The Fijian Competition and Consumer Commission has declined Energy Fiji Limited’s proposal for an increase of the electricity tariff.
In a statement, the FCCC indicated that the proposal, which was submitted last year, advocated for the adoption of both fixed and variable charges, instead of the current practice which relies solely on energy and demand charges.
The decision to decline the proposal was made following a thorough analysis of input from stakeholders, including EFL.
FCCC said this process included conducting extensive stakeholder consultations with Fijian consumers and target groups, verifying the Capital Expenditure plan and the 10-year Power Development Plan, and conducting a desktop tariff analysis.
The Commission identified several concerns with EFL’s proposal, including (but not limited to): long lead times and significant investment requirements for renewable energy development.
The proposed timeline for renewable energy projects raises concerns about the feasibility of achieving targets.
Additionally, the substantial investment required could also pose challenges.
Other factors include capital expenditure and funding model constraints: EFL’s current funding model prioritises debt repayment over capital investment, resulting in lower-than necessary spending on crucial projects.
Additionally, the existing dividend policy may need adjustment to support increased investment in renewable projects.
FCCC considered the financial sustainability concerns with high borrowing levels: The projected capital expenditure for EFL’s plan necessitates significant borrowing, potentially exceeding industry standards and raising concerns about financial sustainability.
Dependency on private investment and risk of high gearing ratios were considered:
The plan heavily relies on external investment. If private investors or independent power producers do not participate as expected, EFL may struggle to meet capital requirements, leading to potentially problematic financial ratios.
Based on these concerns, the FCCC is declining EFL’s current proposal.
However, the Fijian Competition and Consumer Commission said EFL is encouraged to submit a revised proposal addressing the identified issues.
The Commission said it remains committed to collaborating with EFL to achieve a sustainable and affordable electricity sector.
Their approach is geared towards ensuring that changes in the tariff structure are reflective of the economic realities, stakeholder concerns, and the long-term sustainability of Fiji’s energy sector.
