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GBPC explains fuel surcharge

August 8, 2011

As part of an ongoing customer education initiative, the Grand Bahama Power Company is clarifying the fuel surcharge portion of the bill to customers. Remarked Whitney Heastie, GBPC VP of Generation, “With the unpredictability of world oil market prices, customers have seen fluctuations in the fuel surcharge component of the bill that has left many confused. We thought it would be beneficial to customers if we took some time to really explain the surcharge and the implications for them.”

The customers’ bill is made up of two components, the base rate, and the fuel surcharge. The base rate or tariff is the consistent, set cost established by the regulator. The fuel surcharge is a calculated cost that varies each month based on two factors, which are fuel costs and equipment efficiency.

Approximately 60 percent of GBPC’s expenses are attributed to the cost of fuel. The company purchases fuel in bulk to reduce costs and to maintain a consistent supply for the island's needs. It should be noted that due to the need to have sufficient inventories on hand there is a one month lag between the time the company purchases the fuel and passing that cost on to customers. Therefore the current fuel surcharge reflects the cost of fuel for the previous month.

In order to improve reliability and to ensure that the company is equipped to meet the summer load, 54MW of supplemental generation was sourced. As per recent regulatory approval, 3 cents to cover the cost of the rentals was added to the fuel surcharge portion of the bill. “Our fuel surcharge is calculated based on the cost of fuel and how much of that fuel we have to use to keep our customers with a consistent power source,” explained Heastie. “What is important for our customers to understand is that although there is a 3 cent charge included in the fuel surcharge for the rentals, if we did not have the rentals not only would our ability to meet the load for the summer months have been in jeopardy, but we would have had to run less efficient units that would have significantly increased the fuel surcharge portion of the bill. So, in short the cost of the rentals is offset by the higher levels of efficiency they provide as compared to some of our older, less efficient units.”

While GBPC noted that they have no control over world market prices for oil, there are steps they can and have been taking to not only improve reliability but efficiency as well. Heastie remarked, “The facts are we have an old plant and the levels of reliability and efficiency that the residents of this island have been experiencing is not where it should be and not acceptable for them or for us.” He explained that this is why Emera has made an $80 million dollar investment, at no base rate increase to customers; in a new diesel plant that is projected to be commissioned in late 2nd quarter 2012. The plant will provide customers with a cost effective solution for significantly improved levels of reliability and efficiency as well as job opportunities for local Bahamians. It is expected that the improved efficiency of the new generation plant will bring stabilization to the fuel surcharge portion of the bill.

However, the company informed that the long term goal is to look at renewable opportunities for the island. Renewable energy is a key part of Emera’s energy portfolio. They are considering the best business case for GBPC for diversifying the energy mix and moving away from the dependence on high carbon fuels.

The company also noted that they are sympathetic to the economic conditions that their customers are faced with. To that effect, GBPC advises customers that have difficulty paying bills to stop by the their headquarters located on Pioneers Way and the Mall Drive and see one of the customer service representatives to discuss payment plan options.