VZCZCXYZ0000
RR RUEHWEB

DE RUEHBE #0299/01 2122151
ZNR UUUUU ZZH
R 312151Z JUL 09
FM AMEMBASSY BELMOPAN
TO RUEHC/SECSTATE WASHDC 1963
INFO RUEHME/AMEMBASSY MEXICO 0253

UNCLAS BELMOPAN 000299 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG ECON EINV BH
SUBJECT: SUPPLY OF ELECTRICAL POWER IN BELIZE 
 
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Summary 
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¶1. Belize Electricity Limited (BEL), whose major shareholder is 
Fortis Inc. of Canada, is Belize's primary distributor of 
electricity.  Since the beginning of the year, regulatory conflicts 
with the Public Utilities Commission continue to dominate BEL's 
focus.  More recently, a shortage of supply of electrical power from 
its major supplier (the Comisisn Federal de Electricidad of Mexico) 
may put additional pressure on BEL's operations in the coming 
months.  End Summary. 
 
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Belize Electricity Limited 
-------------------------- 
 
¶2. Belize Electricity Limited (BEL) is the primary distributor of 
electricity in Belize.  The company's shareholding is comprised of 
70.2% held by Fortis Inc. of Canada, 26.9% by the Belize Social 
Security and the remaining interest is held by small shareholders. 
 
 
¶3. The company has a customer base of approximately 74,200 accounts 
with a peak demand of 74 megawatts (MW). Its demand is met by 
multiple sources of energy that primarily include power purchases 
from Belize Electric Company Limited (BECOL), Hydro Maya Limited 
(HML), the Comisisn Federal de Electricidad (CFE) which is a Mexican 
state-owned power company, and from its own diesel-fired and 
gas-turbine generation.  All major load centers are connected to the 
country's national electricity system, which is interconnected with 
the Mexican National Grid, allowing the Company to optimize its 
power supply options. 
 
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Regulatory Conflicts 
--------------------- 
 
¶4. The Public Utilities Commission (PUC) is authorized under the 
Public Utilities Commission Act to serve as the economic regulator 
for the electricity, water and telecommunications sectors in Belize. 
 Regulatory issues between BEL and the PUC have continued to 
dominate the former's focus into 2009. 
 
¶5. In March 2008, BEL requested the Public Utilities Commission 
approve a 15% increase in electricity rates. The company's request 
was rejected by the PUC which cited its profits as a central reason 
for rejecting BEL's request for a rate increase.  Since 2004, the 
company had profits exceeding Bz$18 million (US$9 million) which 
peaked at Bz$29.9 million (US$14.95 million) in 2007 with annual 
return on investment averaging between ten and twelve percent. 
 
¶6. In April 2008, BEL again requested a 13% increase in electricity 
rates through the Annual Review Process (ARP) which was similarly 
rejected by the PUC in an ARP Final Decision of June 2008.  The 
PUC's Final Decision, which was based on 350 comments from the 
public, input from PUC technical staff and an independent expert 
opinion, maintained the average tariff at $0.441 per kWh but changed 
the Rate Setting Methodology.  The PUC noted that an Agreement with 
the CFE would have allowed savings of BZ$7.5 million annually. 
 
¶7. In 2008, BEL went to court to challenge GOB's repeal of the 2007 
Tariff Setting By-laws, the PUC's Final Decision, and the PUC's Rate 
Setting Methodology used to arrive at the Final Decision. Note: The 
By-laws refer to a Statutory Instrument (S.I.) which is a subsidiary 
law promulgated by the relevant Minister of Government.  This 
particular SI was done by Melvin Hulse, Minister of Public 
Utilities, NEMO and Transportation.  End Note. 
 
¶8. In January 2009, the Supreme Court denied BEL's claim against the 
Government's repeal of the 2007 Tariff Setting Byelaws, but 
acknowledged that the Company's case is not without merit. In June 
2009, the Court of Appeals (COA), the highest court in Belize, 
dismissed an appeal brought by BEL challenging the Supreme Court's 
decision which upheld the amendment to the 2007 Tariff Setting 
By-laws.  The COA rejected BEL's argument that the repeal was 
unlawful since the company was not consulted prior to implementing 
the instrument. The legality of the repeal has now been confirmed by 
two courts. 
 
¶9. In February 2009, the PUC amended its 2008 Final Decision in 
relation to the period January 1, 2009 to June 30, 2009.  The 
amendment required a 15 percent reduction in electricity rates to be 
applied retroactively from January 1, 2009.  This amendment was 
issued despite BEL's filing for an appeal to the Supreme Court in 
July 2008 to contest PUC's Final Decision.  Nevertheless, the PUC 
justified the rate decrease in light of excess revenues collected by 
BEL which it claimed by law should be credited back to the consumer 
as a result of fall in the expected cost of oil during the latter 
part of 2008.  BEL was subsequently granted an injunction on the 
decreased rates of electricity until the appeal of the PUC's June 
2008 decision is heard.  This case is expected to be heard by the 
Supreme Court at the end of July 2009. 
 
¶10. In its most recent Annual General Meeting, BEL declared losses 
at the end of 2008 that amounted to Bz$10.8 million (US$5.4 million) 
as compared to a profit of Bz$29.9 million (US$14.95 million) in 
¶2007.  The Company claimed that this change of Bz$40.7 million 
(US$20.35 million) was as a result of the almost Bz$20 million 
(US$10 million) in excess power costs it was forced to absorb after 
failing to get approval for the rate increase. 
 
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Shortages in supply of electricity 
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¶11. Recent power shortages have come about as a result of Belize's 
continued reliance on the importation of power from Mexico.  Last 
year, Mexico's CFE provided 53.6 per cent of Belize's total energy 
supply.  In July, the PUC announced that Belizean consumers will be 
faced with shortages in the supply of electricity due to CFE 
shortfalls in power generation.  Between July and August, the CFE 
will be undertaking repairs to its facilities which only allow it to 
supply 15% of Belize's energy demand, and that power will be at a 
higher price. Mexico is generally Belize's largest supplier, 
accounting on average for approximately 40% of Belize's total 
supply.  In 2008 the power supplied from Mexico reached 53.6%. 
Dependence on supply from Mexico generally drops off a bit towards 
the latter part of the year during the rainy season when Belize's 
hydro facilities have more water. 
 
¶12. To help mitigate the current CFE shortfall, an emergency 
agreement was reached between BEL and Belize Aquaculture Limited 
(BAL) to temporarily supply up to eight megawatts additional power 
from BAL's generation facility. BEL is currently taking 16 MW of 
power from Belize Aquaculture Limited and 32.5 Megawatts from its 
sister company, BECOL. 
DIFFILY