Grand Cayman, Cayman Islands --- (METERING.COM) --- December 21, 2007 - A new operating agreement between the Cayman Islands’ Caribbean Utilities Company, Ltd (CUC) and the territory’s government will lead to average residential consumer rate reductions in excess of 15 percent and the establishment of an electricity regulator.
The agreement covers new 20 year licenses for the CUC for the generation, transmission and distribution of electricity in Grand Cayman. The terms include competition for future generating capacity and general promotion of the use of renewable sources of energy.
Consumer savings will arise from average reductions of 3.25 percent in base rates, the removal of the Hurricane Ivan Cost Recovery Surcharge which will reduce bills by 4.7 percent, and the implementation of a government rebate on fuel used in electricity generation.
Under the agreement an Electricity Regulatory Authority (ERA) will be established, with the overall responsibility of regulating the electricity industry in the Cayman Islands. At the same time a new regulatory fee of 0.5 percent of electricity revenues will apply to customer billings for consumption over 1,000 kWh per month as a pass through charge on a per kWh basis.
Following the initial rate reduction, which is expected to be reflected in the January 2008 billings, CUC's base rates (excluding fuel costs) will be frozen through May 31, 2009 and then subject to an annual review each June thereafter.
CUC’s rate of return on rate base will now be targeted in the 9-11 percent range to ensure rate predictability and provide further incentives for it to operate efficiently and keep its cost increases below inflation.
"This Agreement in Principle will benefit consumers in many ways, starting with substantial base rate reductions and rate restructuring, on top of rates that have been frozen for more than five years,” said Cayman Islands minister of infrastructure and communications in a statement. “Further, for the first time, with the advent of the ERA, CUC will be regulated by an independent statutory authority on many aspects of its operations, including rates, environmental standards and policies to encourage renewable energy.”
On behalf of CUC, president and chief executive officer Richard Hew said, "The electricity industry globally is facing difficult times in terms of increased costs and environmental challenges. A significant amount of time and effort has been dedicated to these negotiations to ensure that the blueprint which we will follow to provide efficient, reliable service in Grand Cayman for many years to come is fair, effective and appropriate.”