It is vital that consumers fully understand the charges on their BELCO bill. There are different fees on the bill and concerns about each rate is heightened especially when rates are increasing. Consumers rightfully have questions about how the rates are set and what is the importance for specific charges.
Transparency about rates is a key factor for the RA. We want you to understand your BELCO bill and understand what you are paying for.
In this three-part series of articles, we break down each section of your BELCO bill and answer frequently asked questions about each charge. The first section starts with the Retail Tariff or what is known as Usage Charges.
What is the Retail Tariff?
The Retail Tariff is the rate (tariff) charged to BELCO’s customers and is billed per kilowatt hour (kWh).
This is the rate that electricity is sold at to the consumer. Your total bill reflects the energy consumption for the total kilowatt hours (kWhs) used.
The control of this portion is the consumers hands as it is based on your consumption or usage of electricity for the month.
Where is the ‘Retail Tariff’ located on my BELCO bill?
The words Retail Tariff are not printed on your BELCO bill, it is reflected in the energy (or usage) charge, which is shown as TOTAL USAGE CHARGES on your BELCO bill. The kilowatt hours (kWhs) are divided into three tiers per billing period. These tiers and total Usage Charges are based on your personal electricity usage (consumption) habits during each billing period.
- Tier One: First 250 kWhs
- Tier Two: Next 250 – 700 kWhs
- Tier Three: Over 700 kWhs
You can impact the Usage Charges on your BELCO bill by adjusting how you use (consume) electricity in your home or business.
Tier One charges the lowest rate per kWh, which provides incentives for BELCO’s customers to reduce their electricity usage (consumption) as much as possible to help keep their total Usage Charges down.
Tier Two rate per kWh is approximately 40% higher than Tier One, which is equal to approximately 9 cents more per kWh.
Tier Three rate per kWh is approximately 60% higher than Tier One, or equal to approximately 19 cents more per kWh; and 33% higher than Tier Two, or equal to almost 10 cents more per kWh.
Who is impacted by changes to the Retail Tariff?
All customers who purchase electricity from BELCO are impacted by changes in the Retail Tariff. The Retail Tariff is the rate BELCO is allowed to charge customers for the sale of electricity that is supplied to your home or business.
Whether the Retail Tariff goes up or down, new rates will appear on your BELCO bill when the Retail Tariff changes. These changes have an impact on residential customers, commercial businesses, and large customers, like hotels.
While customers of BELCO do not have direct control over changes to the Retail Tariff, there are steps you can take to minimize the impact of electricity rate changes on your BELCO bill. Learn more about Energy Savings Tips that can help reduce your monthly BELCO bill.
Why did the Retail increase in 2022?
Recently, BELCO made a series of investments to ensure that Bermuda residents have access to a reliable supply of electricity and by law, the RA is mandated to consider their recovery of those costs. In 2021, BELCO agreed to defer the recovery of a portion of their investments, and in 2022, proposed an increase of 16% to energy bills to recover their costs.
Following a comprehensive assessment, the RA rejected BELCO’s proposal for a 16% increase and determined that on average, the overall Retail Tariff increased by 7.5%, effective April 1, 2022.
This equates to an increased change of between one penny to just over two cents per kWh, depending on the tier of usage charges.
Why does the RA have to review the Retail Tariff and allow changes to it?
BELCO is a for-profit business, which is regulated by the RA. As a monopoly, or sole producer of bulk electricity for sale to Consumers across Bermuda, BELCO is not allowed to determine their own rates. Regulation means that BELCO’s rates and profit margins must be approved by the RA. Mandated legislation states the RA will review and decide on proposed new electricity rates from BELCO
This does not mean that all rate change proposals are accepted or approved by the RA.
What is the Retail Tariff review process?
- The RA requests BELCO to submit its initial Allowed Revenue application.
- BELCO submits proposals to the RA with requests to their Allowed Revenue and rate changes. This is known as a Retail Tariff proposal.
- The RA conducts an initial review, including request for addition information and site visits.
- BELCO submits any RA request for addition information.
- THE RA conducts a final review and adjustments to the Allowed Revenue.
- The RA sets BELCO’s Allowed Revenue.
- The RA requests BELCO proposed Retail Tariffs to align with the Allowed Revenue.
- BELCO submits the proposed Retail Tariffs.
- The RA approves or modifies and sets the final Retail Tariff rates.
Once the Retail Tariff review is complete, it will finalize the cost for the following components of your BELCO bill:
BELCO’s proposal for Retail Tariff adjustments is not necessarily what the RA will allow for rate changes. The RA can approve, modify, or reject BELCO’s proposal for rate changes if the RA decides the expenses in BELCO’s proposal are not necessary, or do not work for the benefit of BELCO’s customers at that time.
The Retail Tariff does not set the cost for the Fuel Adjustment Rate (FAR), which is approved by the RA on a quarterly basis.
What factors are included in the Retail Tariff review?
The in-depth analysis includes:
- costs to generate, transmit and distribute electricity, including operations, maintenance, depreciation, amortisation;
- administrative costs;
- allowance for capital investments; and
- reasonable rate of return on capital investment(s).
The rate review also considers the degree of necessity for BELCO’s proposed projects, combined with global issues, the current economy, and other future projections that could impact Consumers in Bermuda. Ultimately, the Retail Tariff proposal and review process is designed to protect the interest of consumers and maintain a steady balance for the cost of electricity.
How does the Retail Tariff provide protection for consumers?
Consumer Protection is a legal mandate for the RA. Regulating Bermuda’s Electricity Sector provides protection for Consumers. One way the RA provides protection for Consumers is by reviewing the Retail Tariff every two years.
The Retail Tariff is the rate that BELCO is allowed to charge Consumers for each kiloWatt hour (kWh) of electricity that is used by the Consumer. Legally, BELCO is not allowed to set their own rates for the sale of electricity.
BELCO is a regulated Service Provider, which means their rates and profits must be approved by the RA. This control mechanism is in place to protect Consumers because BELCO is a monopoly and Bermuda’s only producer and supplier of bulk electricity.
By law, the RA is required to accept a Retail Tariff proposal from BELCO every two years, which includes BELCO’s requested rate changes. The RA considers several factors during the rate review, electricity rate changes are not based solely on BELCO’s proposed Retail Tariff adjustments.
The RA can modify or reject any or all parts of what BELCO proposes for rate changes if the RA decides the expenses in BELCO’s proposal are not necessary or beneficial for Consumers at that time, which is another form of Consumer protection.
It is important to remember that the Retail Tariff can fluctuate. In recent times, Bermuda’s electricity rates decreased two years in a row. The RA reduced the Retail Tariff in January 2020, which provided financial relief for Consumers, and was followed by a second reduction in electricity rates in June 2021 to help Consumers offset the impact of the Covid-19 pandemic.
Go to www.ra.bm/consumer-protection/ to learn more about what the RA is doing to protect Consumers.
When did the new Retail Tariff go into effect for 2022?
The new Retail Tariff went into effect on April 1, 2022. The next Retail Tariff review is scheduled to be conducted in 2023 which will cover rates for 2024 and 2025.
In the next part of this series, we’ll discuss the Facilities Charge.