CUC: We pay highest fuel duty in region

Responding to Premier McKeeva Bush’s statement last week that he would seek an audit of the company’s finances, Caribbean Utilities Company released a detailed breakdown of where its customers’ money is spent.  

CUC’s lengthy response said its current import duty rate of 75 cents per imperial gallon of diesel fuel “is by far the highest in the [Caribbean] region” with the second-highest duty being 40 cents per gallon and with most countries paying fewer than 10 cents a gallon to government on imports. The Cayman Islands government last year raised import duties on both gas and diesel 
fuels 25 cents per gallon.  

However, records released by the power company also revealed import duty charged by the Cayman Islands government for fuel is a relatively small percentage of what customers pay for electricity. The largest chunk of the money you pay for power comes from the cost of the fuel itself, CUC officials said.  

“CUC’s present total per kilowatt hour charge to consumers is 35 cents … made up of the following components: 20 cents per kilowatt hour representing fuel costs, 4.5 cents per kilowatt hour representing government fuel duty and 10.5 cents per kilowatt hour [being] the base rate CUC has to cover all of its costs,” the company’s statement read.  

Caribbean Utilities purchases about 80 per cent of its fuel from Exxon Mobil and about 20 per cent from Chevron Texaco.  

The price in August for that No. 2 diesel fuel was about $3.03 per imperial gallon.  

Additional charges included $0.22 per gallon to cover shipping, port authority fees, storage and handling, and another $0.75 per gallon for government duty – totalling $4.00 for the “landed fuel price”.  

The company imports a more expensive, but also more environmentally friendly fuel than the heavy fuel oil used in several other Caribbean countries.  

“CUC believes that this fuel choice is the most suitable when balancing the economic and environmental impact of generating electricity,” the company said.  

Providing a breakdown of spending “per dollar” by CUC consumers, investors and lenders for 2010, the company said 43 cents out of each dollar was spent on fuel and oil, 13 cents went to pay off loans, 13 cents went for duty to government and licensing fees, 11 cents was paid for capital expenditures, 10 cents went for labour and material costs, nine cents was paid in dividends to shareholders and the last one cent was paid for insurance.  

“Grand Cayman is not alone in having to face the high cost of fuel,” the company’s statement read. “It is also negatively impacting small island systems across the Caribbean, the Pacific and the Mediterranean that 
rely mainly on diesel 
fuel.  

“Unlike the US and larger countries, the Cayman Islands … are not sufficient size to install large power plants, which can operate on coal, natural gas and nuclear fuel and which have significantly lower operating costs.”  

 

Government duty 

A separate statement released by CUC detailed how government duties on fuel have risen by approximately 150 per cent during the past two years.  

The company said prior to September 2009, the effective duty rate for diesel fuel was 30 cents per imperial gallon.  

That rate takes into account the roughly $6 million given to CUC in duty reductions by the previous government.  

“The present government abandoned the rebate programme, which restored the rate of duty to $0.50 per gallon,” the company stated.  

“In June 2010, the rate of duty was further increased by … $0.25 for a total of $0.75 per gallon. 

“CUC estimates that duty of $24 million will be collected by the government in 2011 on the fuel it uses to generate electricity.”  

During the public meeting last week in George Town where Mr. Bush announced his desire to audit CUC, the premier said a major increase in residential electric bills could not be blamed on his government’s decision to raise import duties.  

“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.”  

Opposition lawmakers argued the premier’s government had actually implemented a 45 cent increase in duty, with the elimination of the $6 million duty reduction programme.  

“The premier’s assertion that what we’re dealing with is a mere 25 cent increase in duty is quite untrue,” Opposition Leader Alden 
McLaughlin said. 

CUC graph

A chart provided by CUC that shows a “per dollar” breakdown in spending for CUC consumers, investors and lenders during 2010.
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7 COMMENTS

  1. A few layman queries:
    1. Actual charge on my bill is 0.23 for fuel and not 0.20 as stated.
    2. what is the difference between loans and capital expenditure?
    3. Say you received your CUC bill and it is 600.00 and kw used is say 1776. The actual charge is 0.34 not 0.35 as stated
    4. I am trying to find the relation between the cost per gal of diesel vs the charge out cost to the consumer who pays this indirectly: if my layman understanding is correct, 1 gal of diesel = 48.88 kwh. if my deduction is correct, we are paying indirectly 16.50 per gall for diesel converted to electricity. if CUC’s landed cost is 4.00, is it true we are paying 12.50 to generate 48.88 kw of electricity?

    My opinion is:
    1. Bring in competition and the electricty charge with be half the cost.
    2. By the way this increase duty was a ingenious tax measure to raise revenue by 24 million. Somehow i heard that figure being mentioned before as an operating surplus…wow… so they did know teh impact of the increase duty!
    4, make it mandatory to use solar panels on all new construction
    5. Buy diesel direct from the producers like venezuela, Trinidad
    6.

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  2. So what did our government do with the chicken feed they got from selling our utility company.. Given The mindset was’ if Cayman is to become a premiere financial industry we needed good telecommunications and reliable Electricity..So at our expense we pay for this massive infrastructure which tripled our monthly cost and we bite the same bullet as the profit making financial industry, which our fearless leader is unable or unwilling to tax. This same financial industry cry each day for more concessions and more foreign staff to serve them.. ENRON was a financial service product also.. Stick and stones are a mere remnants of a write off procedure when they pull up stakes.. CUC is doing what any profit making entity do. Stick it to you until you cant bare it no more.. Or what the market will bear.. So they pass the buck around and say see’ your government is sticking it to you not me.. And it this case I agree, we were stuck a long time ago when they took an essential national asset and privatized it.. We could have operated that same pie chart and took the Nine cents for investment in Solar energy.. Don’t sell our water company..

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  3. Blue,

    That would be at 100 percent thermal efficiency, which is not happening. The diesel generators at CUC are rated at like 25 percent efficient. So of that 48.88 kw only 25 percent or 12.22 kw is converted to electricity. So at 4.00 per gallon each kwh costs 0.33 for fuel.

    What they need to do is convert the wasted heat into additional electricity to raise overall efficiency. If efficiency was raised to 50 percent by way of heat recovery, that gallon of diesel would yield 24.44 kwhrs which would make the cost of each kwh 0.16.

    That would allow your bill to halve at the same usage and that would be progress.

    By the way some CHP ,combined heat and power, plants in the US have up to 85 percent efficiency so it can be done. Also google stirling engine, it generates electricity from heat.

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  4. Beenie, you gotta be kidding – 25% efficient!
    Did you also notice that their labour cost excluding materials is less than what they pay out in dividends…I got to invest in this company or maybe I may not be allowed. This might be an elite group.

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  5. As usual lets do a study to find out what we already know. We are taxed to death by import duties. Its the highest of the examples given. So cut to the chase Bush and come straight witht he people of Cayman.

    As for competition, are you joking me. Theres only 55K people in Cayman and do you think there is a line up for utility companies to move here. Get a grip man.

    This government and particularly the challenged man running it is looking for anything to make a scapegoat situation. Come up with a solution to these problems ans stop blaming everybody else.

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  6. Bubba.

    If competition was allowed I would bring new generation to the country. The margins available are so large it would be irresistible. Also if any competition was allowed CUC would be bankrupt just look at that interest bill! The debt to EBITDA ratio must be north of 15 times at these interest rates. Also what would happen to CUC bills if interest rates went up from the artificially low rates we now have?

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  7. Read my post on 10/14/2011 where government denies responsibility for the high CUC fees. I made mention to you that government was getting their piece of the CUC pie in fees. Was I right or wrong?

    The CUC high bills is serving the same purpose as the milllions of x-pats expensive work permits.

    RAKING IN MILLIONS OF DOLLARS FOR GOVERNMENT IN REVENUE ON THE BACKS OF ‘ THE POOR WORKING CLASS

    Its time to camp out in front of the LA Cayman’s Wall Street need to get the message that we are sick and tired. the us and All around the world people are protesting against CORRUPTION IN GOVERNMENT
    Cayman needs to do the same.

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