Ascendant Responds To Electricity Rate Criticism
The Ascendant Group, the parent company of BELCO, responded to recent statements made by Finance Minister Bob Richards about the cost of electricity, saying that the high cost is primarily driven by the cost of fuel oil and also noting that the Customs Duty paid to Government on BELCO fuel is over $15 million annually.
Speaking in recent interviews with the media, Minister Richards suggested that BELCO’s rates were too high. “We really need to look at BELCO,” the Minister told ZBM. “This Government is going to look very closely at the cost of electricity in this country.”
“BELCO is a problem for Bermuda, for Bermudians as individuals, for Bermuda as a country. Everything uses power,” continued Minister Richards.
In response, Ascendant said the high cost of electricity is primarily driven by the cost of fuel oil which is the main source of electricity generation in Bermuda today. The company said the cost of fuel oil equates to approximately 45% of the overall cost of electricity.
“The price of fuel is set on the global market. The overall cost to Bermuda includes the global price, refinery, transport, Customs Duty and fuel terminal processing fees. Customs Duty paid to Government on BELCO fuel is over $15 million annually,” said Ascendant.
Speaking on the Fuel Adjustment Rate, Ascendant said it “is the mechanism by which BELCO recovers the cost it had paid for fuel,” and there is no profit to BELCO from the Fuel Adjustment Rate.
The full statement from Ascendant follows below:
Ascendant Group shares the Government’s concern about the high cost of living in Bermuda, and the contribution the cost of electricity has on the cost of living and doing business here.
It is Ascendant’s position that any new initiative in the energy industry in Bermuda should have a reduction in energy prices as its mandate. It is a strategic imperative for the Ascendant Group to work with Government, engineers, planners, customers and other stakeholders to increase the efficient use of energy, reduce costs, and find alternatives to traditional electricity production.
Bermuda’s present reality is that the high cost of electricity is primarily driven by the cost of fuel oil which is the main source of electricity generation in Bermuda today, as well as on other small island communities. The cost of fuel oil equates to approximately 45% of the overall cost of electricity.
The price of fuel is set on the global market. The overall cost to Bermuda includes the global price, refinery, transport, Customs Duty and fuel terminal processing fees. Customs Duty paid to Government on BELCO fuel is over $15 million annually.
Although it has no influence over the price of fuel, where there are opportunities to secure better pricing, BELCO will enter into forward purchase agreements to lock in the future price. The company also goes to the market on a regular basis to re-negotiate its supply contracts to obtain the most favorable overall fuel rates. Since January 2010, BELCO’s efforts to hedge its fuel purchases have resulted in a saving of $5.9 million versus what would have been paid under the terms of its fuel supply contract.
The Fuel Adjustment Rate is the mechanism by which BELCO recovers the cost it had paid for fuel and is a standard practice for utilities worldwide and not unique to Bermuda. That is why the Fuel Adjustment Rate varies month-to-month and is reviewed and approved on a monthly basis by the Energy Commission. There is no profit to BELCO from the Fuel Adjustment Rate. The Energy Commission is currently conducting an inquiry into the Fuel Adjustment Rate as directed by the Minister of Economic Development. BELCO has been, and will continue to be, open and transparent and provide the Energy Commission with whatever information it requires to assist with this and future inquiries.
Electricity rates in Bermuda do not support diversification by the Ascendant Group. Electricity rates and the return on utility investment are regulated by the Energy Commission. The current return on utility investment of less than 4% is now well below average international accepted rates of return, which are closer to 10%, as well as previously acceptable Bermuda rates of return.
Ascendant is using a combination of earnings from across the group of companies, as well as investor funds and debt to expand its service and product offerings beyond the traditional electricity generation and delivery product, to other energy infrastructure solutions which will combine to bring better efficiencies and in the long term, and lower overall prices.
we all understand a company needs to make money but belco dose not have no compation they just bleed the contry dry a bunch of ba=s=trds lets see if the oba will have the balls to alow people to cut belco out
Belco is only interested in making money. They are not socially conscientious. Here’s their philosophy: charge the poor high rates and pay dividends to the rich.
Just tax them to fk. They have no choice but to pay, then give the money back to job creation schemes.
It’s been said before but it bears repeating, we need to get started on making serious investments in alternate sources of power. I know we have kicked around a few alternatives (wind farms in the ocean) (hydro power from currents that flow past Bermuda) etc. The only way to reduce our dependency on foreign oil (and market prices) it to stop talking about it and get started.
Bermuda is small enough to get it right.
Here’s the problem how will this alternative power get to the consumers?
LOL
If fuel cost is the problem, then why has Ascendant or Belco not found other ways of producing electricity? Or what they should have done is have a sustainability plan in place 20 years ago. They have a social responsibility and a huge Economic impact on every business and individual on this Island. We are using ancient methods of electricity production yet we have are surrounded by resources. Belco never modernized, they did not want to spend a dime on evolving.
Seriously, I am glad the government are preparing to get hard on these money grabbers. They need to change their ways.
Part of the problem (at least it seems to me)is that Belco owns both the generation and the grid – if other providers were free to supply the grid too (as is the case in many countries), new low cost entrants would establish a marketplace with competitive pricing. Also, I suspect BELCO’s labour costs are on the high side and in a competitive environment they would be obliged to address this.
Whoops, sorry should read Ascendant…
So many energy experts on a comment board…amazed
There are not so many experts,just people who pay attention and do research and if you had half a brain you would do your own research and reconize the truth of the matter and that is the nicest way that I can answer your idiotic comment.
Why don’t BELCO just buy its oil from Venezuela? Or are they worried what the US would say or do.
Have a read
http://news.nationalgeographic.com/news/energy/2013/03/130306-hugo-chavez-venezuela-oil/
Posts like this are hilarious.
Got any more suggestions? I’d love to hear them.
…the fuel is bought from Venezuela…
Bermuda should be considering a small nuclear power station.
You are joking, I hope… One mishap and that’s it – even if you don’t care about life on land, think of the fish
Go fusion. Don’t be a scurdy pants.
I truly believe that there are avenues by which we can take to out source our power energy to other business ventures,there is one group of people that was on a road to being successful in that area and were blocked.
B.E.L.C.O does not have to be our only source to getting elactricity in Bermuda and it is about time they be challegened,just as we saw when T.E.L.C.O had the monopoly on lomg distance service and now we have multiple longdistance service providers to choose from,same as when we only had Cablevision for paid television programing and now we have everything from WOW to satlelite services.
All you have to do is take a good look at the break down of your B.E.L.C.O bill and see that is some cases your fuel cost is higher then your usage which is rediculous.then as we know there more cost effective ways for B.E.L.CO to reduce its spending in order to allow us the costumers to benefit but I think in Bermuda across the board,it is all about greed and growth and not caring really if the small man continues to get crushed in the process.
But what BELCO doesnt say is that they only have 3 months of storage capacity, and when they get low they just order more. Do they give any thought to hedging international markets, purchasing future contracts at lower prices or derivative transactions to lower the cost of fuel like a competitive market does?
Maybe invest in a fuel storage facility in another country where they can purchase and store fuel while it is cheap and then transport it when they get low?
Can somebody provide a detailed date breakdown of the the increases and fuel surcharges that people have been charged? It would be very interesting to compare the increases and fuel surcharges to international Oil prices (Diesel in particular I believe)
Yada yada look who is talking trying to justify talking about Customs Duty, remember what your former CEO or COO or some sort of C said, yes same one who was running for public office and then duly resigned when the voters rightly REJECTED him….. He was talking about companies with a social conscience or lack thereof I guess he conveniently forgot that for years he could have been a part of the solution….. We all know we are being choked by the mighty hand of Belco especially people who operate business and you do it because you know there are no real viable alternatives and we MUST use your over priced service….. How many years have you talked about alternate means and done nothing except ride our backs while your pockets bulge with profits….. I do hope the Hon Minister is real serious and diversy the industry and introduce competition, remember C&W how the strangled us for more than a century do you remember Mr Belco, do you.
Agree, BELCO has flapped for years about alternative energy and has produced zero!!!
We need to march on Parliament for an immediate change to our energy policy and demand to become 100% renewable by 2020 like many other countries around the world. Otherwise, WE, the working people of Bermuda will be paying the cost of rising fuel which is going to sky rocket over the next 8 to 10 years when all these countries will go off the grid. WE, the people of Bermuda will be left holding the last bags of coal which will cost MUCH more than we can imagine!
WOW are you serious????? 15million in customs duty for fuel. I am in the wrong business perhaps. As for this RUBBISH on the cost of oil. Some one is ripping some one off or pulling the wool over the sheeps eyes. Example one oil tanker sinks it has nothing to do with Bermuda. it isnt registered here nor does it sail here…but the cost of gas locally goes up if it sinks. I never understood that given the fact that Wars use and waste oil and the cost never seems to spike just because its a war. Something not right. Dont try to explain to me the economics of oil. That someone wants to just get RICH
Now I know why the government does nothing about promoting renewable energy….$15M per year in CUSTOMS DUTY on dirty fuel imported to Bermuda!!! SHAME on you governemnt of Bermuda!!! Your hands are as dirty as BELCO’s!!!
BOO HOO BELCO! You will continue to see losses into the future because quite bluntly they REFUSE to join the bandwagon of green energy solutions and come up with an alternative energy solution for Bermuda! If other little islands can do it, why can’t Bermuda! Check out this video…solution might not be exact for Bermuda, as each island is different, but where there is a will there is a way!!!
This video puts Bermuda to SHAME. https://www.youtube.com/watch?feature=player_embedded&v=nKmHJGvDaN0#!
It is the new government of Bermuda that should drive the energy policy for the people of Bermuda not BELCO’s investors and government’s greedy and dirty pockets.
We have wind, we have sun and we have currents. What more do we need???????????
BELCO’s investors have been enjoying incredible profits over the last 100 years! Just like we needed a change in government, we the people of Bermdua now DEMAND a change in energy from this current government. You owe it to the people of Bermuda who elected you!!
Those countries left holding the dirty bag of coal are going to be paying a VERY high price for it and it is coming much faster than we think…in the next 8 to 10 years! Guess who is going to pay the final bill???
From your comment, I guess you don’t operate any fossil fuel powered vehicles right? That includes electrical vehicles as well that don’t run on solar or wind generated energy.
Next time I send a bill out I am going to include a fuel adjustment rate (for everything that I had to buy that now cost me more) so I can make the same profits if not more every year! Let’s see how the customers of an average mom and pop shop respond to that!
Well if you need to transport goods via motorized vehicle, any smart business person would know they’d need to recoup the costs of powering that vehicle and all other expenses related to operating that vehicle right?
Do you recognize how silly your bright idea sounds?
Bob Richard’s comments are an embarrassment to this country. That someone in his position lacks such basic understanding is appalling. Without question Bda has high energy costs but they are comparable to other isolated island nations.
All this talk about alternative sources – even cursory reading will inform you that these “alternatives” cost much more than existing sources. Yet, everyone is already complaining about prices. And your alternatives still required 100% of the infrastructure at BELCO to be functional (which costs money) because guess what – the sun goes down and there are days the wind doesn’t blow and you still want power at those times.
The Energy Commission regulates BELCO and posts all their related correspondence online. Read before you speak people. How can an entity be profiteering yet be making all time low profit margins?
BELCO also posts all their annual reports in detail online. If BELCO was a US utility, it would need to generate $30 million a year in profits to be viable. It generates less than half of that and folks are unhappy. Let’s see how happy you are if they go out of business.
The FACTS posted in the online documents contradict the random comment bloggers and even the “honorable” minister.
One more thing, ask any location that even approximates Bermuda’s size what happened to prices when monopolies where broken up – higher prices people! Don’t take my word for it, look it up.
Without question there is room for improvement but getting the facts right is a prerequisite to decision making.
Oh and one more thing. My gasoline bill is 33% higher than my monthly electricity bill. My food bill is 400% higher. For all the things I get from it, light, heat, cool, cook, hot water, charging electronics, tv, phone, modem etc. for me the relative price to other services is good. Where are the cries against gas stations? Unregulated food industry? Odd silence.
Just wondering has belco ever thought to go nuclear 100% no emission. And don’t have to buy any fuel. And could down size and sell most of the land they currently occupie. And would generate more then enough power for years to come. They could pocket that 15 million.
Wonderful idea. The only little problem is where to get the $8bn it costs to build one.
Yo Bobby – I’m not as smart as you because I aink got no degree, but wouldn’t that 15 million that belco pays govt be a good place to start? Just sayin…………….who’s profiting here?
Hey Belco, don’t try to hoodwink Bermudians by trying to attribute your exhorbitant fees to exclusively fuel cost For years, you have used your monopoly position to not only overcompensate your shareholders, but also your overstaffed, overpaid employees(particularely seniorofficers) that ALSO have Benefit + retirement packages that far exceed most Bermudian businesses! For example, how about disclosing how much your CEO and Legal staff are being paid!! Won’t hold my breath waiting for that disclosure Lol Also, business down–however no layoffs, reduced hours, wage cuts or Benefit reductions like the Civil Service is being asked to take!! A pox on your house and hopefully Bob Richards actually WILL hold you to task!!