PHILIPSBURG--Rapidly decreasing fuel prices will have their effect on local energy prices, but the general public will have to be patient.
"The trickledown effect of these decreases takes an average 45 days before consumers can enjoy some much-needed relief. This means based on present trends, by February's billing period, consumers will experience further relief," GEBE management stated in a press release on Wednesday.
"The main objective of GEBE is always to ensure that the fuel clause is as low as possible," GEBE Chief Operations Officer and Managing Board President Romelio Maduro said.
According to data provided, prices have dropped and will continue to do so. During the year 2014, GEBE listed the July price as 0.375 NAf./kWh, August as 0.366 NAf./kWh, September as 0.360 NAf./kWh, October as 0.338 NAf./kWh, November as 0.318 NAf./kWh, and December as 0.2648 NAf./kWh.
"We operate the power plant as efficiently as possible using heavy fuel oil (HFO) to keep costs down and we balance this with effective monthly collection of revenues to maintain a sound operating capital," he said.
In reply to consumer curiosity based on rapidly dropping international prices GEBE said, "The challenge with the windfall from the reduced energy price on the world market is timing and that translated means that the St. Maarten consumer cannot suddenly see the benefit.
"This is largely due to the company's limitation when it comes to storage of fuel it needs to operate monthly. Fuel purchased in a given month is delivered and booked at a set price quoted on the date of purchase.
"This means that the utility company's operating cost will be based entirely on that amount booked and the net sales derived from it. If after that purchase date the price suddenly falls, it will have no effect until GEBE makes its next purchases in order for the company to have an opportunity to offer some relief to its consumers.
"Purchased fuel takes a few days to be delivered to St. Maarten via ocean, and when it arrives it is stored for 15 days maximum at fuel supplier St. Maarten, as there is presently no storage alternative to allow larger or unscheduled purchases and deliveries.
"Besides this, all consumers also pay their bills the following month, which adds up to the 45 days. When this fuel is finally used to generate energy, the consumer pays based on that price as it is calculated in the fuel clause.
"The fuel clause is total fuel and lubricant cost per month – at the time of purchase – divided by the monthly net sales. However, that net sales is only determined at the end of a consumption period and this is then billed to consumers."
Other factors affecting the fuel cost include shipping to St. Maarten. These all form part of GEBE's direct expenses which the company said it offsets only by the collected revenue.
"In order for us to operate efficiently, collection of revenue is extremely important for the company's ability to provide continued and efficient service to its consumers," GEBE said.
It said it was not using the "hedge strategy," which meant that it would have entered into an agreement with its supplier to have an across-the-board price so that the spike in price would not necessarily affect the consumer.
"The challenge though is that when the price on the global market falls below this agreed price, neither GEBE nor its local consumers could benefit under such an agreement, as they would need to continue paying the originally-agreed hedge price," GEBE said.
It added that the price of the fuel it purchased was determined first by the prices of the Eastern Caribbean Posting for this region and differed from the United States. In the past, the Eastern Caribbean posting consisted of Shell West, Petro Trin and some other postings, but at present the only company trading is Petrotrin Postings.
"Also important to note is that the price differs from country to country based on the type of fuel needed as some countries may have older power plants and as such use a more inferior quality product to generate energy. The fuel used in St. Maarten consists of HFO and light fuel oil (LFO) also known as gas oil.
"Our fuel supplier delivers the supply to us adding their cost on the oil which becomes the purchase cost to GEBE. So basically we have to pay this price to get it to the island," Maduro was quoted as saying.
He added that it was GEBE's responsibility as a government-owned company to educate the general population about the fuel clause and how fuel pricing affected the consumer in St. Maarten.