CUC announced that it will push back a 6.6% price increase until next year.
The company would have been allowed to increase its base rate from 1 June under the Rate Cap Adjustment Mechanism that is part of the electricity provider’s licence.
However, due to the COVID-19 pandemic, the company and utility regulator OfReg have agreed to defer the rate increase and recovery of related lost revenues until January 2021, CUC said in a press release.
Richard Hew, president and CEO of CUC, said, “CUC is well aware that, if effected in accordance with our licences, an increase of base rates in June may have been difficult for many of our customers to bear, and therefore the company made the submission to OfReg to delay the implementation date.”
The company noted that customer electricity bills for July, distributed in early August, saw a 37% reduction in the fuel-cost charge since the beginning of the year.
This equates to $48.60 or 20% less per month for an average residential consumption of 1,000 kilowatt hours.
The higher price will now take effect in January and be billed in February 2021.
In a statement, OfReg said it “does not take lightly its decision to authorise CUC to raise its base rates but we are bound by law and CUC’s T&D licence to issue a decision now”.
The regulator said, “The impact of the price hike will be softened by deferring the increase until January 2021 and customers will see a marginal increase only in the energy portion of their electricity bill come February 2021.”
The average residential consumer, who consumes 1000 kWh/month, should expect to see an average increase of $2.10 on their monthly bills effective January 2021 as a result of the deferral, OfReg added. But this may vary slightly depending on any reduction in the base rate increase through the end of the year.
CUC’s base-rate prices are calculated based on the Rate Cap Adjustment Mechanism, a formula that includes inflation increases in Cayman and the US, after eliminating the price changes for food and fuel.
Next year’s 6.6% increase will reflect the weighted average of 60% of the change in the Cayman Islands Consumer Price Index and 40% of the change in the US Consumer Price Index, net of food and fuel, for the 2019 calendar year.
The utility company had reported earlier that the COVID-19 lockdown measures continue to have a significant impact on Cayman’s economy and that the related decline in energy demand has affected CUC’s financial performance.
In the second quarter of this year electricity sales were 4% lower and earnings were down 43%, or $3.4 million, compared to the same period in 2019. CUC said at the same time it had invested US$30 million into its grid infrastructure during the first six months of the year.
Hew said CUC’s ability to absorb lost revenues while facing increasing costs speaks to the financial stability of the company at the outset of this pandemic.
“The ability to recover revenues in the future is necessary to maintain that financial stability and to meet the company’s ongoing obligations to invest in infrastructure and provide a safe, reliable and sustainable electricity service,” he added.
CUC said it will continue to assist customers with reducing their bills through energy conservation and by offering extended payment-plan options to those in need until the end of next month.
For more information about the terms of the CUC T&D Licence, the Rate Cap Adjustment Mechanism, the Energy Smart programme or the Cayman Islands Utility Regulation and Competition Office (OfReg), go to the CUC or OfReg websites at www.cuc-cayman.com or www.ofreg.ky.