Law change to secure Saba, Statia electricity subsidies

The Second Chamber of the Dutch Parliament will shortly be handling a change to the Caribbean Netherlands Electricity and Drinking Water Law, which will regulate, among others, an effective use of subsidies to maintain affordable utility prices and the supervision on the boards of the utility companies in Bonaire, St. Eustatius and Saba. writes The Daily Herald.

Dutch Minister of Economic Affairs Henk Kamp stated in a recent elaborate document to the Second Chamber’s Permanent Committee for Economic Affairs, that an adjusted regulating framework was merited, considering the “considerable” subsidies to ensure that electricity tariffs in St. Eustatius and Saba remained affordable after the start of the new local utility companies on January 1, 2014. The law proposal and the related policy regarding the electricity and drinking water facilities in the Caribbean Netherlands have two major objectives, explained Kamp: creating a solid management structure and the improving of the quality and affordability of service through a subsidy basis. The law proposal also regulates the appointment and dismissal of the members of the Supervisory Board of Directors of the utility companies on the islands. In the future, the appointment and dismissal of these members will require approval by the Minister of Economic Affairs. The supervisory boards will have a member from the Dutch energy sector to limit conflict-of-interest situations, due to the small scale of the islands.

Saba’s electricity company currently has three board members, and St. Eustatius and Bonaire each has five board members. The utility companies will be placed under the supervision of the Netherlands Authority for Consumers and Markets ACM, as well as the Human Environment and Transport Inspectorate ILT of the Dutch Ministry of Infrastructure and Environment. ACM will cover the economic side of the supervision and will be authorized to set the production price and the tariffs the distributor will charge the consumers. ILT will cover the technical aspect of supervision. The Minister of Economic Affairs will have the final responsibility for the electricity supply.

The Executive Councils of St. Eustatius and Saba initially protested against what they termed as an “undesired meddling” in the authority of the local government, because the conflict of interest situation didn’t arise at the newly-established utility companies. Kamp stated that the Executive Councils eventually showed understanding for the fact that an adjusted regulating framework was merited to secure an effective spending of the large subsidies that were needed after the establishing of the new utility companies on the two islands. Kamp said he was hopeful the utility companies in Saba and St. Eustatius would be run more efficiently now that the islands had taken over the responsibility from St. Maarten’s utility company GEBE.

The Ministry of Economic Affairs, responsible for subsidies of the electricity network in the Caribbean Netherlands, in 2014 paid US $480,000 and US $500,000 to keep electricity prices in St. Eustatius and Saba respectively at an affordable level for consumers. Bonaire received US $5 million for this purpose.

The subsidies for drinking water, a responsibility of the Ministry of Infrastructure and Environment, are much lower. In 2014, the drinking water subsidy for St. Eustatius was about US $260,000 and about US $130,000 for Saba. I

t was agreed in 2013 that the tariff structure for consumers would not change after the splitting up of GEBE’s shares and the setting up of the new electricity company in Saba and the new water and electricity company in St. Eustatius on January 1, 2014. In Saba, the average consumer tariff was US $0.342 per kilowatt hour (kWh) in 2014, and in St. Eustatius US $0.346 per kWh. The Ministry of Economic Affairs pays a structural subsidy of US $0.05 per kWh for Saba and US $0.031 per kWh for St. Eustatius to cover the network costs. Without these subsidies, price hikes of the electricity tariffs would have been inevitable, stated Kamp.

The law proposal that the Second Chamber will be handling in the near future introduces a structural subsidy to cover the relatively high network cost on the small islands. The objective is to decrease the subsidy by ten per cent per year, by introducing measures to increase efficiency.

The Ministry of Economic Affairs will cover the exploitation losses over 2014, estimated late 2013 at one million euros for Saba and 1.3 million euros for St. Eustatius. It was agreed that in 2015 the utility companies would absorb the losses. Since January 1, 2014, the electricity companies in St. Eustatius and Saba were running at a loss of US $0.15 to US $0.20 per kWh. The lower fuel prices have had a positive effect on the losses, but that has not been enough to get the companies out of the red figures, Kamp stated in the 30-page document in response to numerous questions of the members of Parliament’s Permanent Committee for Economic Affairs. The Committee decided last week to submit the law proposal for plenary handling.

St. Eustatius and Saba were given a large, one-time subsidy in 2013 of respectively 2 million euros and 5.3 million euros to develop sustainable energy sources. This should limit future price hikes of the electricity tariffs and should result in a reduction of the cost of the local electricity companies.

The first phase of public tenders for these sustainable energy projects has started. The first solar parks in St. Eustatius and Saba should be operational by the end of 2015, stated Kamp. This would yield 20 per cent of sustainable energy, with a doubling of this capacity in 2016.

Saba was also given a onetime 1.6 million-euro subsidy to relocate and renovate the electricity plant, an urgent project that is currently in execution. Another large project in Saba is the construction of two large additional water tanks, a project that should be ready in the second half of this year. “This means that they will be ready for the dry period in 2016,” Kamp stated on behalf of his colleague Schultz van Haegen, who is paying for this project.

Water filter systems are currently being tested in an effort to improve the quality of drinking water in Saba. The first water filters should be operational in the second half of 2015. By mid-2016, the drinking water supply should be in order, quality and quantity wise.

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