Barbadians will have to dig deeper into their pockets to pay their electricity bills this month.
A surge in international fuel prices, especially for aviation fuel, has caused an increase in the Fuel Clause Adjustment (FCA) paid by Barbados Light & Power Company (BLPC) customers.
This means that the average BLPC residential customer’s electricity bill is expected to increase by about $22 this month, the company said Thursday.
The fuel component of Barbadians’ electricity bill goes up and down as the price of fuel fluctuates and the utility company explained that for October, the FTC “has increased by 19.8 per cent due to continued volatility in international fuel markets and higher fuel-related electricity generation costs”.
“The increased FCA for October is expected to raise the average Light & Power residential customer’s electricity bill by approximately 13 per cent, equivalent to about $22,” BLPC said.
“If BLPC’s approved smoothing mechanism was not applied, the FCA for the current period would be higher. In other words, the full cost of fuel utilised in September is not being passed on to the customer at this time. Actual impacts will vary depending on individual electricity consumption.”
The company also said it “continues to manage fuel cost volatility through a combination of fuel risk management, operational efficiency and regulatory mechanisms designed to moderate customer impacts”.
“While fuel prices remain largely driven by international market conditions, the company actively uses the FCA smoothing mechanism to help reduce significant month-to-month fluctuations by spreading cost impacts over time,” it explained.
“At the operational level, BLPC carefully plans and executes maintenance activities to maintain the availability and reliability of generating units. This approach helps limit reliance on higher-cost generation and supports more efficient system operation.
“The company also continuously optimises the dispatch of its generating fleet, prioritising the most cost-effective available units while maintaining the safety and reliability of electricity supply,” BLPC said.
“By maximising efficiency in generation and fuel use, BLPC works to contain overall production costs within the constraints of system demand and operational requirements.”
Cushion effects
It noted that “together, these measures help cushion the effects of fuel market volatility, support reliable service to customers and ensure electricity is produced as efficiently and cost-effectively as possible”.
In an effort to shield Barbadians from higher electricity bills caused by increased oil prices resulting from the war in Iran, Minister of Finance Ryan Straughn announced in March that the Barbados National Energy Company Limited (BNECL) was engaged in fuel hedging for the purchase of heavy fuel oil used by the electricity company.
This locks in the cost of a barrel of oil at a specific price for a period of time and hence negates the impact of higher oil prices. Straughn said last month that the last BNECL fuel hedge was US$78 per barrel of oil and that was expected to provide sufficient heavy fuel oil until “the end of November.
BLPC explained, however, that “while the price of heavy fuel oil remains locked in through Government’s hedging arrangements, aviation fuel continues to be affected by international market fluctuations”.
“The key distinction is that heavy fuel oil and aviation jet fuel are not subject to the same pricing approach. Heavy fuel oil, which is used in electricity generation, is covered by Government’s hedging arrangement, whereas aviation jet fuel is not,” BLPC said.
“Based on fuel price movements over the past six months, heavy fuel oil prices would have been, on average, approximately five per cent higher had a fixed-price arrangement not been put in place. By comparison, aviation jet fuel prices increased by between 23 per cent and 94 per cent over the same period.”
The company also noted that aviation jet fuel “does not have a fixed price arrangement and therefore its costs are more immediately affected by market price movements. As a result, aviation jet fuel experienced significantly larger price increases than heavy fuel oil during the period”.
Explaining how the FCA worked, BLPC said this “reflects the actual cost of fuel used to generate electricity, as well as the cost of renewable energy purchased from customers [and] Light & Power does not add any mark-up to this pass through charge”.
BLPC is again encouraging its customers to conserve energy but shared that, at this time, it “has not observed any material change in customers’ overall electricity consumption that would indicate widespread moderation in usage or adoption of energy-saving measures”. (SC)