FAR vs FIT: What You Need To Know

Bermuda’s electricity prices are set using several methodologies that enable BELCO to operate efficiently and deliver energy to customers. Two important components of this pricing system are the Fuel Adjustment Rate (FAR) and the Feed-in Tariff (FIT).

 While both the FAR and FIT involve fuel cost as a component, they measure different things and should not be compared directly. 

 Fuel Adjustment Rate:

The FAR reflects the real cost of transporting fuel from suppliers to the power plant. It is comprised of two main parts-the cost of procuring the fuel and government taxes.

1. Procurement

This includes the price of the fuel itself,shipping it to Bermuda and storing or handling the fuel once it arrives onisland. Global oil prices directly impact thecost of heavy fuel oil(HFO) and no.2 diesel oil which are primarily usedby BELCO.

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2. Taxes

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The FAR also includes two government taxes:

·       A UNESCO World Heritage Tax

·       AFuel Tax (per barrel)

In July 2025, the Government of Bermuda reduced fueltax on electricity from $0.08 to $0.04 per litre to help lower customers’overall bills. 

The FAR is a cost recovery mechanism, meaning anyincreases or decreasesin BELCO’s actual costs are passed directly on tocustomers. That is,there is no profit added.

The FAR is updated quarterly based on actual and projected fuel costs and electricity sales.

In September 2025, the RA approved FAR at a rate of 13.799 cents for Quarter 4 (Q4) of2025. As of December 2025 it was announced that the FAR will remain the same for the period of January 1 to March 31, 2026. 13.799 cents

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Simplified formula: Total fuel cost ÷ Total sales (kWh)

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Feed-in Tariff (FIT)

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The Feed-in Tariff (FIT) is the rate that BELCO pays to Distributed Generators (DG) who generate their own renewable energy—such as solar energy—and any excess supply of electricity is sent back into the grid. In other words, if a home or business produces more solar than it consumes, BELCO buys that excess energy at the FIT rate.

The Fit is set quarterly by the RA using a methodology based on the avoided cost of generation.

This means that the FIT reflects the marginal cost of producing one additional unit of electricity, which is the cost BELCO avoids because it receives renewable energy from customers.

In September 2025, the RA released the FIT Report for Quarter 4 (Q4) for which the Fit has been set at $0.1029per kWh

The difference between the FAR and FIT is by design, not by error. The RA’s methodology ensures that DG customers are paid based  on the savings their energy creates for the system, not the full retail rate customers pay for electricity. This prevents non-DG customers  from unintentionally subsidizing DG customers.

Simplified formula:

Total Marginal (avoided) fuel cost ÷Total exports (kWh)

Summary

Bermuda’s electricity system uses the FAR to ensure customers pay the true, up-to-date cost of fuel, and the FIT to encourage renewable energy by fairly compensating solar producers. These tools serve different purposes but work together to support a fair, efficient, and sustainable energy future.

By maintaining transparent pricing methods, the RA continues to support the island’s transition to cleaner and more resilient energy.

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