Bermuda Electric Light Company Limited (BELCO) always seeks to source the lowest cost and most reliable fuel supply for the Company’s operations and today explained how the Company purchases fuel and the impact of falling oil prices on electricity costs for customers.
While the price of crude oil has fallen to historic lows as a result of the COVID-19 pandemic and reduced global demand, this is not the fuel BELCO uses to generate electricity. BELCO uses heavy fuel oil which is refined from crude oil.
A BELCO spokesman said: “In order to ensure a reliable and cost-competitive supply of fuel, BELCO regularly conducts competitive bids for fuel supply, whereby suppliers are selected based on their proven ability to reliably supply fuel to Bermuda, their financial stability and their supply cost. BELCO must purchase fuel several months in advance of need to ensure reliable operations and to reduce as much as possible the purchase and delivery cost of its fuel. Our fuel procurement goal is to ensure the lowest cost and to also have fuel in reserve.”
The Fuel Adjustment Rate, which is set by the RA, is calculated quarterly and contains more than just the variable cost of fuel itself. It also includes fixed duties, taxes and freight and handling charges which make up between 50% to 65% of the fuel adjustment rate. These charges are fixed and therefore do not change as BELCO’s cost of fuel changes.
In October 2018, the Regulatory Authority released a cost-of-service rate methodology which outlined the price BELCO can charge customers. BELCO submitted a rate application under the methodology and received the approval late in 2019 for tariffs effective as of 1 January, 2020. The new rate is lower than what customers had been paying in 2019.
The spokesman added: “BELCO will continue to source the lowest cost, most reliable fuel to power the Company’s generators with the ultimate aim of reducing costs for our valued customers. “