Barbadians would be facing an even steeper increase in electricity bills had Government not stepped in to absorb part of the soaring fuel costs being driven by instability in global energy markets.
This was stressed by Minister of Energy, Business Development and Commerce Kerrie Symmonds yesterday as consumers prepare for another jump in the fuel clause adjustment (FCA) on their Barbados Light & Power (BL&P) bills. It has moved from 35.8256 cents per kilowatt hour (kWh) in April to 39.75 cents this month, according to a BL&P notice published in the last SATURDAY SUN.
The FCA represents the price the utility pays for global fossil fuel to generate electricity, and renewable energy purchase costs.
The increase means that a customer using 250 kWh per month will see the bill rise from $156.05 to $166.66.
However, Symmonds maintained that the hike could have been far worse without Government’s intervention through its fuel hedging and subsidy programme.
Half off table
“Were it not for the Government taking one half of it off of the table, the April electricity bill for the average household would have risen by an estimated $32 a month above what it would have been at the time of the Budget in March,” he said.
“Government would have absorbed one-half of the difference. So, the fuel cost adjustment for the average householder would have gone up by $16, but were it not for the Government taking one half of it off of the table.”
He said Government’s intervention stemmed from measures announced during the last Budget, where they moved to hedge international fuel prices while also cushioning consumers from the full impact of higher oil costs.
“You will recall that in the Budget of the 16th of March, the Minister of Finance had announced that not only were we going into the international market to hedge on the prices at which we imported fuel into Barbados. That is the fuel that obviously powers our electricity generation.
“We had locked it in at $92 per barrel. However, in addition to that, what we also announced was that with effect from the first of April, the Government will absorb 50 per cent of the increase in the fuel clause adjustment on the electricity bills,” he explained. The minister added that Government’s strategy was aimed at preventing consumers from being overwhelmed by a sudden spike in utility costs. “As the Prime Minister likes to say, a steep increase at once is going to be disruptive, and a slower rate in the increase is bearable. It might be uncomfortable but it is for the most part bearable, and that is where we’re trying to keep it, given the circumstances we now find ourselves in,” he noted.
Uncertainty
Symmonds cautioned that Barbados continued to face uncertainty because of tensions surrounding the Strait of Hormuz and the wider Middle East conflict, which have been rattling international oil markets and threatening global supply chains.
“The tensions in the Gulf create tremendous uncertainty for virtually every country around the world,” he said.
He pointed to warnings from international agencies and corporations, including concerns over airline disruptions and fertiliser shortages that could eventually affect food prices worldwide.
“The World Food Organisation has warned about the likelihood that there will be severe shortages in fertiliser, and fertiliser production obviously drives agricultural industry and agricultural production across the world. Therefore, there is the likelihood of a knock-on food shortage and possible crisis.”
Symmonds said the reality was that Barbados could not avoid the fallout from international economic shocks.
“It is almost impossible for us to believe that we can continue to live in splendid isolation and not be impacted in terms of cost of living, and in terms of access to certain things that we take for granted and might even be essential as long as this continues,” he said.
Government’s current fuel hedge arrangement covers a three-month window, with about $8 million committed towards cushioning the impact of volatile oil prices. Symmonds indicated that authorities will later determine whether further intervention will be necessary depending on developments internationally.
(CLM)
