IRC hosts public consultation on DOMLEC’s depreciation rate

The Independent Regulatory Commission (IRC), as part of the progressing Electricity Tariff/Rate Review for the Dominica Electricity Services (DOMLEC) Ltd, hosted its first in-person public consultation on Thursday, February 22, 2024, at the St. Alphonsus Parish Hall.

The consultation discussed DOMLEC’s Depreciation Study, which assesses the reduced value and remaining life of the company’s fixed assets. The purpose of the study was to develop updated depreciation rates for DOMLEC’s fixed assets, as part of the upcoming tariff. The U.S-based Alliance Consulting Group conducted the Depreciation Study for DOMLEC.

Managing Partner of the firm, Mr. Dave Watson, said the life of DOMLEC’s assets would remain in service for longer than expected, after assessing the company’s operations.

“When you increase the life you will decrease- all things being equal- the depreciation expense that is required each year. So, in finding those changes we have seen that the depreciation expense for DOMLEC should reduce annually by around 7 million dollars and that is because we see a number of cases that the lives [of the assets] were increasing to some degree,” Watson explained.

DOMLEC submitted its Depreciation Study to the IRC for its review in November 2022. The IRC engaged a tariff consultant from the Paris Infrastructure Advisory (PIA), to help it analyze the information. IRC’s Financial Analyst, Connie Joseph-Louis said DOMLEC’s initial method of calculating its depreciation expenses resulted in an overestimation, amounting to $18.2 million. She noted that following further revision, the consulting teams concluded that a total depreciation expense of $12.7 million would be more accurate.

The proposed depreciation expense of $12.7 million applies to DOMLEC’s assets in the categories of building and construction, plant and machinery, transmission and distribution, vehicles, and general property.

Executive Director of IRC, Justinn Kase told some 40 attendees, representing stakeholders of electricity from various sectors in Dominica, that other expenses of DOMLEC must be analyzed before the IRC can make a final decision on new electricity rates. He added that the next item for stakeholder feedback will be on DOMLEC’s Weighted Average Cost of Capital.

The consultative document on DOMLEC’s Depreciation Study can be accessed on https://www.ircdominica.org/consultative/.

Stakeholders can view the consultation questions on page 13. Stakeholders have until March 28, 2024, to provide additional comments on DOMLEC’s depreciation. IRC will publish its final decision and results on April 30, 2024.