It’s important to know as much as you can about how electricity rates are set, so you can budget accordingly and empower yourself to make decisions about your energy usage.
The first thing to understand when considering electricity rates is that the local energy market is a regulated sector, overseen by the Regulatory Authority of Bermuda (RA). As a regulated utility, we are committed to accountability and transparency. The electricity rates that we all pay have been set by the RA in the third retail tariff review to be conducted by the RA since it commenced regulating electricity in Bermuda. The RA is responsible for setting tariffs under the Electricity Act 2016 and the retail tariff methodology that was issued by the RA in 2018.
The RA has approved a rate increase for BELCO bills from 44 cents per kilowatt hour (kWh) for the three months ending March 31, to 49 cents per kWh beginning April 1st.
Let’s break this down so that we can understand all the elements of the electricity rate.
Fuel is the largest segment of the per kWh rate, which has increased from 11 cents at the end of March, to 14 cents beginning April 1st. Government and UNESCO World Heritage tax on fuel remains at 5 cents per kWh.
Your bill also includes an RA fee of 1 cent per kWh. This goes to the RA to help cover their operational costs. This charge will not change on April 1st. However, a previously postponed Revenue Deferral fee of 1 cent per kWh, which had been approved by the RA in 2021 and deferred on BELCO’s recommendation because of the effects of the global pandemic, will now be included in bills as of April 1st.
Other costs that are reflected in monthly bills include Labour (the work carried out by more than 230 BELCO employees to operate the plant and Transmission, Distribution & Retail operations), which will increase from 9 cents per kWh to 10 cents, operating costs, which will remain the same at 3 cents per kWh, and Plant and Equipment, which will increase from 8 cents to 9 cents per kWh.
The final part of the monthly bill is BELCO income, which will be reduced from 7 cents per kWh to 6 cents per kWh as of April 1st.
We have worked hard during the last few years to increase operational efficiencies and prevent a higher increase in monthly bills.
However, one area we cannot control are the fluctuations in the price of oil and, consequently, the price at which we purchase fuel, which are reflected in the Fuel Adjustment Rate (FAR). It is important to note that the FAR is a cost recovery mechanism and all cost increases, as well as any savings due to a reduction in BELCO fuel costs, are passed on to customers. (Click here to review a table illustrating the FAR over the past decade).
The FAR, which is approved by the RA) reflects the total cost to deliver fuel to BELCO’s central plant and is comprised of two parts—the fuel adjustment charge and Bermuda Government and UNESCO World Heritage taxes.
We are acutely aware that high energy costs are a burdensome expense for many families in Bermuda who are struggling—but it is important to note that we recorded a reduced income last year in an effort to assist customers and will now record even less income this year—even though the rate has been increased.
We remain committed to ensuring that we can reliably meet the energy demands of Bermuda while laying the foundation for moving Bermuda to a sustainable energy future. We aim to achieve carbon net zero by 2050.
BELCO customers can learn more about their bill, as well as tips on energy efficiency and ways to reduce their bill, at www.belco.bm