NASSAU, BAHAMAS — The average consumer could save upwards of 30 percent on their monthly electricity bill with Bahamas Power & Light (BPL) having now executed its fuel hedge facility.
BPL, the Ministry of Finance and the Inter-American Development Bank (IDB) announced the arrangement yesterday that will set the fuel charge at 10.5 cents per kWh for the next 18 months.
BPL secured Cabinet approval for its hedging program two weeks ago.
The Inter-American Development Bank noted that it has partnered with The Bahamas for a new oil hedging instrument to “protect government budget and better manage financial risks in uncertain times”.
“This hedge illustrates the IDB’s commitment to adopting innovative strategies to support its member countries, particularly in present climate of high uncertainty provoked by the impacts of the COVID-19 pandemic,” said Daniela Carrera-Marquis, the IDB’s Representative in The Bahamas.
“Through this transaction, the Government of The Bahamas can further strengthen its risk management tools to protect its public finances and best support the people of the Bahamas.”
The agreement follows months of close work between the Ministry of Finance, BPL and the IDB exploring the market for an Asian Call option style.
This benefit to BPL fuel expenses is expected to have a long-lasting effect on the local economy as it will provide crude oil price certainly for the next 18 months.
BPL executives noted that for the first time in the company’s history it has executed a fuel transaction which has the effect of setting the fuel charge for BPL customers at about 10.5 cents per kilowatt hour (c/kWh) for the next 18 months, subject to review after 12 months.
BPL CEO Whitney Heastie pointed out that since fuel is a pass-through cost, there is no savings to the company: all savings go to the customers.
Heastie said: “Compared to recent history when rates were 19 cents and more in many months, the projected savings for the average customer will be about 30 percent through January 2022.”
“We would like to particularly thank the IDB for facilitating the transaction,” Heastie added.
“They were able to give us access to the market, provide technical expertise and we were able to leverage their relationships.”
In the last five years, the fuel charge hit a high of 27.7 c/kWh in October 2014, and low of 8.38 c/kWh in February 2016.
The government yesterday also commended BPL for its latest move to stabilize the cost of fuel in The Bahamas.
“The Government’s partnership with the Inter-American Development Bank has allowed BPL to take advantage of low prices on the international oil market to secure affordable crude oil coverage for The Bahamas over the next 18-months,” said Deputy Prime Minister and Minister of Finance K Peter Turnquest.
“This unprecedented step will deliver local consumers fuel price certainty for the first time in BPL’s history.”
Turnquest said: “This move will deliver significant savings at a time when Bahamians are doing their best to restore their lives and livelihoods in the era of COVID-19. The Government committed to accelerating modernization reforms everywhere possible and bringing down the cost of energy is an important component of our reform agenda.
“We are not only doing this with our upcoming renewable energy projects. This initiative demonstrates that we are doing things in the present to bring down the cost of electricity significantly to households and business fulfilling a promise made to the Bahamian people,” he said.