By Guevara Leacock
On A View from the Outside this week, we turn our attention to the fuel surcharge on electricity bills, with the view being that replacing it with a standing charge would not bring bills down, and that we should focus on cutting our dependence on imported diesel.
On Sept. 25, it was reported that for the first time in its history, VINLEC expects to spend EC$100 million on fuel in a single year. VINLEC’s Finance Manager, Bantu Campbell, said fuel makes up about 76% of the company’s total costs each month. The dry, hot weather has made matters worse, because there is less water in the rivers for the hydro plants and more Vincentians are running fans and air conditioning. The diesel generators in St. Vincent and the Grenadines (SVG) are working harder and burning more fuel. Every extra gallon used ends up on your electricity bill.
Before this year, the highest fuel surcharge ever recorded in St. Vincent and the Grenadines was EC$0.73 per kWh, in July 2022. In June 2026, it went to EC$0.74, and in July it went to EC$0.83. The July cost came after VINLEC had already applied a subsidy of EC$734,959 promised by the new government. Even after nearly three quarters of a million dollars of relief the fuel surcharge still rose by about 9 cents per unit in a single month. It eased to EC$0.77 on August bills, and on September bills it was back up at EC$0.79. That is four months in a row above the 2022 record.
VINLEC’s basic domestic rate is 50 cents a unit, a little less for the first fifty units, and it has not changed since 1989. So for every household, the fuel surcharge on each unit is now bigger than the charge for the electricity itself. It is no surprise, then, that one question keeps coming up on the call-in programmes, on social media and in conversation across SVG. Why do we still use a fuel surcharge at all, and why not scrap it and use a standing charge instead?
VINLEC buys its diesel from the fuel companies at prices that follow the world market, and those prices change from week to week. The fuel surcharge is the part of your electricity bill that passes the cost of purchasing the fuel on to customers, unit by unit. The formula is set out in the law which governs electricity supply in SVG; the Electricity Supply Act. VINLEC claims that it makes no profit on the fuel surcharge and that its calculation is audited every year.
In August, VINLEC spent about EC$12.3 million on fuel, and only about EC$421,000 of that was covered by the base rate. The other EC$11.9 million went on to your September electricity bill through the fuel surcharge.
When people say standing charge, they usually mean one of two things. The first is a flat fee that every customer pays each day or each month, however much electricity they use. In Britain, for example, households pay a standing charge simply for being connected to the grid, and then a separate price for each unit they use. That kind of charge makes sense for costs that do not change with usage, such as electricity poles, wires, meters and the staff who maintain them. It makes no sense for fuel, because fuel is only burnt when electricity is used. The fairest way to charge for electricity is by the unit.
Imagine a poor family in Georgetown with an average-sized house, a refrigerator, a television and a few light bulbs. Conversely, picture a large house with three air conditioning units running throughout the night. Under a flat fuel fee system, the average-sized household would pay the same fuel bill as the larger one. The small user would end up paying for part of the big user’s diesel, and Vincentians least able to afford it would carry the heaviest load. We on A View from the Outside cannot support a change that moves the cost of electricity from the better off onto the poor.
The second meaning is a fixed price per unit, set for a year, so that your electricity bill doesn’t change from month to month. That sounds attractive, and Vincentians would welcome knowing in advance what a unit will cost so that they can budget for it. But the price of diesel would still change. When oil rises above the fixed price, the cost of the gap has to be covered, and because VINLEC is owned by the state, that somebody is the taxpayer: you. When the price of diesel falls, with a flat fee, Vincentians would pay more than the fuel actually cost, and VINLEC would keep the difference. A fixed price does not make fuel any cheaper. It only decides who pays, and when they pay.
The real problem is that SVG still generates most of its electricity by burning imported diesel, and changing the way it is paid for will not make that diesel any cheaper.
The current rise in diesel prices has been driven by war in the Middle East and a small island state like St. Vincent and the Grenadines buying diesel on the world market has to accept the price it is given. On Sept. 21, diesel in the United States reached its highest price since records began there thirty-two years ago, and the world price of oil has climbed further since then. Because each month’s surcharge is worked out from the fuel burnt the month before, Vincentians are likely to see that rise on their October and November bills.
So what really can be done to lower electricity bills in SVG? A unit of fuel made from the sun or the rivers burns no diesel, so the more of those units there are, the smaller everybody’s share of the fuel bill becomes. Only about one sixth of the electricity in SVG comes from the rivers and the sun. The rest, in fact the majority, comes from diesel. We on A View from the Outside say that changing that balance is the surest way to bring electricity bills down.
The most direct step is harvesting more solar energy, with batteries to store it, something our very own Lennox Lampkin has been suggesting for years. A large battery system is being installed at Cane Hall, and the upgraded solar farm at Lowman’s Bay is expected to come on stream in November. Those are welcome, but they are small against a fuel bill heading for EC$100 million this year. Also remember that on Bequia and Canouan electric power still comes almost entirely from diesel engines.
The reason why more homes in SVG do not have solar panels on their roof is partly because of the law. The Electricity Supply Act dates back to 1973, long before anyone imagined solar panels on a house in Diamond or on a supermarket roof in Kingstown. The rules on what VINCLE pays a home or business for the power it sends back into the grid are outdated. VINLEC’s own Chief Executive, Dr .Vaughn Lewis, has called for the law to be modernised so that customers can make their own power under a proper renewable energy tariff. This is what happens is neighbouring Barbados, Grenada and in Jamaica.
Power from the rivers burns no fuel at all, but deforestation has reduced the flow in our river catchments. We should protect the forests above the rivers more and replace worn turbines. This would let the water we already have make more electricity for the benefit of all Vincentians.
There is also help that reaches households directly. Every unit a household does not use saves the base rate and the fuel surcharge on that unit, and for homes using more than 250 units a month it saves the 16% VAT as well. An old refrigerator or air conditioning unit uses far more power than a modern inverter model, and LED bulbs use a fraction of the power of the old ones. The government has also said that changes to VAT on domestic electricity are expected this month.
The government should bring the Electricity Supply Act up to date. Clear rules and a fair price for the power that homes, churches, schools and businesses send back into the grid should be established. Vincentians who can make their own electricity should benefit for it. We should develop and publish a plan for increased use of solar energy with battery storage on the mainland and in the Grenadines. Develop and improve existing hydro stations. We should set up a fuel price stabilisation fund, putting money aside when oil prices fall and using it to hold down the surcharge on the first units each household uses when prices rise, so that the help goes first to the households least able to cope.
So in the coming days, when somebody tells you that VINLEC should just scrap the fuel surcharge and charge everybody a flat fee, ask them who would end up paying more. Ask them what happens to the household with one refrigerator and a few light bulbs. Then ask the question that matters most, which is how much of next month’s electricity will come from solar energy and the rivers instead of from diesel. The answer to that question will decide what Vincentians pay for electricity for years to come.
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