In the face of growing complaints from householders about huge increases in their monthly electricity bill, the Acting General Manager of the island’s sole power generating company, Clive Hosten has sought to explain the reasons behind the exorbitant amount being charged by the utility.
Hosten has appealed to electricity consumers to closely monitor their average usage per day in order to ensure their ability to pay for the service due to high fuel rates because of the demand on the international market as countries move to increase economic activities amidst the COVID-19 pandemic.
The General Manager of the Grenada Electricity Services Ltd. (GRENLEC) spoke to reporters during Wednesday’s post-Cabinet press briefing in St. George as he attempted to clear the air on the hike in fuel surcharge, which is the fee assessed by a carrier to account for variations in fuel costs and passed onto the consumer to protect the carrier from the volatility of fuel prices.
Some electricity users in Grenada have been reporting 100% increases in their monthly payments to Grenlec, while several others have been disconnected due to their inability to pay for the energy service.
According to Hosten, the state-owned company recorded “an overall 30% increase on energy bills between September 2020 and September 2021,” as reflected on the bills sent to consumers and attributed this to the unstable cost of fossil fuel on the world market, a price, which he said “fluctuates every day.”
He also cited “increased consumer consumption” as “a major contributing factor” due to the fact that more people are at home now due to the pandemic, especially students, most of whom are engaged in online learning.
He explained that the energy cost and the energy unit, a kilowatt-hour, otherwise known as a kWh “is a way to measure how much energy you’re using” in a household.
This, he said is made up of two (2) components, the non-fuel component, the cost of which “has remained the same since 2016,” and “takes care of all Grenlec administration, lines, power plant generation and our overheads,” and the fuel component, which is “a commodity that we (Grenlec) has no control of.”
“We have to adhere to world prices…and at the end of each month there is a fuel charge component, which is calculated, and this charge, per se, is passed onto customers…So, every month there is a change in the fuel component of the electricity price,” he added.
The GRENLEC Manager noted that in January 2021 the fuel charge went up from 20 cents in 2020 to 28 cents (and) at that time the cost of a barrel of oil was around USD44.00 but the fuel charge reached “40 cents in July,” and “is now at 44 cents” with a barrel of oil now costing USD 83.00”
While there have been increases in the cost of oil over the years, Hosten told reporters that this time around “COVID is a major factor” due to the lockdown, and restrictions last year, which hampered industrial and commercial activity worldwide”.
“Some of the oil demand had dropped, prices had dropped, (but) now we are seeing the reverse,” Hosten said and pointing out that as “countries open up and economies recover from COVID, there is a greater electricity demand, (which) means prices of fuel increases.”
“…There has to be that balance with supply and demand and this is what we are seeing – we see (the) demand going up, restrictions being removed, oil prices going up, and up and that’s the primary reason for the increase in electricity,” he added.
“We have seen a particular increase in the domestic energy area, and one has to look at it closely because it will affect people in different ways. Some people it might not affect them based on your livelihood and how you operate (and) some people it might…” he said.
The GRENLEC boss went on to say: “We ask customers to pay attention to their bill, and the average energy usage per day. If your average energy usage increases, it means the impact of increased energy bills is even more pronounced because you have the cost of fuel increasing, and then you are using more electricity.”
In 2016, the Public Utilities Regulatory Commission (PURC) was given the mandate and the authority to set electricity rates in Grenada.
Hosten disclosed that “we (GRENLEC) have been in discussions with the PURC on their methodology” for energy rate and tariff setting among other pressing issues.
An electricity tariff or rate structure is the combination of rates, additional charges, and other rules that determine how the electricity bill is calculated.
Hosten said: “We had issued rate-setting methodology, tariff setting methodology documentation, and there have been public consultations on that particular regulation, and a number of other regulations over the last year and a half.”
Regarding the tariffs, he explained that the formula or method that “GRENLEC used in the past was based on the cost of living RPI (Retail Price Index) minus two (2), and the new methodology change but (it) will go to a different type of system all together based on rate base” which is the value of the company’s assets minus accumulated depreciation.
However, he said that this is “still under review.”
“We would have to do a lot of studies… (and) there are a number of studies that would have to take place until we come up with the final formulation, and in between that time the PURC is looking at an interim tariff, which will address a number of factors,” added Hosten who emphasised the need for “energy conservation and management as one way to handle the increases.”