Commission ‘dropped ball’ on fuel hedging, says consumer advocate

The Fair Trading Commission (FTC) has missed several opportunities to help provide an ease to Barbadians from high fuel costs, and instead will cause an already struggling population to be dealt a double blow.

This assessment has come from renewable energy advocate Hallam Hope, who has been in support of a fuel hedging mechanism from as far back as 2016 when the Barbados Light & Power Company Ltd (BLPC) made one of those applications to the regulator.

His comments came in light of the BLPC’s recent announcement that it was seeking an 11.9 per cent rate increase, which would see households paying between five and 20 per cent more on their monthly electricity bills.

Businesses could end up paying between $300 and $4,000 more depending on their electricity usage.

Hope told Barbados TODAY while he agreed this was a “very bad time” to ask people to pay more for any utility. He believed if a decision was made on the BLPC fuel hedging programme an application for a rate increase would not have been necessary.

“I support the hedging because I did my research,” said Hope.

“I did my research and the research showed that it made sense to give the Light & Power the permission to hedge. So two things would have happened – assuming that everything went well, assuming that they took advantage of the lower prices – it would have made Light & Power’s operations much more efficient and it would have led to the passing on of benefits to the consumers.

“Instead, now you have a situation where Light and Power is coming and saying ‘we know things real tough with the COVID but we need a rate increase’,” he explained.

BLPC officials have defended the company’s decision for an increase, noting that the last adjustment to electricity rates was made in 2010.

Moreover, Director of Customer Solutions Kim Griffith-Tang How said that several other options were considered over the years but those measures were either not approved or are still before the regulator for review.

One of those measures was the fuel hedging, which was applied for on three different occasions, the last time being November 2020. Last year oil prices were averaging just over US$45 per barrel.

The fuel hedging mechanism would help the company to manage risks and reduce exposure to volatility and increases in fuel prices. It would also see customers either paying slightly more for electricity in some months or benefiting from lower oil prices.

With oil prices now reaching just over US$85 per barrel, Hope explained that Barbadians will not escape paying more.

“The Fair Trading Commission really missed the boat . . . Clearly, long before the price reached US$85 recently, Light & Power would have had a chance to hedge and benefit from that hedging process because the price was so much lower,” Hope said.

“You have a situation now that I believe could have possibly been avoided. For example, if they had given the Light and Power permission to forge ahead in 2016 or even in the more recent times, to me Light and Power would have taken advantage of the lower prices and it would have been extremely difficult to come back and say ‘we benefiting from the lower prices because we are hedging but we still want a price increase’,” said Hope.

“So the consumer is getting a double whammy. The consumer is going to be paying more through the pump because the Government cannot subsidize it and secondly, you are going to now have a rate increase which is more likely than not. I wouldn’t say they deserve it. I don’t believe they should be given a rate increase at this time but we have a very conservative Fair Trading Commission and they might very well give them a rate increase even if not what they are asking for,” explained Hope.

He said he was not convinced the FTC was keeping up with the changing times, insisting that while he understood some decisions would take a longer time than others, the consumer protection body did not seem to be looking out for the consumer and the economy but was instead “focusing on the legal and the data”. marlonmadden@barbadostoday.bb