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Understanding the Fuel Factor

The fuel factor rate (or power cost adjustment) is a mechanism used to recover the cost of fuel used to produce the electricity consumed by each customer. It is calculated monthly, and is based on the fuel consumed for the specific period and determined by the actual price of fuel at the time it is purchased, from our supplier, Sun Oil Limited.

FortisTCI is a government-regulated utility and operates pursuant to the Electricity Ordinance and the company’s licenses and takeover agreements. As outlined in the law, increases and decreases in the price of fuel are passed on to customers through the fuel factor or power cost adjustment.

The Fuel Factor Rate is approved monthly by the Electricity Commissioner. The fuel factor fluctuates with world market prices and allows for both reductions and increases to the consumer.

The average price per gallon of fuel consumed for a specific month is reduced by $0.90 per gallon (base cost per electricity ordinance and shall be borne by the company.) Any cost above $0.90 is considered recoverable at a rate specified by the electricity ordinance (Part V, section 32). Therefore, the first $0.90 per gallon is absorbed by the FortisTCI. Only the cost above $0.90 is recovered from the customer.

The fuel factor rate or power cost adjustment is calculated as outlined in the Electricity Ordinance. The calculation is done monthly, based on the fuel consumed for the specific billing period and determined by the price of fuel at the time it is purchased, less the cost mandated in the ordinance to be borne by the company.

Because FortisTCI is a regulated electricity company, the adjusted fuel factor rate after the calculation is sent to the government’s Energy and Utilities Commissioners Office each month for verification.

Your electricity bill is made up of two parts. The electric rate and the fuel factor, (or power cost adjustment). The electric rate is a regulated cost and is outlined in the Electricity Ordinance, Section 32. It covers the company’s operational costs. The fuel factor (or power cost adjustment) is the recoverable cost of fuel used to generate electricity using diesel fuel.

The fuel factor is mandated within the Electricity Ordinance, as a mechanism to recover the cost of fuel that is used to produce electricity. FortisTCI uses low Sulphur diesel to generate electricity throughout the Turks and Caicos Islands. Although renewable energy is the fastest growing source for electricity generation, most of the world’s electricity is still generated by fossil fuels, as reported by the U.S. Energy Information Administration. In addition to diesel and renewable energy like solar and wind, there are several other types of sources used to generate electricity including coal, natural gas and petroleum, to name a few. Without a fuel source, electricity cannot be generated.

The fuel factor or power cost adjustment has always been a cost associated with electricity generation and will continue to be for the foreseeable future. Even the Resilient National Energy Transition Strategy (R-NETS) maintains the use of fossil fuel generation in the country’s energy mix because TCI is an island nation that requires a firm energy source. In some places across the Caribbean, in the United States and Canada, and even where renewable energy sources are prevalent, the fuel factor or power cost adjustment applies but may be referred to in other terms such as energy charge or fuel surcharge. These fees are passed on to customers and are separate from the base rate charge of electricity.

No. The fuel factor has always been a cost associated with electricity. As a matter of fact in the Caribbean, even in large markets, such as the Unites States and Canada, you will often find an “energy” charge separate and apart from the “capacity” charge, per kilowatt hour.

No. Most electricity customers whose utilities use some form of fuel to generate electricity pay a fuel charge.

The fuel factor is directly linked to the rise and fall of fuel prices in the world market. If the price of fuel rises, it is reflected in the monthly fuel factor calculation. If the price of fuel decreases, it is also reflected in the monthly fuel factor calculation. Please bear in mind that all calculations are done based on the cost of fuel at the time it is purchased from our fuel supplier and a lag of approximately two months in both increases and decreases are likely as the result of the supply chain to the TCI.

FortisTCI uses low sulphur diesel to generate electricity, which is purchased under contract with the company’s fuel supplier Sun Oil Limited. Low sulphur diesel is a cleaner fuel considered to have a reduced impact on the environment compared to heavier fuel options available on the market.

The cost of fuel includes refinery fees, shipping and trucking costs, as well as government taxes and fees. The supply chain to TCI currently starts at the refinery, followed by bulk shipping to the Bahamas, transshipment from the Bahamas to the TCI due to the absence of a deep water harbor here, trucking from South Dock to the plant on Leeward Highway, or costs for interisland shipment and delivery. Each step in the process incurs fees that impact the final cost of fuel purchased by the company to generate your electricity.

Due to the long and convoluted supply chain, and because there is a need to purchase an advanced supply of fuel to ensure energy delivery to customers for up to several weeks at a time, world market fuel prices are generally not reflected in the fuel factor or power cost adjustment for approximately two to three months.

FortisTCI is committed to the continued integration of renewable energy to diversify the country’s energy profile. By partnering with customers through the company’s Utility Owned Renewable Energy (UORE) Program, as of December 2019, 1MW of distributed rooftop solar was installed on the grid. The company is looking to increase its solar penetration in the coming years, in line with the Resilient National Energy Transition Strategy (R-NETS), which has been developed by the Turks and Caicos Islands Government, FortisTCI and the Rocky Mountain Institute. The R-NETS is a comprehensive energy plan for TCI for the period up to 2040 and calls for a significant increase in renewable energy sources to help power the islands.

Research continues to find ways of reducing the cost of electricity to customers while also ensuring a reliable and resilient service. FortisTCI believes that new sources of electricity should not increase the cost to customers, nor should it reduce the safety and reliability in service.

FortisTCI is also working to deliver the most reliable and cost-efficient supply of electricity to customers today and continues to invest in new generating equipment that will ensure a balance between price and reliability. The company’s renewable energy generating projects are based on a similar consideration, in addition to benefits to the natural environment.

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