BL&P: Fuel Hedging was meant to guard against high light bills
Fri, 01/13/2017 - 12:00am
REDUCING the risks of higher light bills to Barbadians was the lone reason the Barbados Light and Power Company (BL&P) sought to introduce hedging on the Fuel Clause Adjustment (FCA).
This is according to Kim Griffith-Tang How, Director of Customer Solutions at the BL&P, during a news conference yesterday.
The application for hedging was turned down last month by the Fair Trading Commission (FTC) which ruled that the company did not make a strong case and that were the go-ahead given to the company to introduce the measure, it would have resulted in higher light bills to consumers.
Griffith-Tang How explained that hedging is a tool to reduce customers’ exposure to extreme fuel price movements and to lower the risk of price increases to our customers.
It is different from speculation which involves taking risks or gambling to make a profit.
“At no time was the Light and Power contemplating speculation on fuel prices as reported in some areas of the press,” the BL&P official said. “We were simply seeking to reduce the risks of fuel price increases to our customers,” she said.
She remarked that the Light and Power does not profit in any way from the FCA mechanism and neither would the company have benefited financially from the proposed fuel hedging programme.
According to her, “The FCA is a pass through charge which recovers all fuel related costs used in the generation of electricity. These costs are reviewed monthly by the FTC. Similarly, it was contemplated that costs associated with the administration of hedging would also be a direct pass through.”
The Light and Power will not be appealing the FTC decision but it hopes to make another application to have the matter dealt with. “We accept the decision,” Griffith Tang-How said. It is the second time the company had been seeking to introduce hedging and the first application was also turned down.
Managing Director, Roger Blackman said that the application to the FTC was a response coming from customers. He stated that in recent times one had been seeing an increase in oil prices from about US$37 a barrel in early last year to over US$50 currently, and the subsequent increase in light bills. He reasoned that if a hedging agreement was in place, there would have been lower light bills.