Taking some heat over the rising cost of electricity, Cayman Islands Premier McKeeva Bush said this week it was unfair for residents to blame the ruling government for high energy bills.
Mr. Bush told a group of more than 200 people gathered at a public meeting Tuesday night in George Town that a massive recent increase in residential electric bills could not simply be blamed on his government’s decision to raise import duties on fuel by 25 cents per gallon.
“Nobody can convince me that a 25 cent increase on diesel is causing your bill to be doubled and in some instances more than your mortgage,” Mr. Bush said to the crowd at Mary Miller Hall. “Nobody can convince me that.”
A private members’ motion debated in the Legislative Assembly last week asked government to consider reducing import duties on both fuel and gasoline to 50 cents per gallon. The motion, brought by North Side MLA Ezzard Miller, was defeated.
“When Mr. Miller and the opposition gets up and talks that it’s government’s fault, they would love for you to believe that,” Mr. Bush said. “They’re bringing motions that will rile people up.”
Premier Bush said he wanted to have an outside audit done on Caribbean Utilities Company to see “what the true cost is and where the cost comes from”. He said he wished to get a company from the US or Canada to perform the audit.
“These are the questions that must be answered,” he said.
CUC’s 2010 annual report, the most recent year for which data is available, showed significant increases – about US$20 million each overall – in the company’s fuel factor revenues and operating expenses between 2009 and last year.
“Fuel factor revenues increased due to an increase in the cost of fuel,” the 2010 annual report read.
According to CUC, the average fuel cost charge rate per kilowatt hour in 2010 was $0.20, an 18 per cent increase from the $0.17 per kilowatt hour rate charged in 2009.
“CUC passes through 100 per cent of fuel costs without mark up to consumers on a two-month lag basis,” the 2010 report read.
The company’s average price per imperial gallon of fuel for 2010 increased to $3.45 per gallon compared to $2.77 per gallon the year before. Twenty-five cents of that 78 cent increase – a little less than a third – was due to the increase in government duty, CUC said in its financial statements.
According to earnings statements produced by CUC for the second quarter of this year, the most recent date for which those were available, the utility provider stated the economic downturn in Cayman had “negatively affected” energy sales.
Electricity sales for the second quarter (April through June) of 2011 totalled 144.9 kilowatt hours, a decrease of about three percent from the same quarter of 2011.
“The impact of recent high diesel fuel prices on electricity rates has exacerbated the situation and remains of concern for CUC,” said Richard Hew, company president. “In the short term, we are advising customers to conserve energy and are providing assistance through energy conservation education.”
Mr. Hew also said CUC had received approval to hedge fuel up to 40 per cent of its annual fuel requirements. Hedging fuel is a strategy that involves buying a certain quantity of fuel to protect against market fluctuations in oil prices. Although power usage decreased in the most recent quarter, total CUC customers as of June 2011 had increased.
“Despite increases in overall customer numbers, average monthly kilowatt customer consumption for the residential and commercial categories has declined for the first half of 2011,” according to CUC’s second quarter 2011 report.
Mr. Bush has proposed an additional annual fee of $1,500 for certain hedge fund ‘master funds’ which would be used to offset the rising costs of fuel.
However, the Cayman Islands Monetary Authority had not released a timetable for the implementation for new regulations governing the fee and no legislation has been brought before the assembly to approve it.
The premier was quick to point out his belief that CUC is a top-notch electricity distribution service, despite his call for the audit.
“Perhaps we got one of the best services in the region in Caribbean Utilities, but a factor in that is that we pay dearly for it,” he said. “We are happy that we have … such a company here. We know that world energy costs are high.”