Residents of St. Kitts and Nevis will begin paying more for fuel and electricity from November 1st, but Government has put in place a mechanism to assist the more vulnerable groups to cope with the rise in energy costs.

Minister of Public Works, Utilities, Transport and Posts, Dr. the Hon. Earl Asim Martin made the expected announcement in a nationwide radio and television broadcast on Monday night.

He said that despite rising oil prices on the world market over the years, the increases would be the first rise in electricity rates since 2000 and in fuel prices since February this year.

Dr. Martin said fuel at the pump will increase from EC$8.30 to $10.50 and electricity will rise from $0.37 cents per kilowatt hour to $0.51 cents per kilowatt hour.

He said Government has put in place a mechanism to assist the more vulnerable groups of society such as the very poorest senior citizens and families who are likely to have extreme difficulty in coping with the adjustment in electricity rates.

The Public Utilities Minister said that escalating oil prices now pose the greatest threat to the achievement of fiscal targets for 2005 and in light of the increase in international oil prices, governments in the region have decided to discontinue subsidising fuel cost and to pass on the increase to the consumers.

Dr. Martin pointed out that on October 6th 2005, the Government of Antigua and Barbuda increased the pump price to $11.89 per gallon. On October 29, 2005, the Government of Dominica set the pump price at $10.32 per gallon and on April 20, 2005, the Dutch St. Maarten Government set the pump price at $11.03 per gallon.

“The Cayman Islands is $10.80 per gallon, Barbados $12.89 per gallon and the Bahamas $10.85 per gallon. Montserrat, St. Lucia and Anguilla also had similar increases. St. Kitts, by contrast up until this very moment, has set $8.30 per gallon as the pump price,” Dr. Martin told the nation.

He said although the price of fuel at the pump should really be increased by $6.09 to take it to $14.39, Government took into account the likely inflationary effect of such increase and has agreed to an interim upward adjustment of $2.20 per gallon thus setting the price of gasoline at the pump at $10.50.

“This means that Government will still be paying suppliers $1.22 for each gallon of gasoline consumed. This will achieve the objective of reducing the impact on transportation costs and other costs likely to be affected and provide a shield of protection to all consumers,” said Dr. Martin.

He said Government has also had to give deep thought to the cost of the generation of electricity as the cost of diesel has increased dramatically over the past few years. The base price of diesel has surged by 75% from $3.38 per gallon in 2000, to $5.91 per gallon in 2005. “Over this same period, the charges for electricity consumption have been held constant, and hence have been subsidised by the government,” said Dr. Martin.

He pointed out that the gross revenues from the electricity department amounted to $31 million while the amount spent on fuel amounted to $40.1 million.

“This situation is untenable and indicates that the Electricity Department is unable to cover the cost of fuel alone, not to mention salaries and other administrative and operational expenses to keep the department functioning. In addition, capital costs for the upgrading, and replacement of generators at the power station simply cannot be recovered,” said Dr. Martin.

He said that the demand for electricity supply is increasing as the lives of residents become more modernised, as the government pursues its housing development programme, and as the tourism and construction sectors continue to expand at rapid rates.

Dr. Martin said that electricity charges in St. Kitts have remained at $0.37 per unit since 2000, not withstanding all of this increase in costs of fuel and of operations. He said despite the increase in St. Kitts, other OECS countries are paying more for electricity. In Anguilla, it is $0.64; Antigua – $0.85; Grenada – $0.73; St.Vincent – $0.78; Montserrat – $1.02; Dominica – $0.66 and Nevis – $0.51.

“These costs reflect the reality of the increasing cost of diesel fuel used in the generation of electricity and at the same time the reality of the budgetary constraints of the small developing vulnerable states of the OECS. St. Kitts is no different and we must act responsibly as a government. Our electricity rates are not only the lowest in the entire region but are simply far below the generation cost,” said Dr. Martin.

He said that the Government of St. Kitts and Nevis although it has no control over the price of fuel on the world market and does not produce even a drop of oil, it has done its best to keep the price down, “but there comes a time when adjustments are necessary.”