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.”
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.