With this press release, the Bureau Telecommunicatie en Post (to be referred to hereinafter as: the Bureau) provides further explanation on the backgrounds of the tariff adjustment for electricity and water per 1 February 2016, as resolved by the Council of Ministers. This tariff adjustment refers to the monthly adjustment of the so-called fuel clause. This is adjusted every month by changing prices of oil products, as well as by the changing proportions of wind and solar energy. The prices are determined on the basis of forecasts for the coming month in combination with corrective calculations regarding the past month.

Besides this, in view of the relevant (market) developments, both locally and internationally, an explanation is provided of the development of the electricity and water tariffs in Curaçao during the past two years.

Adjustment tariffs electricity and water

The fuel clause for electricity will decrease by almost NAF. 0.04 per kWh as per 1 February. This means that the electricity tariff for all tariff groups will decrease by almost NAF. 0.04 per kWh. Thus the household tariff up to 250 kWh decreases from NAF. 0.5132 per kWh to NAF. 0.4736 per kWh, and the corporate tariff from NAF. 0.6229 per kWh to NAF. 0.5833 per kWh.

The fuel clause for water will be decreased by almost NAF. 0.27 per m3 as per 1 February. This means that the water tariff for all tariff groups will decrease. The household tariff up to and including 9 m3 decreases from NAF. 7.5438 per m3 to NAF. 7.2764 per m3, and the corporate tariff will decrease from NAF. 13.0638 per m3 to NAF. 12.7964 per m3.

Explanation new tariffs

The price adjustment of electricity in February is primarily the result of considerably lower fuel costs for Aqualectra. After all, also the regulated prices of the fuels to be purchased by Aqualectra from Curoil will decrease in February due to lower purchasing prices and due to the termination of the ‘60 months recovery’ component, as part of these regulated fuel prices.

There is a positive correction however, of almost two cents per kWh for the month of December 2015. In this month, the fuel prices turned out to be lower than planned, but at the same time the wind parks and the BOO power plant produced more than expected. With the current fuel prices, at present the purchase from these production units (wind parks and BOO power plant) is more expensive than the fuel costs for production by Aqualectra itself.

For water the price decrease in February is largely the result of the above factors, because electricity is used for the production of water.

Price developments

In the past two years, the prices for electricity and water have dropped drastically. The development of the electricity price (average for all tariff groups) is displayed in figure 1. This also reflects the structure of the tariffs, consisting of the basic tariff and the fuel clause. The basic tariff for electricity and water serves to cover the main operational costs of Aqualectra, which include personnel costs, maintenance costs, costs of depreciation, etc., and in principle this is a fixed component within the tariffs. The fuel clause serves to cover the fluctuating costs of fuels and purchase of electricity and is adjusted every month.

Figure 1 Development average electricity price

The tariff has decreased from approx. NAF. 0.77 per kWh in January 2014 to approx. NAF. 0.51 per kWh per 1 February 2016, a decrease of over 30%. During this period the basic tariff of approx. NAF. 0.33 per kWh remained the same. The decrease is the consequence of a lower fuel clause which has decreased from approx. NAF. 0.45 per kWh in January 2014 to approx. NAF. 0.18 per kWh per 1 February 2016. As such, this is a decrease of more than 50%.

The development of the water price (average for all tariff groups) is displayed in figure 2. The tariff decreased from approx. NAF. 11.82 per m3 in January 2014 to approx. NAF. 9.74 per m3 per 1 February 2016, a decrease of approx. 18%. During this period the basic tariff of approx. NAF. 8.09 per m3 remained the same. The decrease is the consequence of a lower fuel clause which has decreased from approx. NAF. 3.73 per m3 in January 2014 to approx. NAF. 1.64 per m3 per 1 February 2016. Just as in the case of electricity this is also a decrease of more than 50%.

Figure 2 Development average water price

Over the past two years, the price development for electricity and water has been dominated by the development of the fuel prices for the production of electricity. A substantial part of the electricity production takes place on the basis of fossil fuels, of which prices fluctuate.
The main fuels for Aqualectra, formerly Industrial Fuel Oil (IFO) and currently the slightly lighter Marine Fuel Oil (MFO), gained considerable price reductions, which led to the lower fuel clauses.

Apart from the reduction of the fuel prices, also extensive changes of the production facilities of Aqualectra contributed to the lower fuel clauses for electricity and water. Construction of a new power plant at Dokweg (‘Dokweg 2’) started in 2014 and became operational in December 2014 with 4 Wärtsilä diesel generators, with a total capacity of 35MW. Simultaneously, the production of electricity and water by (obsolete) steam turbines at Mundo Nobo was stopped. The new diesel generators are much more efficient than the old systems at Mundo Nobo. Through the course of 2014 and 2015, the 56MW of temporarily leased Aggreko diesels was gradually phased out. Since the start of November 2015, there are no more Aggreko units operational, which ran on much more expensive gas oil.

(BT&P publication period: 2016)