RATE & BILL
BREAKING IT DOWN
If there’s one thing that most people agree on, it’s that BELCO should reduce energy rates. In fact, we agree. Our long term goal is to reduce the average rate by 6¢ per kWh.
Before we get into our plan to reduce the rates, let’s explore what is involved in making up the rates and seeing how this is reflected in your bill.
Our average rate of 39¢ per kWh* comprises five cost categories:
BELCO INCOME (3¢)
BELCO income is capped by the Regulatory Authority at 8% of rate base. Our company is publicly traded and 70% of our shareholders are Bermudian.
PLANT & EQUIPMENT (6¢)
As a utility business, we have invested in a considerable number of assets, including our plant and accompanying equipment. We incur expenses associated with maintenance and operation. We streamline these costs as much as possible without risking damage or service disruptions.
Our dedicated team carries out the labour that keeps BELCO running. We do have the ability to reduce labour costs by making some processes more efficient.
GOVERNMENT FUEL TAX (6¢)
This portion of the rate goes directly to the Government of Bermuda. This is completely out of our control and has doubled in the past 3 years to over $30 million per year.
A large part of the rate comes from the cost of purchasing the fuel we need to run the generators and transporting it to BELCO. Every two years, we go through a competitive RFP process to ensure we are getting the best prices for quality fuel. Beyond this, the costs are out of our control.
Your kilowatt hour (kWh) usage represents the amount of energy your household consumed over the billing period.
BELCO has been working towards reduced rates because we know it’s the right thing to do for Bermuda. The Government of Bermuda and the Regulatory Authority also have an interest in keeping rates affordable.
The Electricity Act
In 2016, the Electricity Act was introduced. The Act regulates the local power industry and is meant to help prepare the energy sector for the future. The Regulatory Authority is responsible for ensuring that energy services are reliable, efficient, adequate and safe. They are also overseeing the introduction of renewable energy providers into the energy sector in Bermuda.
Our customer rates are governed by the Regulatory Authority, who must approve increases and decreases in energy rates. Between the Electricity Act and pressure from stakeholders, like the Government and our valued customers, we must act quickly to reduce our rates.
There is another external factor which is running in direct contravention of our goal to reduce rates. In recent years, our population has decreased substantially. You might expect a decrease in demand to result in lower prices to entice people to consume the excess supply. This is not how electricity supply works. We have a base load that constantly needs to be supplied, regardless of how many people are using it. When fewer people are available to split the cost of that base load, the price actually rises for everyone.
From a peak of 123 Megawatts (MW) in 2010 to a low of 103 MW in 2018, demand has fallen considerably. Fewer people are using fewer kilowatt hours but we still need to cover the cost of that minimum base load.
Peak demand paradox
Despite the decrease in population and demand, there are still select periods of time where the base load is actually not enough. There are regular spikes in demand that occur on a daily basis, typically from 6pm – 9pm when most people return home and use all their electronics and appliances. That’s when we have to run the more costly, inefficient diesel generators.
It costs more to ramp those up to meet demand than it does to continually run the base load generators. These costs are also being split amongst fewer people.
New developments like hotels and marinas will increase demand, as would an increase in our population. More widespread adoption of electric vehicles would also help, as customers would pay less for electricity to fuel their cars than they would for gasoline, all while increasing electricity demand and lowering costs for everyone.
We are working to lower the cost of energy.
We are taking a multi-faceted, cost-effective approach to address the risks of our ageing infrastructure while making our energy more affordable and environmentally friendly. We are working diligently to provide Bermuda with clean, resilient, affordable energy.
We are replacing 80 megawatts of generating capacity with a new dual-fuel, high-efficiency generation plant.
Battery Energy Storage System (BESS)
To supplement the replacement generation, we are introducing our new cutting-edge battery energy storage system, which will allow us to regulate spikes in peak electrical demand more efficiently.
Transmission, Distribution & Retail (TD&R)
We are replacing old, worn underground transmission cables and upgrading distribution assets and facilities. This process will help us to expand the capacity of the grid.
Advanced Metering Infrastructure (AMI)
Advanced meters improve the efficiency and reliability of electricity service, while providing customers with more control.