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Belco fuel adjustment rate explained

Belco does not profit from the Fuel Adjustment Rate, and nothing parent company Ascendant Group is doing affects the price of electricity in Bermuda. This from Ascendant president and CEO Walt Higgins. The Fuel Adjustment Rate applies to the price Belco paid above a Commission set $30 per barrel base rate. So, if Belco paid $130 per barrel $100 would be the amount upon which the Fuel Adjustment Rate is set. The cost is collected on a per kilowatt hour usage basis. The cost of fuel for Belco is thus made up of: The actual cost of the fuel purchased on the world market, refinery, plus transport, terminal processing fees and Bermuda Customs duty of $15.10 per barrel, which provides over $15 million in Government revenue, annually. Commenting on Ascendant’s recent steps to diversify, including formations and acquisitions, he said: “Nothing Ascendant is doing is affecting the price of electricty. “What we are doing is taking shareholder money and investing it in other business opportunities to offset the fact Belco is in a fourth year of seeing diminishing sales.” Belco saw electricity sales decrease for a third year in 2012, on fewer customers and reduced consumption; at the end of 2012 Belco had 35,770 customers compared to 35,862 in 2011. Kilowatt hours have declined from a high of 656.1 million in 2009, to 606.3 million in 2012., a drop of 49.8 million, or 7.6 percent. Ascendant noted in its annual report that fuel adjustment revenues increased $12.7 million to $104.1 million from $91.5 million in 2011, primarily due to a 12.6 percent increase in the average price of fuel, which for 2012 was approximately $135 per barrel as compared to $119.88 a barrel in 2011. The remainder of the increase was due to a higher rate paid for more kWh purchased from the Government’s Tynes Bay waste-to-energy incinerator plant as well as drop in overall fuel effiiencies, as aging plant required more time of service for maintenance. Mr Higgins said there will always be a fuel adjustment rate, it will just get bigger or smaller, based on the true cost of oil. As Ascendant explained, Belco applies to the Energy Commission each month to set the monthly Fuel Adjustment Rate, which covers the cost of fuel purchased to supply electricity. The Energy Commission sets the rate based on the price Belco paid for the fuel shipment. The Fuel Adjustment Rate will vary from month-to-month, up and down, dependent upon the price Belco paid for the fuel. The Fuel Adjustment Rates so far this year have been: January 16.5 cents February 17.5 cents March 18 cents April 18 cents May 17 cents Mr HIggins said he welcomes meeting with Finance Minister Bob Richards who has accused Belco of charging too much for electricity and has urged it to give some of its profits back to customers by lowering prices. Mr Richards charged the company was using its “monopoly power” to grow its business and pay dividends to its shareholders, while cash-strapped consumers suffered from its high charges.