Despite stepping in to prevent a rise in the fuel charge for electricity consumers in March and promising to “brainstorm” ways to avoid it altogether, Prime Minister Philip Davis told the nation yesterday that the fuel charge will nearly double for smaller consumers in less than a year; larger consumers will see their fuel charge nearly triple.
It was a major reversal of policy for the Davis administration, which has been subsidizing Bahamas Power and Light’s (BPL) fuel consumption for months as the government gave opaque answers when questioned about the continuation of a fuel hedging strategy left in place by the former administration amid rising fuel prices.
The first of the incremental increases, which Davis said can’t be postponed any longer, has already happened.
BPL and government officials admitted yesterday that the government has paid “tens of millions” to stave off the fuel increase but that position is no longer sustainable.
To recover those costs, consumers will pay increased fuel charges for the next year, with the prime minister labeling the increases as “short-term”.
“After implementing price increases in stages, over the next four quarters, BPL calculates that the fuel charge will begin to come down,” the prime minister said.
The current fuel charge is 10.5 cents per kilowatt hour (kWh). As of October 1, it increased to 12.5 cents per kWh for consumers using less than 800 kWh and 14.8 cents for consumers using more than 800 kWh.
It will increase to 14.5 cents on December 1 for consumers using less than 800 kWh and 19.1 cents for consumers using more than 800 kWh.
The fuel charge will stand at 16.5 cents for usage under 800 kWh and 23.3 cents for usage over 800 kWh from March 1, 2023 to May 21, 2023.
It will peak at 18.5 cents and 27.6 cents from June 1, 2023 to August 31, 2023.
After that, it will start to decline, according to officials.
It will decrease to 25 cents for consumers using more than 800 kWh between September 1, 2023 and November 30, 2023.
It will then drop to 17 cents for usage under 800 kWh and 18 cents for usage over 800 kWh from December 1, 2023 to February 28, 2024.
Davis said the impact will be minimal for most of BPL’s consumers.
“For a large majority of BPL customers, who consume less than 800 kWh, the fuel charge is increasing by two cents per kWh, which will result in an increase this quarter of less than $20 per month,” he said during a press conference announcing the increase.
“If your current monthly bill is $182 or less, you fall in this category. For those who consume more than 800 kWh, the increase will be 4.3 cents per kWh.
“I want to note here that we will raise the VAT (value-added tax) ceiling from $300 to $400. So going forward, no VAT will be due on any electricity bills under $400, which will take some of the sting out of the 4.3 cent increase for a great many BPL consumers subject to the larger increase.”
Approximately 47,500 of BPL’s 110,000 customers use less than 800 kWh, according to BPL CEO Shevonn Cambridge.
In a statement yesterday, BPL pointed to the global increase in fuel prices over the last year.
It said this increase made it “imperative” for the company to increase its fuel charges, adding that the fuel used to generate electricity now costs about 100 percent more than it did a year ago.
“Notwithstanding the global trends, BPL has been able to maintain the fuel charge at 10.5 cents per kWh since the implementation of its fuel hedging program in 2020,” the power company said.
“However, as the hedged volumes are declining under the current hedging strategy and there is no sign of immediate relief in the market, BPL must now move to align its fuel charge with the current market demands.”
Back in February, BPL announced a fuel charge increase from 10.5 cents per kWh to 13.7 cents but the statement was recalled after the government intervened.
The announcement coincided with steadily increasing food prices and gas prices, which were caused by Russia’s war on Ukraine.
When asked yesterday if the seven-month delay of the hike made the situation worse, Cambridge said, “Once you delay, you accumulate. So there was an accumulation of arrears which we’re now seeking to recover through the glide path strategy.”
Financial Secretary Simon Wilson said the government spent “a substantial amount” in BPL subsidies.
“I guess in the tens of millions of dollars,” he said. “That’s the best way to describe it and obviously a lot of that money that was spent will be recovered over a period of time.”