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EDITORIAL – Rising cost of power

luigimarshall, [email protected]

EDITORIAL – Rising cost of power

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Ever since the oil crisis in the early 1970s, fuel has been a major cost for consumers of electricity, oil being an essential ingredient in the generation of the energy and recoverable from said consumer as part of the monthly bill.
What was a ticklish issue became a pronounced irritant when the fuel charge component of the bill was shown as a separate item, and the consumer was asked to pay his portion of the fuel charge, based on the number of kilowatt hours used by the consumer.
Within recent months, this issue has become a major bone of contention on the national airwaves and in the print media, with Barbadian consumers arguing that the cost of electricity is simply too high.
The debate has been further inflamed by the allegation that as the international price of oil has been falling, the local price for fuel has been increasing, and all kinds of prescriptions are being touted as the solution to this problem; not the least of which is that the Government should own or have a major stake in the Barbados Light & Power Company (BL&P).
Now, it is clear that the cost of electricity will always be a front burner issue, for it has implications for our economy and the price of doing business, and for day-to-day living. Keeping fuel costs as low as possible must be in everyone’s interest.
But there is a political divide on whether the Government should once again subsidize the cost of electricity to the consumer. It would be difficult to see the subsidy being reintroduced at the moment, given the fiscal position of the country, but perhaps there could be some fine-tuning of the taxes on fuel.
Since Independence, Barbados has enjoyed a rapid acceleration in the standard of living, and a large part of that has been due to the services provided by reliable public utility companies, privately owned and publicly regulated, firstly by the Public Utilities Board, and more recently by the Fair Trading Commission (FTC).
Public scrutiny is the price that the BL&P pays for the monopolistic position it occupies – represented by the hearings of the FTC, where members of the public to take part, to ensure that fair rates are charged by the company.
Lately, the debate has centred on the cost at which the Barbados National Oil Company (BNOC), the sole importer of fuel, is purchasing petroleum for sale to the BL&P. It has been claimed in Parliament that the BNOC appears to be “locked” into pricing arrangements that are impacting adversely on the fuel charge element of electricity bills.
The BNOC has responded in a paid advertisement pointing out that it won the right to supply BL&P with heavy oil fuel on the basis of competitive tender, and that it is reasonable to assume that BNOC bid was the best and possibly lowest tender. It also disclosed that in an effort to mitigate prices, it negotiated call options with financial institutions, though at no time did it commit to purchasing the product at a price above the market price.
These disclosures throw some light on the complex responsibility which the BNOC exercises in maintaining the supply of fuel in a volatile international environment, and obviously some pricing factors are beyond its control.
Yet amidst customer concern, a clearer explanation of the arrangements made by BNOC for the purchase of fuels may need to be given, if only to clarify matters for the public, especially since that pricing is a crucial part of the cost of supplying electricity, and given that the BL&P is a utility company regulated by the Fair Trading Commission.