Belco customers were spared some of the pain of sky-high oil prices on their electricity bills last year because the power company deferred collection of some of the fuel adjustment charge.

The revelation came in Belco's 2008 annual report, which said the fuel adjustment charge, which is based on kilowatt consumption and is used to recover the cost of fuel, was more than 40 percent of the monthly electricity bill inSeptember 2008.

But the utilities company added that it had since voluntarily deferred recovery of the surcharge to avoid further peaks in the fuel adjustment rate after recognising the effect the high cost of fuel was having on its customers.

"Unfortunately, due to Bermuda's small size and geographic isolation, there is little or no flexibility in the timing of fuel purchases and the cost, but we are continually reviewing purchase strategies in an effort to offset price volatility," Michael Collier, chairman of Belco, said in his letter to shareholders.

The statement did not say how much was deferred, or until when.Belco's consolidated net earnings for the year rose by five percent to $21.4 million from $20.4 million in 2007, while earnings per share also increased 4.55 percent to $2.07, although the market price per share was down from $21 in 2007 to $18 at the end of last year.

Mr. Collier said the company had been striving to initiate renewable energy products last year, including its new subsidiary PureNERGY Renewables Ltd., which specialises in customised, small-scale renewables design and installations and was officially launched in May 2008, followed inSeptember by an invitation of local and international proposals for large-scale renewables projects, ranging from waste-to-energy and photovoltaic to wind and tidal energy provision, dependent on finding suitable sites, sale or leasing agreements, technical studies and permits.

However, he admitted that the weakening economy and ever-changing regulatory environment had influenced the future of its capital investment programme, with the planning application for the 20-year expansion and rebuilding of the Pembroke Central Plant site, which would cost $500 million built over eight phases and was submitted in November 2007, still under consideration by the planning department.

He said the first phase of the plan had been postponed for 18 months to consider alternatives to the development of the Central Plant site and applied to Government for approval of phase two instead - the implementation of 13.5 megawatts of gas turbine plant worth $18.7 million for emergency back-up and peak load operations by 2010 to meet peak demand through 2013.

"We are diversifying our energy portfolio to position our group of companies to meet renewable energy targets, reduce our dependency on fossil fuel and find ways to integrate all aspects of future infrastructure," said Mr. Collier.*

"Expanding our focus within the strata of our core strengths allows us to provide added expertise to our community, greater opportunities for our people and added value for our shareholders."

Mr. Collier pointed out that Bermuda had approximately 15 major, multi-million-dollar development projects under consideration in February 2008, but a year later, due to the global economic meltdown and its impact on the economy, it was questionable whether all of them would go ahead.

However, he reckons Government was confident that some of the proposed developments would come to fruition, which would offer growth opportunities for Belco, such as combined heat and power facilities with by-products of water or steam and alternative forms of energy.

"As we look to the likelihood of competition on the generation front and its associated uncertainties, we are considering changes to our business model to maximise non-regulated aspects of our businesses and to seize new opportunities," he said.

"New regulation will likely favour renewable energy and carbon reduction technologies. However, should we need to invest in traditional plant to ensure reliability of electricity supply for Bermuda, we will seek financial and environmental regulatory assurances before proceeding.

"On many fronts, 2009 will be a challenging year. In anticipation of the potential issues ahead, we will position our subsidiaries to optimise success with an enhanced focus on fiscal discipline, and we will continue to invest only when the expected associated returns are commensurate with the level of risk."