KINGSTOWN, St. Vincent – Vincentian consumers have again this week taken to the airwaves venting their anger about the portion of their electricity bills that result from the fuel surcharge.
Their anger comes two weeks after an opposition legislator and former executive at the state-owned VINLEC, the nation’s sole commercial provider of electricity, told Parliament that the surcharge is “out-dated”.
“We are seeking for an improvement in an important matter here — energy cost and electricity cost — not just for domestic consumers but for our competitiveness and the Prime Minister assumed in the question that my interest is seeing the fuel surcharge go down. And that is precisely what I am arguing against,” Central Kingstown representative St. Clair Leacock told Parliament on May 31.
Leacock’s comments came after Prime Minister Dr. Ralph Gonsalves provided and contextualised data on the average fuel surcharge cost each decade since 1973.
“The argument is that the mechanism is out-dated. It is obvious that you must recover your fuel cost, period. And my argument, while I am going through this exercise, is to prove that we are looking in the wrong place for a solution to the electricity problem,” Leacock said.
“Mr. Speaker and as the Prime Minister is signalling that he appreciates, these questions are designed to assist in seeing whether we can have a reduction in electricity cost and whether our approach is the right one,” Leacock further said, noting that the fuel surcharge was introduced in 1973 as a result of the fuel prices.
He wanted Gonsalves to tell legislators what was the average cost of fuel to VINLEC in 1973 compared to 2011, the average monthly fuel surcharge in 1973, 1983, 2003, and 2011, and the average monthly fuel consumption for each of those years.
In 1974, consumers paid an average of 1.51 cents per kilowatt-hour as fuel surcharge per month. They paid 15.18 cents per kilowatt-hour per month in 1983, 8.56 cent in 1993, 16.24 cents in 2003, 46.73 cents in 2011 and, 52.73 cents in March 2012, Gonsalves said.
The surcharge kilowatt-hour per month in 1990 was 9.42 cents, 16.42 cents in 2000, 36.76 cents in 2010, and 46.70 cents in 2011, he further stated.
Meanwhile, VINLEC used an average of 435,350 gallons of fuel per month in 2003, 513,898 gallons per month in 20011, and 545,262 gallons per month in 2012. Data for 1974, 1983, and 1993 were unavailable, Gonsalves said.
Meanwhile, on average, VINLEC paid EC$14.4 million per month for fuel in 2000, EC$46.1 million per month in 2010, and EC$58.69 million per month in 2011.
“When people tell me that you mustn’t pay the fuel surcharge, where are you going to get EC$58.69 million from to run the electricity company?
“… Mr. Speaker, it goes without saying that the fuel surcharge increased over the years,” Gonsalves said.
“But that doesn’t help us except one wants to make the mischief to say, ‘Well the average monthly fuel surcharge in 1974 was 1.51 cents per kilowatt hour and in March 2012 it was 52.73 cents per kilowatt hour’ so that you can get a headline saying ‘Murder! Advantage!” Gonsalves further said.
He said that context is important in understanding the fuel surcharge.
According to him, a domestic consumer using 100 units of electricity per month in 1990 paid VINLEC an average of EC$59.42. Such a consumer paid VINCLE an average of EC$96.70 per month for the same amount of electricity in 2011, an increase of EC$37.28 that goes directly to paying for the fuel used.
Gonsalves said that in both 1990 and 2011, VINLEC received EC$50 of those amount to cover its operational cost, with the remainder going to the fuel supplier.
“But, in the second case — in 2011 — instead of EC$9.42 going to pay the cost of fuel, EC$46.70 would have gone to pay for the cost of fuel. So, the surcharge is related to the cost of the fuel,” Gonsalves said.
Domestic consumers continue to pay VINLEC the same amount to run its operation while commercial customers pay less, Gonsalves noted.
“And Mr. Speaker, I want to make this bold statement here. VINLEC has lowered the cost of the basic component of the electricity cost to consumers. But this has been eroded because of the increasing fuel surcharge over which we do not have the control because of the increased fuel prices.
“The fact is this: If oil prices were the same in 2012 as they were in 1990, electricity consumers in St. Vincent and the Grenadines would have been paying basically the same figure for electricity,” Gonsalves said, noting that this is an oil-importing country.
All electricity companies have mechanism to address the issue of rising electricity cost, Gonsalves said, adding, “And the one which has been established here is the fuel surcharge mechanism, which is not unreasonable, it is not unfair.”
Gonsalves said that to try to help consumers, his government has reduced the minimum charge on domestic consumers, eliminated the demand charge to commercial and industrial consumers, reduced basic electricity rates in 2011 to commercial and industrial consumers, and reduced rates in hotel sector from 2008 to December 2010, as a buffer against the global financial meltdown.
Further, the government pays VINLEC a subsidy to cover the surcharge for poor and vulnerable homeowners and offers volume discounted electricity rate to commercial and industrial consumers.
“The policy of the government is to deliver a very efficient electricity system at the cheapest possible cost that we can do it,” Gonsalves said.