The average household is paying almost a fifth more for its electricity than it was a year ago. And the bad news is that BELCO bills will climb even more steeply this summer, with a further 10 per cent price rise likely by the time air-conditioning units are operating in full.
The spiralling cost of oil on the world market has already pushed the average BELCO bill from around $230 in May 2007, to more than $270 in May this year. However, the latest and most severe spike in oil prices - which pushed the price of a barrel to an unprecedented $135 - will not be felt in Bermuda until later in the year, according to experts.
'Never seen anything like it'
Andrew Parsons, head of finance at BELCO, said yesterday that the company's generators are still burning oil that was bought at around $101 dollars a barrel. The next shipment, which will fire the power station from the beginning of July, will cost the company between $115 and $121.
Mr. Parsons said of his 18-year career at BELCO: "I've not seen anything like it during my tenure here in terms of [oil prices] jumping that quickly. They have jumped 20 dollars in the past month, which is absolutely extraordinary. We have not seen the full extent of that jump. We normally have a forward purchase inventory [of oil] in hand. There is about a three-month lag or delay [behind world oil prices]. April's inventory will run out towards the end of June, early July, and then we will start on the next shipment. Unfortunately for householders, summer tends to be their peak usage, and that's also when we will see the full extent of it [price rises]."
BELCO statistics show that the average household uses 718 kilowatts of energy per month. On top of a flat $20 meter charge (up from $13 last year) BELCO charges households a base rate of around 22c for every kilowatt used. On top of the base rate, it charges a "fuel adjustment rate", which fluctuates to take account of world oil prices. The fuel adjustment rate has traditionally been a small fraction of the overall bill, but this year has begun to catch up with the base rate.
Climbing costs
Throughout the first half of 2006, and the first half of 2007, the fuel adjustment rate hovered around 7.5c. However, it climbed above 10c at the end of last year and has now climbed to 13c. Mr. Parsons predicted that the fuel adjustment rate will climb to 15c or 16c during coming months. That could push the average bill towards the $300 mark - even before taking into account the extra energy used to power air-conditioning and pool pumps during the summer.
Growing demand, dwindling stocks and speculating by traders have helped push the cost of oil to its current peak. In recent days, several influential analysts have said that the cost of a barrel will not plateau until it passes $150 and even $200. Mr. Parsons told a recent BELCO AGM that at $150 a barrel the fuel adjustment rate would most likely hit 22c - matching the base rate currently charged by the company.
Last week, the Bermuda Sun reported that spiralling oil prices have pushed up the cost of some staple foods by up to 40 per cent. The island's food stores and wholesalers - who face greatly increased importation costs - warned Bermudians to expect even bigger bills at checkouts in coming months.
Peter Carey, of The Family Centre charity, said that price hikes will put a further squeeze on hundreds of Bermudian families who are already struggling to cope. He said: "Housing is the big essential - everything else revolves around housing. Utility bills are one extension of housing, and if people can't afford them then it is the most vulnerable of all - children - who will suffer. Everything is getting more expensive. For someone who is already struggling, who's to say what straw breaks the camel's back?"
Reader Comments
Posted: Sunday, June 15, 2008
Comment by:
Rex Atlas
When I was in Bermuda two years ago BELCO had a deal with Current to Current Bermuda for an underwater turbine to produce 20Mb of electricity. My understanding was that the system was to be operational by the end of 2007. What has happened and why no mention of the deal in the article?
Posted: Sunday, June 15, 2008
Comment by:
Rex Atlas
When I was in Bermuda two years ago BELCO had a deal with Current to Current Bermuda for an underwater turbine to produce 20Mb of electricity. My understanding was that the system was to be operational by the end of 2007. What has happened and why no mention of the deal in the article?
Posted: Wednesday, May 28, 2008
Comment by:
ellie
I have thought for years that Belco should change its base rate so that the fuel adjustment rate would be more accurately shown to the consumer.
