Barbados Light & Power Company Limited (BL&P) Challenges Fair Trading Commission (FTC) in Court Over Rate Increase Decisions

Barbados Light & Power Company Limited (BL&P) and the Fair Trading Commission (FTC) are set to face off in court in December as the electricity provider seeks to overturn its regulator’s rate increase application decisions.

However, before the full trial starts in the High Court, the two entities are battling over a BL&P bid to file fresh evidence related to $19 million in accumulated deferred income tax (ADIT) it gained after Government reformed corporate income tax in December 2018.

Like the FTC, intervenors in the process, attorney Senator Tricia Watson, Ricky Went and the Barbados Association of Retired Persons (BARP) have all made submissions to the court opposing BL&P’s bid to introduce new evidence.

The matter is being heard by Justice Barry Carrington.

Following requests for an extension to file submissions in the appeal, the parties appeared again before Justice Carrington on July 9 and arrived at mutually convenient dates for all documents to be filed.

By order, pre-trial review will be on September 25, after which the trial is set down for hearing on December 3 and 4. Parties involved expect the court could give a decision on BL&P’s request to add new evidence by pre-trial review.

In an affidavit dated June 26, BL&P managing director Roger Blackman said pursuant to the court’s June 12 order, the company “was granted leave to file an application for leave to file fresh evidence” and submitted that it wished to tender two letters, dated January 30, 2019, and April 5, 2019, as fresh evidence in the appeal.

“The additional evidence and the said correspondence are particularly relevant to the appellant’s assertion in the appeal that the commission acted in breach of the appellant’s legitimate expectation; and that the commission engaged in prohibited retroactive ratemaking,” Blackman said.

“Consequently, a review of the appellant’s April 5, 2019 letter and the correspondence on the ADIT gain generally are necessary to enable the court to properly determine the issues raised in this regard in the appeal.”

The new evidence relates to what BL&P stated was an approximately $19 million re-measurement of its deferred tax liability, as recognised in the fourth quarter of 2018 after Government’s tax reform in December that year reduced the company’s tax rate from 15 per cent to about 2.34 per cent.

BL&P said it proposed to defer this gain and amortise it to make up any shortfall in the allowed rate of return until base rates are reset. Blackman said in his affidavit that BL&P indicated to the commission that the company’s proposed approach “would result in a fairer view of the return earned in 2018 through to 2020”.

BL&P is contending that prior to the rate review, it and the FTC “verbally agreed that the ADIT gain would be treated as income for current year (2018) and recorded as such in its regulatory reporting”.

“It is the appellant’s case that the commission, having agreed that the ADIT gain should be treated as 2018 income, the appellant recorded it in their financial statements accordingly. Having acted on its agreement with the commission, it was not open to the commission to act in breach of the appellant’s legitimate expectation or to retroactively address the ADIT gain in the decisions,” the managing director submitted.

However, in a July 12 affidavit in response to Blackman, FTC chief executive officer Dr Marsha Atherley-Ikechi said a BL&P December 31, 2018 letter to the commission and the regulator’s response on April 3, 2019, are the only documents necessary for understanding the positions of the two parties on the ADIT gain.

She said the best evidence available of the representations made would be the oral testimony of the statements made in a teleconference meeting on April 5, 2019, between representatives of the FTC and BL&P, and not the company’s letter of that same date.

“The [FTC] never agreed that the ADIT gain could be paid to shareholders. There was no request, that I can recall, made during the meeting, for the ADIT gain to be paid to the shareholders or no longer considered in the next rate review. If such a request had been made, it would have been rejected,” Atherley-Ikechi said in her affidavit.

The FTC is arguing that the additional evidence BL&P wants to introduce “is not necessary to come to the right conclusion or arrive at the right result”. (SC)