To our valued customers,
Since April 2022 you have experienced a significant increase in the fuel surcharge on your monthly electricity bills. The objective of this presentation is to provide you, our valued customers, with an explanation for this increase.
However, before we do so, we will present you with these useful facts about the fuel surcharge:
a. The fuel cost adjustment factor or fuel surcharge was introduced by the NEVLEC in November 2005.
b. NEVLEC introduced this fuel adjustment mechanism (surcharge) to mitigate against the fuel price fluctuations and curb the trend of significant losses.
c. The fuel surcharge is not unique to NEVLEC, but has been adopted by most Caribbean electric utilities and international courier and shipping companies.
d. On the one hand, the energy charge on your bill is not related to the fuel surcharge but is a component of NEVLEC’s current tariff structure (the regular cost per kilowatt-hour for energy used). The fuel surcharge, on the other hand, is associated with the rising cost of fuel.
We will now address the factors that are driving the high fuel costs and by extension the high fuel surcharge. The major price driver is the ongoing Russia-Ukraine conflict. The impact of this conflict is perhaps most felt in the energy sector. Russia is the world’s third-largest producer of oil and is also the world’s largest oil exporter.
The ban on Russian oil by the United States and the European Union has resulted in increased pressure on global prices. There has been a sharp decline in oil supply on the world market, resulting in higher global prices. In the case of NEVLEC, the average price of fuel has moved from $7.98 per gallon in January 2022 to $14.68 per gallon in June 2022. A resolution of the conflict seems unlikely in the short term, which means that global oil prices could remain extremely high.
In the meantime, NEVLEC has implemented some initiatives to assist you during these challenging times. In September 2021, we introduced the use of a six-month moving average of the actual price to calculate the fuel surcharge. This mechanism helps to smooth out the wide fluctuations in the price of fuel.
In effect, NEVLEC has created a “cushion” so that you, our valued customers, do not have to absorb the full impact of the significant rise in fuel prices. During this period, you have benefited from reduced fuel surcharge and by extension reduced bills. Our records indicate that this initiative has cost NEVLEC in excess of $3.1 million over the period, which translated to savings to our customers. At this juncture, we strongly encourage all customers to pay their bills on time to prevent undue financial hardship on NEVLEC.
As we do our part, we implore you, our valued customers, to play a greater role in reducing your bills. Effective management of your energy consumption not only reduces the fuel surcharge but also the energy charge on your bill. Please take advantage of our energy conservation tips which are available on our website www.nevlec.com and our Facebook page.
Remember, we are in this together!