Cayman Islands consumers can’t stand another rate hike

A local utility company recently indicated on its social media page that the dollar value of fuel costs on electric bills will increase in the coming months and consumers should take steps to assess their properties to identify areas where they can make adjustments. which will lead to reduced energy use. While there are some individuals who will be able to make these adjustments without any material impact to their daily lives, there are others who may find the proposed rate adjustment challenging, in part, due to the high cost of living in Cayman. .

For a better understanding of this, in particular how rate increases can affect the cost of living and how it can affect people differently, it is helpful to look at the cost of living data published by the Bureau of Economics and Statistics ( ESO) from the Government of the Cayman Islands for the past two years.

Overall, ESO data shows that the consumer price index (often used to measure inflation and the cost of a basket of goods and services) increased by 7.6 percent in the fourth quarter of 2021.

In relation to housing and public services, the ESO said:

The housing and utilities index increased by 11.5% in the fourth quarter of 2021. The main contributors to this increase were electricity rates, which increased by 26.5%, and water supply, by 13.1 %. In addition, actual rents paid by tenants and rents imputed to owner-occupants increased by 5.1% and 10.7%.

For house cleaners and others earning less than $3,000 a month, there isn’t much left after dealing with car loan, mortgage or rent payments, spending on groceries and sending funds abroad to support families. Therefore, a rate increase for people in these categories can be a big deal, resulting in the choice to feed their families or keep their lights on.

On the other hand, the five highest median earning occupations in the Cayman Islands, which are judges, lawyers, managing directors, CEOs, and dentists who typically earn six-figure annual incomes, may have more (relatively speaking) after monthly commitments to act as a buffer against the proposed increase in electricity prices this year.

ripple effects

For those who are pushed over the financial limit by rate increases this year, they can turn to the government’s Needs Assessment Unit or local charities to supplement their living expenses. This will increase the dependency of some people in these areas, the opposite of what the current government seems to be trying to do, i.e. the government is trying to get people off welfare and into jobs that provide them with the support adequate finance.

Regulator also in sight

In addition to charities, consumers will look to the Office of Regulation and Competition for Public Services (OfReg) for a solution to keep utility prices low. However, due to the way current laws are drafted, OfReg’s board of directors is likely to face a dilemma in this area.

The challenge is that while OfReg should act in the public interest in situations such as rate increase proposals, OfReg is required by law to ensure that suppliers to the fuel sector make fair and reasonable profits.

Without a definition in the laws of “fair and reasonable returns”, what is fair and reasonable will be left up to discussions between fuel sector suppliers and OfReg executives at the bargaining table.

Failure to clarify this definition and confirm the interests of OfReg that it really should act in favor of will ultimately lead to frustration, confusion and anger from members of the public, directed at OfReg, if the higher dollar value proposed high of the cost of fuel is actually reflected. in utility bills later this year.

Instead of allowing low-income consumers to break their backs with tariff increases, OfReg’s new board of directors should propose changes to the relevant laws/Laws, along with suggesting to the government that the government reduce or eliminate tariffs on fuel for a while. period. Doing so can (hopefully) prevent any higher dollar value of fuel costs from being passed through to consumers through electricity bills, which currently accounts for about 50 percent of monthly electricity bills. , as shown in the following utility bill snapshot provided by a Loop reader.

The other alternative, of course, is to ask the electricity supplier to assume the proposed increase in the cost of fuel; however, this may result in lower dividends or no dividend distribution for shareholders, which can be a difficult conversation for the utility provider. their owners.

Electricity bill

Electricity bill

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