The Regulatory Authority of Bermuda (RA) recently approved and enforced an 8.59% increase in the residential power tariff. This price hike could raise the average monthly residential power bill by $20 to $100—a heavy blow to Bermuda residents.

Rather unsurprisingly, this is not the first time BELCO has convinced the RA to raise power costs, and it’s certainly not the last. Bermudian electricity is already the most expensive in the world, yet there’s no end to these blatant price hikes. Why do we have to pay so much for power, and what can we do about it?

Why Bermuda’s Power Costs Keep Rising?

BELCO relies on its two relatively low-output electric generators to power the island. These generators run on fossil fuel imported from the mainland. Producing power this way is understandably expensive. But that’s not the whole story.

BELCO calculates its rates based on a “minimum revenue guarantee.” In other words, BELCO sets a per unit price that ensures the company makes enough money to keep going. Meanwhile, the RA checks, reviews, and approves BELCO’s allowed revenue.

Using this pricing model, BELCO must increase the per-unit price to remain profitable if fewer people purchase power. This is exactly what’s happening right now. There are fewer and fewer people buying power from BELCO, forcing the remaining consumers to pay more.

It’s easy to blame the growing shift to solar across the island for the dwindling demand for power. While solar PV adoption has certainly dented BELCO’s sales, an even bigger factor is at play here.

Bermuda’s population has dropped over the last couple of years. In 2022, the population of Bermuda fell to 63,542, following a five-year streak where the death rate has surpassed the birth rate. This means fewer people are buying BELCO’s power, leading to inevitable price hikes.

Solving Bermuda’s Power Question

What is the Bermudian government doing to cushion its citizens against the high cost of energy?

For starters, Jason Hayward, the Minister of Economy and Labour, plans to increase Bermuda’s working population by 8,418 persons come 2027. This plan is detailed in the 2023 – 2027 Economic Development Strategy. Hon. Hayward does not explicitly say whether the move aims to cut energy costs, but it most definitely will. With more residents, the island’s energy financial burden is spread across more consumers, lowering the cost per unit of power.

However, growing Bermuda’s population by about 1,684 persons per year for five years straight is a tall order, perhaps even too ambitious. Whether the current administration can actually pull this off remains to be seen.

On 17th July 2024, the Premier and Minister of Finance, Hon. David Burt, announced that the cabinet had just approved a significant cut on energy tax. The Premier said the government will reduce energy tax by at least 50% to relieve the financial strain imposed by the new rates.

But tax relief really isn’t an adequate or sustainable solution to Bermuda’s energy crisis. For one, the tax cut isn’t enough to offset the higher power bill. Plus, the government must make up any lost revenue through other means.

Take Matters into Your Own Hands

We shouldn’t expect electricity prices in Bermuda to come down any time soon. That’s the plain, sad truth. Global fuel prices are only going up, we don’t have the population figures to share power costs, and government tax reliefs are just too little too late.

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