NEVLEC Initiatives to Minimize the Impact of Fuel Price Increases

One of the critical objectives of the Nevis Electricity Company Limited (NEVLEC) is to keep the cost of electricity to consumers to the lowest level possible. Several initiatives are being pursued to achieve this over the short, medium and long term.

The current major driver of cost to consumers is the cost of fuel. NEVLEC currently relies on the use of diesel fuel for the production of electricity. This is very expensive and exposes NEVLEC and our customers to international price movements, given that this fuel has to be imported at prices that are indexed to international benchmarks.

In order to ensure that NEVLEC can recover the cost of fuel and be able to pay its suppliers, the current tariff has a Fuel Cost Adjustment Factor (FCAF) or Fuel Surcharge. This figure is generally calculated on a monthly basis and passed through to consumers.

Given the rapid increases in fuel prices, since last year NEVLEC has been implementing a number of measures to minimize the impact of fuel prices on customers. These include the following:

  • Applying a cap at EC$0.29/kWh for the FCAF for the months of June, July and August when the calculated Fuel Surcharge (FCAF) was EC$0.31/kWh, EC$0.32/kWh and EC$0.31/kWh respectively. This resulted in significant savings to consumers.
  • With oil prices continuing to rise and the need to recover costs to pay fuel suppliers, NEVLEC transitioned to six months moving average for the Fuel Surcharge in September 2021. This means that the average price for the last six months is used for the Fuel Surcharge rather than the instantaneous monthly values. The benefits of this approach include the following:
    • During rising oil prices, the cost to consumers is reduced;
    • There is less volatility in movements of the Fuel Surcharge (FCAF) and thus electricity rates do not experience erratic changes from month to month;
    • NEVLEC will get a chance to recoup costs for fuel when oil prices start to descend on a sustainable basis.

The figure below indicates the impact of NEVLEC’s initiative on the Fuel Surcharge (FCAF) charged to consumers.

In addition to the above, NEVLEC pursuing the following:

  • Commissioning of a new generating unit which is more efficient and will thus reduce fuel consumption per kWh of power generated. This will thus provide additional savings to consumers.
  • Working with the wind farm owners to improve output from that facility, which will reduce the generation required from burning fuel.
  • Development of new renewable energy sources for electricity with emphasis on geothermal, wind and solar power projects.
  • Implementing a program to assist customers with financing and implementation of energy efficiency measures to reduce their consumption and monthly bills. This program is currently being launched with the first customer being the Alexandra Hospital. The program will later be expanded to include all categories of customers.

NEVLEC continues to focus on reducing the cost of electricity to our valued customers while improving the quality and reliability of service. We thank you for your patience and understanding during this time.