Higher max rates for lights, drinking water in Bonaire, Saba and Statia

The maximum rates for the production and distribution of electric­ity and drinking water in Bonaire, Saba, and St. Eu­statius will increase effec­tive January 1, 2022. This increase is mainly due to the fact that the price of oil needed to produce electric­ity and drinking water has risen sharply.

The Netherlands Author­ity for Consumers and Markets (ACM) annually sets the maximum rates for electricity for Bonaire, Saba, and St. Eustatius. The ACM also sets the maximum rates for drink­ing water for Bonaire and St. Eustatius. The ACM determines the rates on the basis of the costs in­curred by the producers and distributors. These companies then determine themselves, on the basis of these maximum rates, what they actually charge customers.

Unpredictable oil prices have a major impact on production costs and thus on (maximum) rates for electricity. That is why a vigorous further increase in sustainability of produc­tion on the islands will not only contribute to a better climate, but actually also to more stable electricity and drinking water rates, because sustainability re­duces the dependence on oil, it was stated in a press release.

In previous years, the Min­istry of Economic Affairs and Climate Policy and the Ministry of Infrastructure and Water Management have always provided sub­sidies to the companies so that they could charge low­er rates to customers. The Ministries indicated that they would do the same for 2022.

Bonaire

For Bonaire, the maxi­mum usage rate for elec­tricity increases from ap­proximately US $0.29/kWh to approximately US $0.33/ kWh. The maximum limit for the Pagabon rate (pre­paid) increases from ap­proximately US $0.50/ kWh to approximately US $0.53/ kWh. These increases are mainly due to expected higher costs of the produc­tion of electricity. For the consumption of an average household, this means an increase of approximately US $8 per month on the electricity bill.

The maximum rate for the consumption of drinking water decreases from ap­proximately US $3.81/ m3 to approximately US $3.74/ m3. For an average house­hold, this means a drop of approximately US $075 per month on the bill.

Saba

For Saba, the maximum electricity usage rate in­creases from approximately US $0.37/ kWh to approxi­mately US $0.41/ kWh. This is mainly due to expected higher costs for the produc­tion of electricity. For the consumption of an aver­age household, this means an increase of about US $9 per month on the electric­ity bill.

St. Eustatius

For St. Eustatius, the maximum electricity us­age rate increases from approximately US $0.32/ kWh to approximately US $0.36/ kWh. This increase is mainly due to expected higher costs for the produc­tion of electricity. For the consumption of an average household, this means an increase of approximately US $8 per month on the electricity bill.

The maximum rate for the use of drinking water increases from approxi­mately US $6.73/ m3 to ap­proximately US $8.62/m3. For an average household, this means an increase of approximately US $19 per month on the bill. Part of this increase is not only due to the increased oil price, but also because repairs were necessary to the trans­port pipeline.

Annually, the ACM deter­mines the maximum rates on the basis of the expected costs that the producers and distributors will have to incur in order to supply and to be able to continue supplying. To this end, the ACM continuously analy­ses the realised and expect­ed costs of these compa­nies and the ACM assesses these costs, for example, on necessity. The ACM determines the expected costs on the basis of the in­vestments envisaged by the companies. The ACM also includes these plans in its analysis and assessment.

To incentivise the com­panies to work as cost-efficiently as possible, the ACM applies the principle of profit-sharing. This means that if a company succeeds in incurring fewer costs than estimated, it may keep half of the difference as a reward for its perfor­mance. But if, on the other hand, the costs are higher, then the company is only compensated for half of that difference through the rates. Annually, the ACM incorporates this bonus­malus rule into the maxi­mum tariffs.

What makes the maxi­mum rates for electricity and drinking water increase or decrease? Increases or decreases in the maximum rates usually have several causes, but the most impor­tant is usually the develop­ment of the international oil price, because the costs for the production of elec­tricity and drinking water on the islands Bonaire, St. Eustatius and Saba are strongly dependent on the international development of the oil price.

In addition, scheduled investments also play a major role, because an in­vestment in a pipeline or installation is usually a rel­atively large cost item com­pared to the total costs. The latter is partly due to the small scale of produc­tion and distribution on the islands Bonaire, St. Eustatius and Saba and their isolated location. Any investment is then quickly relatively large and conse­quently noticeable in rates.

Also, incidental settle­ments from previous years often play a role in the rates. An important example is the so-called profit-sharing. The ACM applies the principle of profit-sharing to encour­age companies to work as cost-efficiently as possible. This means that if a com­pany succeeds in incur­ring fewer costs than esti­mated, it may keep half of the difference as a reward for that performance. But if, on the other hand, the costs are higher, then the company is only compen­sated for half of that dif­ference through the rates. Annually, the ACM incor­porates this bonus-malus rule in the maximum rates and it can sometimes have a great impact on rates.

Finally, it happens that companies successfully challenge decisions of the ACM. Often, this also has a material impact that is settled in rates in later years. In short, the reasons for decreases or increases are usually not unambigu­ous, but depend on many factors. The oil price is usually the most important factor.

Producers and distribu­tors determine the level of the rates that they charge to customers. However, the rates cannot exceed the maximum rates set by the ACM.

For the time being, the Ministry of Economic Af­fairs and Climate Policy and the Ministry of Infra­structure and Water Man­agement are subsidising the rates in the Caribbean Netherlands. These subsi­dies are passed on to the customers via the produc­ers and distributors in the form of lower rates. As a result, the rates charged, particularly to small-scale consumers, were generally well below the maximum rates. At the time of writing, it is not yet known whether and how much subsidy is provided for 2022, but it is expected that there shall also be subsidies in 2022.

The Daily Herald.