In 2022, consumers saw the effect of the highest inflation in years across the board, including their electricity bills. In Bermuda, the Fuel Adjustment Rate (FAR), which directly impacts the price of crude oil, significantly increased by 21% from April to June 2022, largely due to Russia’s invasion in Ukraine.
The first half of 2022 saw a stark increase in the wholesale price of crude oil, which BELCO uses to produce energy. On March 8th, 2022, oil soared to an all-time high per gallon since 2014 after a global ban on Russian energy imports.
Those sanctions on Russian oil and inventory levels thereby caused a supply and demand tension, which led to the steep price increase for oil per barrel. Other volatility factors can be storage levels, the number of productions and imports, delivery constraints, or weather changes. Interestingly, the price of crude oil then declined in the latter of 2022. This is largely due to the coronavirus lockdowns in China which impeded the demand for oil. As one of the world’s top crude oil importers, the effects of China’s restrictions risked a global recession that relied on energy demand.
While analysts predict the price for oil going down from last year, the market will still be volatile. In fact, the recent oil price forecast published by Deloitte LLP indicates price volatility will continue through 2023, as the energy sector tries to balance supply and demand. The Fuel Adjustment Rate decreasing in January 2023 is a direct influence on the overall electricity rates going down.
The FAR in 2022:
Q1: 15.57 cents
Q2: 18.90 cents
Q3: 20.12 cents
Q4: 16.874 cents
In the recent quarter from January 1st to March 31, 2023, the FAR is 14.304 cents.
Now that the FAR is lower, due to the price reduction of fuel, consumers will be eagerly looking to see how it affects their monthly BELCO bill. They will notice a slight increase in their base rate (usage charges), which is the rate charged per kilowatt hour, as well as the Facilities Charge. To take advantage of the lower electricity rates, consumers should try to either maintain or reduce energy consumption. For example, if you consume the same amount of electricity in January as you did in December, then your latest bill will be less. However, if your consumption is more than usual, there will belittle advantage to the reduced FAR on your bill.
Due to price volatility described above, there is no guarantee that fuel prices will not increase. However, there are additional ways consumers can lower their consumption and save more by taking advantage of these energy savings tips.