HYDRO DAM in which Musa gave it to FORTIS for $1 for fifty years. The cost of the dam is being born by the Belizean consumer of electricity, yet it is a FORTIS asset which can be sold off in the future to another buyer, which FORTIS has been hinting at lately. If FORTIS owns it and can sell it, then FORTIS should be paying for it out of their profits. As any PRIVATE for PROFIT company must do in business. Not the Belizean consumer of electricity via higher electricity rates.
This then raises the question of LOANS, borrowed to expand the infra-structure. If LOANS are used, and the cost is passed through to the customer in higher electricity rate costs, then the asset value of the loan investment belongs to the Government of Belize representing the citizen consumer. Or it should, but does not appear so?
The way I understand the media presentations on this subject, is that FORTIS owns the increased transmission lines, generators and so on. FORTIS cannot OWN these things, if they don’t pay for them out of their PROFITS, we the customers do. This is after all a Government alleged owned UTILITY.
The Government of Belize have to decide what is actually owned by FORTIS available for sale to another buyer, and what is owned by the citizens of Belize, paid for by FORTIS management services. This needs to be divvied up and straightened out before FORTIS calculates in the short and long term, which is most advantageous to their private for profit company system. To be able to sell our production and transmission assets paid for by our higher electricity customer rates, since the PUP gave away the store apparently, lock, stock, and barrel. Who would handle such a sale, or transfer of assets and management and who would get what, from such a sale is the question? Or say, the return of the DAMS to Belize in 50 years after they are depreciated, the asset and EARNING CAPACITY of for instance the HYDRO DAMS. At some point in the fifty years, it is going to be worth more to FORTIS to sell those dams and transmission lines to another foreign outfit, than to lose them as an operator, keeping the profit from them. There will come a time of diminishing returns for FORTIS, in which; what seems the current setup, to be a period in which selling out will be more advantageous than operating the electric utility for FORTIS.
I’m not going to get into loans and depreciation and management fees here. That requires a more detailed study. The essence here is that something is very wrong in the way the MANAGEMENT CONTRACT is operating between FORTIS and the Government of Belize, representing the citizens, who ultimately should own these assets and their value worth, for which the citizens are still paying through artifically high electricity rates.
You the PUC should be figuring this out and correcting the situation on the value of assets, investment by loans we are paying for in rates, or out of Fortis profits per capital re-investment expansion for eventual private corporate resale, as a methodology for our public utility. There is something smells about this whole thing the way the PUP organized this electric utility ownership for Belize.

Fortis electricity debate in Belize- FORTIS threatens to sell out!

FORTIS ELECTRICITY SUPPLY TV INTERVIEW, WITH STANLEY IN BELIZE

The head of FORTIS made no bones about, he wants to make money in the electricity business. Fair enough. The Belizean tv interviewers and he, went round and round in their questions and answers. FORTIS claim $10 million operating losses last year for BEL the distribution company and Stanley of FORTIS said he will no longer invest in the distribution company BEL under the PUC regime. He wants a return to a sort of guaranteed dividend system and that the Belize Government, present and past have not lived up to their agreement to establish some sort of system that will establish a guaranteed rate of return, or dividend. Belizeans under the new UDP government are trying to understand how big business works and were the money is. We are after all, a bunch of rural country bumpkins.
Stanley I think his name is; head of FORTIS the Canadian Electric Company running the pyramid of electrical companies, said BELIZE only represents 3% of their gross incomes in Canadian Fortis Company electrical supply, worldwide management services. I got the impression that the $3 billion investment in the country was enough now, that he would like to either get his way, or cash in his profits by selling the assets FORTIS now owns in Belize
There was considerable double talk and essentially he is angry that the profit that the companies make, are not being maintained. As Stanley explained it, they cannot keep up with depreciation costs. The cash profit flow is re-invested in expansion assets which are owned by FORTIS.
I listened to the pro and con and I was asking myself, why and what does he want out of Belize and where, if you take his talk at FACE VALUE, is their profit in FORTIS. The only way I could say, is by using an analogy of investing in a 300 apartment complex and how you make money off that. The loss is in the depreciation and the profit is the increase of the value of your property investment over time by appreciation. The cash flow you throw back into maintainance and write offs and you try to take some of the cash flow off, by some dividends and management costs. Long term investment though, you are holding and expanding the value of your assets, to resell some years down the road and that is where the real profit is. The money profit is the re-investment in the apartment complex, which over ten, or twenty years if you have maintained it and covered the depreciation amounts, from your rental cash flow, is your PROFIT, when you re-sell those assets. If done right, the apartment complex loses money over ten years, but since you use the money flow those apartments earn to maintain, while taking off your depreciation, you eventually have an investment that is FREE and CLEAR if you had borrowed loans to start off with, and now worth millions of dollars you can cash out when you sell. The apartment rents put back in the business, make you your profit when you re-sell over a long period of time.
In the case of the pyramid electrical companies in Belize, owned mostly by FORTIS, the value, or assets are now around $3 billion, I understand Stanley of FORTIS said. The thing is BELIZEANS have paid for it ALL. Except the original investment, which by now is covered, or written off, or fully depreciated. FORTIS just manage the overall investment. My understanding is; that he is fighting with the government right now, over the guaranteed rate of return, from which he takes off DIVIDENDS and the management fees? He may already have the management fees in the balance sheets, as an operating cost? I wouldn’t know about that. FORTIS he says are re-investing in the Belize Electricity system most of the BELIZEAN CUSTOMER CASH FLOW they are getting back and maintaining the value of the investment, in dams and distribution lines, or expanding these as re-investment ( which will be years ahead Fortis profit ) from the CASH FLOW supplied by the USERS which are the Belizean consumers, but while Belizean consumers are paying for EVERYTHING, through the Fortis management system, only FORTIS are accumulating ASSET WEALTH, because the electrical system they are expanding and building is the FORTIS profit eventually. If and when FORTIS decide to sell the operation to a world bidder. Stanley indicated he wanted to SELL out now and collect the $3 BILLION for FORTIS, the electrical operation in Belize, is now worth. Belizean consumers don’t own anything. We are just like renters in the apartment complex analogy. The electrical system of Belize, belongs to FORTIS the way it is setup.
Stanley of FORTIS is right in that he wants a properly regulated rate of return system and obviously there should be; a government to FORTIS dialogue. I don’t think either our PUC people, and certainly our CABINET people, understand the way BIG BUSINESS works. The profit for FORTIS, is actually in the building up of the assets value, by using consumers money. Fortis at some time can re-sell those growing valued assets to outside foreign world firms, or take the companies PUBLIC on the stock exchange and make money that way, with the assets they are acquiring by re-investing our consumers money wisely. I liked Stanley’s argument, that he wants to do it right, as to quality and service reliability, or NOT at all. I agree with that.
Belizeans apparently under the UDP and PUC are educating themselves on how this big business works! In the meantime, FORTIS is not covering depreciation cost losses, from Belizean consumers cash flows, which eventually reinvested turn into ASSET VALUE for Fortis. The rate of return and a system, or formula for calculating all this needs to be set in place.