Page 38 - CARILEC Electricity Tariff - December 2014

Fuel Price
Hedging Fuel Supply Logistics And Fuel Alternatives
Name of Utility Impacts Of Fuel Price Volatility
Initiative(s) Challenges And Prospects
Adopted

NVGEBE - - - -
By ship therefore vulnerable to
SKELEC Affects Pricing No No
weather
TTEC None No - -
Fuel price volatility affect this
utility by decreasing demand
for our service. Customers
either reduce consumption or
find alternative energy
solutions. Those customers
who continue to use our service
The fuel is shipped via barging to LPG, LNG, Solar,
either can’t pay or slow pay.
VIWAPA No St. Thomas and St. Croix. There Wind, Biomass
As a result, our account are no associated challenges.
receivable increases. Because
we are not allowed to pass on
the total monthly increases of
fuel cost to the customers, our
deferred fuel expense continue
to rise.

Notes Impacts of Fuel Price Volatility
BEC: The greatest impact relates to the opportunity energy purchased from CFE (Mexico). Depending on the energy mix for the node supply of the
intertie, the price of energy varies. This mix typically comprises hydro, natural gas and diesel. Shortfalls in the supply of natural gas results in price
hikes and at times the company loses the opportunity energy for purchase. With CFE typically supplying approximately 40% of annual energy, the
impact can be in the order of multiples of US$10M.

Other fossil fuel based generation on the grid are for peaking units. Therefore, the impact would be at the time of stock replenishment. However,
as the production is minimal, the impact of the volatility is insignificant.

Furthermore, the island of Caye Caulker is isolated from the grid, and uses diesel generation. There the cost is typically US$0.30/kWh. This is above
overall regulated cost approved for the utility, and as such the impact is not only based on the diesel prices, but also on the energy mix for the grid
supply. However, the load is less than 2% of the total production.

Notes Hedging:
BELCO: Heavy Fuel Oil Supply contract includes the option of forward purchasing. Fuel pricing is closely monitored and normally 30,000 barrel
parcels and purchased in advance of delivery at a time when prices are favorable. The overall fuel purchasing strategy is to keep fuel costs steady
without large fluctuations and generally trending downwards when possible.

CUC: In March 2011 the ERA approved the Fuel Price Volatility Management Program. Contracts utilize call spreads to promote transparency in
pricing.

GBPC: Financial hedges on future contracts layered at approximately 10% - 20% per layer, with 10% left unhedged.

LUCELEC: Currently we hedge using swaps for 75% of the estimated consumption on a rolling 12 month period

Notes Fuel Alternatives & Prospects:
JPS hired a consultant to review the market opportunity of these fuel sources and it has been confirmed that these are viable options. Subsequent
market information/intelligence has confirmed that there are opportunities for the supply of these to the Jamaican market

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