Grand Cayman power bills face new hike

| 28/05/2015 | 30 Comments

power meters(CNS): The local regulator has cleared a new base rate hike for CUC, pushing up the cost of electricity again for consumers on Grand Cayman. The Electricity Regulatory Authority (ERA) confirmed that it had approved a 0.9% increase in the rate the monopoly power provider is allowed to charge. Customers will see the increase immediately in bills issued after 1 June. Officials said the average residential bill will go up by less than a dollar.

President and CEO of CUC Richard Hew said the increase would allow the power firm to invest in the necessary infrastructure to provide electricity services. Despite the bottom line on most people’s bills, the CUC chief said, “CUC’s base rates remain at or below most other utilities in the region, and we expect that the average residential customer will see an increase of less than $1.00 dollar in their monthly bills.”

Hew said the firm continued to encourage customers to cut electricity consumption by becoming as energy efficient as possible, “particularly for the upcoming summer months when temperatures and air-conditioning use are on the rise”.

Charles Farrington, Managing Director of the ERA, said the regulator was satisfied with the way the Rate Cap Adjustment Mechanism (RCAM) has performed in regulating CUC’s Base Rates.

“The new CUC Licences were signed in 2008 and RCAM took effect in 2009,” he said. “Since 2009 CUC’s Base Rates have increased a total 4.98% on a compounded basis or the equivalent of 0.81% p.a. over the 6 years to 2015. This would seem like a good result for consumers while still allowing CUC to maintain a strong level of performance.”

He added that it was reflective of the low inflationary environment that has persisted over the time period. “But the ERA expects that the RCAM would perform equally well in a high inflationary environment and require efficient operations from CUC in order for them to maintain operational performance and remain financially sound,” Farrington said.

The hike comes in the wake of an announcement by government of a further fall in the duty that CUC pays on its diesel as it tries to make electricity more affordable and after the first duty cut was implemented in January, which, together with a fall in fuel prices, had seen bills fall. However, with fuel prices on the rise again and another increase expected Monday, efforts by government to cut bills are being eroded now from two fronts.

CUC is allowed to request a rate hike in accordance with the Rate Cap Adjustment Mechanism detailed in CUC’s Transmission and Distribution (T&D) Licence.  The RCAM is based on a formula which incorporates readily available external data to determine the inflation rate.

Officials from the ERA explained that this is adjusted by an appropriate factor, which may provide for a rate increase less than, equal to, or greater than the Price Level Index. The RCAM may also provide for no increase or for a rate decrease. The change to Base Rates is calculated using the most recent CUC audited financial statements to calculate CUC’s Return on Rate Base and a weighted average consisting of 60% of the Cayman Islands Consumer Price Index (CI CPI) and 40% of the United States of America Consumer Price Index (US CPI), (both indices adjusted to remove the effects of prices of food and fuel) as reported by independent authorities for the most recent calendar year.

Officials added that upon review and confirmation of the CUC audited financial reports, the CI and US CPI reports, and the 2014 CUC Return on Rate Base, the ERA has approved the overall CUC 0.9% Base Rate increase, which is a result of 2014 inflation in both the Cayman Islands and the USA, CI CPI and US CPI of 0.9% and 1.6% respectively (both excluding food and fuel).

The base rate increase does not impact the Fuel Cost Charge nor the Licence and Regulatory Fees Charge.

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Comments (30)

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  1. WaYaSay says:

    One family brother sits in the LA and hands CUC a handsome reduction in their operating capital outlay, by reducing the duty on diesel; while the other family brother sits at CUC and immediately increases the profit margin further by hiking the cost of electricity to it’s customers, the common people.
    Sounds like a great family business. Hope the family has lots of shares in CUC.
    Perhaps, with profits they will rake in this year, the family can purchase Jeff Webb’s mansion in Georgia.

    • Anonymous says:

      At say perhaps a minimum of 50,000 residential meters in cayman that’s a sweet 50,000 per month revenue increase for cuc. That should do some pretty nice infrastructure improvements i would say. Cant help wondering if those infrastructure improvements will eventually lead to a reduction in our cuc bills…NAH, dont think so. Sorry folks.

    • Anonymous says:

      You are obviously not the sharpest tool in the shed! The duty on fuel is paid by you and I idiot and that is why Government has substantially reduced the fuel duty: so you and I can keep more of our hard earned money! It cannot have any benefit to CUC!

  2. Anonymous says:

    Any and everyone behind this ridiculous façade of a company should not be able sleep at night for the next 40 years or so. This company acts like it is genuine and talks about how to save and whatnot, when it fact it is the largest organized pirate ship of the Cayman Islands (only located on shore). Talk about looting and robbing ya own people blind. CUC, unna disgust me. Shame on ALL involved.

  3. Sharkey says:

    Now that power company got its hike increase , next will be the gas hike increase. This is our government hard at work for the people that elect them .

    • Anonymous says:

      Just remember Sharkey – the bite of these costs are still nowhere as bad as it was 3 years ago!

  4. Anonymous says:

    Did they not announce just a couple of weeks ago that bills would be going down in June….???

  5. Anonymous says:

    And if you are a few days late with paying your bill, they will let a debt collector take care of it, who will double your bill and make your life hell. 80$ bill became 230$.

  6. CayGuy says:

    It would be just like CUC to tap on ERA’s shoulder for a rate hike when the public was about to experience lowest bills in years due to government cutting duty rates on fuel.

    For once, why don’t they be a ‘good corporate citizen’ where it counts when it affects the average guy on the street. They do enough charity stuff, but people see through that like a corona beer. Time for them to step as well as fueling stations around the country to keep prices / bills in check.

  7. Anonymous says:

    This seems fair enough. CUC are an excellent power provider, and I don’t begrudge them a cent.

  8. Anonymous says:

    Gobbly goop to me.

  9. Panda Ring says:

    CUC says “jump” and ERA says, “how high?”

  10. Anonymous says:

    The Government giveth back, CUC taketh away. AKA Corporate greed.

  11. Sammi blue says:

    I don’t understand this. Didn’t they just got 25 cents tax off each gallon of diesel? And another 50 cents reduction is promised for nest year.Isn’t that a savings to them. Even though they say it work out to less than a dollar I still don’t understand why thy are so greedy and mean.. They are only doing because they can. I hope they realise they can’t carry it with them – in the end it will all burn up.

    • The cost of fuel is still lower and that will reflect on your bill despite this up in the fee taken by CUC – they are 2 seperate issues. the prevailing increase in price for your monthly basket of goods has been around 2-3% each year since 2008 so this is a pretty good deal vs eg the increase in egg prices.

      However, their genuinely needs to be an open conversation in cayman about how we plan for our future energy needs – our reliance on oil and how far out of our control the pricing is going to continue to be a problem. The piecemeal use of solar power is also incredibly detrimental to the average man ( the only people who can afford to install capital intensive self producing energy sources are already rich putting further burden on the poor to support the only viable public energy supplier).

      The comparison of Cayman to the ‘region’ is an unacceptable comparison – in this case they would attempt to compare a first world, highly developed nation with one of the highest living standards in the world to third world nations in our region eg Haiti. This is ridiculous benchmark and they know it! who do you think you are fooling?

      I think that cuc have been waiting for years for a govt to come along and ask them to partner for a long term sustainable solution to power cayman – noone has had the balls to give them an ultimatum yet – in the mean time good people like Mr Farrington are negotiating the best deal possible.

    • Pogo says:

      The fuel duty is a pass through to government. CUC doesn’t get to keep it – CIG gets ever dollar. When the government puts 25 cents on fuel, the price CUC gets charged goes up by 25 cents, and the price of electricity gets increased to recover that 25 cents – no more, no less. Same issue when the price goes down. You are worrying about the wrong issue. The sensitive issue is their long term contract with CIG under which they are allowed to set the price to ensure a guaranteed profit and even guaranteed rate of return on capital investment – that’s what is triggering the latest price increase – nothing to do with fuel. Now a contract of that sort is entirely normal for public utilities – the critical piece in protecting the public is a) negotiating a tough but fair contract in the first place and b) having a regulator who scrutinises the compliance with the contract with a microscope to make sure the calculations of rate increases are right, but also ensure that compliance with the service obligations are met – amount of interruptions to supply, capacity provided etc.

      • Anonymous says:

        There is no guaranateed rate of return or guaranteed profit in the existing contract. Please re-read the article or go ask the folks at the ERA.

      • Anonymous says:

        You had it correct up until here: “a long term contract with CIG under which they are allowed to set the price to ensure a guaranteed profit and even guaranteed rate of return on capital investment”. There is no guaranteed rate of return under its current licence. CUC does not set the price, it is set by an automatic price adjustment mechanism calculated by a certain % of the CPI increase. The ERA just ensures the calculations are correct. CNS has a penchant for sensationalising these minor, periodic rate adjustments.

    • Anonymous says:

      The reduction in fuel costs and fuel duty are not savings to CUC. The savings are passed directly to consumers in the fuel factor.

      • R. U. Kidden says:

        Excuse me, Anonymous 10:01 .but where did you get this information? Straight from CUC I’ll bet!

    • Anonymous says:

      Sammi – they don’t pay the cost of the fuel or the duty – we do. So taking the tax off benefits us, not CUC.

  12. B. Hurlstone says:

    Where is our reduction in our electric bills? Hasn’t the price of fuel dropped dramatically? Why is CUC raising our bills? Is the ERA in CUC’s pocket?

  13. Anonymous says:

    1) does the regulator (of the sole power generator…) ever not agree with any CUC proposal?
    2) when have CUC ever decided that instead of raising rates and screwing the consumer that they could instead raise money for inward investment by reducing the level of dividend payout to shareholders….

    Thought not…just another day in paradise!

  14. Nonymouse says:

    I would also like such a licence to print money.

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