Lower oil prices begin to affect electricity bills

Cayman Islands residents should begin to see a significant drop in their monthly electricity bills from March as the dual impact of falling diesel prices and a duty cut takes effect.

The fuel surcharge on household bills has already started to come down, according to the Electricity Regulatory Authority.

The full impact of falling oil prices, which plummeted by half in the latter half of 2014, bottoming out at just over $43 a barrel in late January, will not be felt until next month.

The Caribbean Utilities Company is billed for the diesel it uses two months in arrears. Thus, January’s electricity bills reflect the oil prices for November.

January’s record low global oil prices won’t be passed on to Cayman consumers until March. Similarly, a duty cut of 25 cents per gallon, scheduled to take effect in January of this year, won’t impact bills until March.

The duty cut, announced at the last government budget, should lead to a reduction of around 4 percent, or $20 on a bill of $500.

Charles Farrington, managing director of the Electricity Regulatory Authority, said, “There has already been some decrease in the fuel factor – that has been coming down since October.

“The world oil price bottomed in January. Combined with the duty cut, the March bills should be substantially lower. I would think if customers haven’t already noticed their bills coming down, they will do by next month.”

The combined fuel and duty cost accounts for roughly two-thirds of the average household electricity bill.

Mr. Farrington cautioned that there has been no change in the base price of electricity, which accounts for the other third of the bill.

World oil prices have begun to rebound slightly since the January low and were up to $52 a barrel this week, still significantly lower than in the latter part of 2014.

Mr. Farrington cautioned against unrealistic expectations by consumers.

“Your bills are not going to be cut in half, but you will see reductions,” he said.

CUC’s diesel pricing is based on Platt’s Gulf Coast pricing for Ultra Low Sulphur Diesel, which moves roughly in sync with the price of oil.

A CUC spokeswoman said, “Fuel prices have been on the decline, and this benefit is being passed on to our customers already. However, with the two-month time lag on the pass through, the impact will be more noticeable in the next few months.”