The Barbados Light & Power Company (BL&P) Ltd says Barbadians would now be paying less for electricity if the Fair Trading Commission (FTC) had not turned down its application for fuel hedging at the end of December.
BL&P’s Director of Customer Solutions Kim Griffith-Tang How made this assertion during a teleconference Thursday in which she said the power company felt justified in applying to the regulator to implement the system.
She explained that in March 2016 when the application was made to the FTC, oil prices were set US$37 per barrel. However, she reported today that since then, they had climbed to over US$50 a barrel, amounting to an increase of over 40 per cent in just a few months.
“Had we been able to lock in those lower prices, rather than resulting in higher electricity bills, our customers would currently be experiencing lower bills under the proposed hedging programme,” argued Giffith-Tang How.
The BL&P executive while singling out hoteliers, said hedging would have put customers in a better position generally to predict their bills from month to month.
“They would be able to know what their electricity bill on a monthly basis would look like, and on that basis be able to competitively price their hotel rooms and there are manufacturers, retails and other services that internationally could be more competitive if they had greater bill certainty,” she added.
However, she acknowledged that there was a chance that international oil prices may fall below the price at which BL&P locked in its fuel purchases.
“If this happens and the price falls, while our customers would still enjoy the security of having a predictable bill, they however would not be able to experience these lower prices,” she said.
“On the other hand, if oil prices increased above the price which was locked in, customers would have benefitted from not only a predictable bill but also lower monthly bills,” the BL&P spokeswoman added.
“We therefore felt it would have been prudent to lock in our fuel purchases at these lower prices because there was a higher probability of prices rising considerably as opposed to falling much lower in the future,” she stressed.
Last month the FTC announced that it had denied an application from the BL&P to apply the results and costs of fuel hedging to the Fuel Clause Adjustment, the mechanism designed to recover the cost of fuel used in the generation of electricity.
“Due to the risk associated with fuel hedging, the BL&P should not be allowed to pass the cost of hedging and associated gains or losses onto the consumers of Barbados,” the FTC had stated then in its release.
It said BL&P had not provided enough evidence to suggest that the Barbadian public was willing to pay for the reduced volatility in fuel prices after the power company had applied to the commission on March 29, 2016 for permission to implement a fuel hedging programme, which it said would reduce customers’ exposure to extreme fuel price movements and to reduce the risk of price increases to customers.
However, following consideration of BL&P’s case and submissions from five interveners, the FTC said it had determined that it could be too costly for consumers.
Pledging that BL&P would continue to look for “opportunities that can benefit customers”, Griffith-Tang How said the company would be engaging customers again and had not ruled out the possibility of another application, but she could not say how soon.
Other Caribbean countries with fuel hedging schemes include the Bahamas and St Lucia, which the company said provided those customers with greater bill certainty.
In the meantime, BL&P officials say there was no immediate intention of applying for any rate increases.