Caribbean Utilities Company announced on Tuesday a continuing decline in electricity prices – and consumer bills – as the price of oil falls on international markets. The utility company predicted further declines as government lowers fuel duties.
Residential consumers using 1,000 kWh per month saw bills decrease by approximately $85 in the fourth quarter of 2015 compared with the same period in 2014, the company said in a statement.
Ninety-three percent of CUC’s 23,874 residential customers have bills less than $500, according to the power company.
Declining prices were led by a 32 percent drop in the international cost of an imperial gallon of diesel fuel, from $3.16 in December 2014 to $2.15 at the end of December 2015, CUC said.
That drop translated to a fuel cost reduction of 8 cents per kilowatt hour for consumers, from 23 cents in December 2014 to 15 cents in December 2015.
Prices have fallen further since December, reducing fuel costs to 13 cents per kWh for consumers, and bringing the overall cost of a kWh to approximately 26 cents, contrasting with kWh prices as high as 33 cents in the past.
The cost of electricity varies from month to month and comprises three chief elements: CUC’s “base rate,” currently pegged at 10 cents per kWh, representing the cost to produce, transmit and sell power; fuel costs, now at 13 cents per kWh, representing oil’s international market price, which is passed to consumers without a markup; and fuel duty, set at approximately 3 cents per kWh, a consequence of government per-gallon charges to CUC on imports of fuel.
Duty fees are also passed to consumers without a markup, and have ranged from a high of 75 cents per gallon to the current 25 cents per gallon, reached on Jan. 1 this year. The latest cuts, however, will not appear on consumer bills until March. “We are pleased that customers are benefitting from the current lower fuel prices,” said CUC president and CEO Richard Hew.
He said the company would “continue to push towards getting alternative energy sources to be connected to the grid and with improving our overall plant fuel efficiency.”
A new 5 megawatt, $18 million solar farm is scheduled to open in Bodden Town in October.
Meanwhile, CUC’s Customer Owned Renewable Energy program, in which individuals generate their own solar energy on rooftop systems and then sell it to the utility, buying it back as required, is nearing its 4 MW cap. Mr. Hew also pointed to CUC’s $85 million installation of two 18.5 MW German-made diesel generators, scheduled for June, and a 2.7 MW heat-recovery system, yielding additional capacity of 39.7 MW, making the new engines “the most fuel-efficient diesel generators in the Caribbean.”
CUC overseer, the Electricity Regulatory Authority, announced approval on Oct. 30 for Cayman’s first utility-scale solar project and first corporate non-CUC power supplier. Entropy Cayman Solar Ltd. will build a 20-acre solar array east of Bodden Town, expected to be commissioned in October.
The price of a solar-generated kWh will be approximately 17 cents, nearly 35 percent below current diesel-generated prices, although market forecasts predict a further decline in oil prices.
Charles Farrington, ERA managing director, said that due to the drop in oil prices, “the fuel factor could well fall to 10 cents in the coming months. “Compare this to the … 17 cents for the first year [of] solar kWhs that CUC will buy from Entropy.”
Pointing to the volatility of Middle East oil, however, he said costs of solar-generated electricity during the 25-year term of the Entropy agreement are likely to prove cheaper on average “because it is still expected that the price of diesel will rise much faster,” especially if world leaders combat climate change and rising temperatures with a carbon tax, he added.
“Any reduction in price for electricity is good,” said Jim Knapp, managing director of locally based Endless Energy Cayman. “Unfortunately, this is only a temporary reduction and can’t be counted on as long term.”
Declining oil prices will not last, he said.
“Invariably, it will only take a small destabilization in the Middle East to skyrocket the price of oil again to levels that will be unsustainable. Our entire infrastructures for water, transportation, cooling and electricity are all currently dependent upon oil,” said Mr. Knapp, a former vice chairman of the Cayman Renewable Energy Association.