A short-term $7.9m subsidy designed to cushion households and businesses from rising fuel costs that was set to expire at month-end may be extended, Barbados TODAY can exclusively reveal, after the government inked a US$150m ($300m) energy security loan from the Inter-American Development Bank.
Minister of Energy Kerrie Symmonds on Thursday pledged his ministry’s investment in the electricity subsidy, which Minister of Finance Ryan Straughn had announced in the Budget would come into effect on April 1 and last for three months initially.
“We will also support the electricity subsidy to further protect Barbadian individuals and businesses from the full impact of the international fuel crisis,” Symmonds told Barbados TODAY, as he responded to the Inter-American Development Bank’s (IDB) approval of a policy-based programmatic loan to strengthen energy security.
The programme includes reforms to foster a more competitive, resilient and sustainable energy market, supported by coordinated regulation and private sector participation. It will also contribute to improving system stability and reducing energy imports.
More than 135 000 electricity customers stand to benefit from the programme through reduced exposure to international price fluctuations. In addition, independent power producers, lenders and project developers will face lower investment risks and reduced financing costs.
Symmonds said: “The money goes to the Consolidated Fund. Our role in the Ministry of Energy is to ensure that we have met the policy requirements, which are a threshold for accessing the funding. The next step is that we work with the Ministry of Finance to determine the major priorities confronting the country.
“The funds can be used for any purpose determined as a first priority by this collaborative process at this stage. There are a number of things on my radar including increasing the level of resilience in the energy sector.”
Symmonds identified upgrading the grid as one of several priorities: “Improving our energy regulation capacity, accelerating the process of undergrounding of transmission and distribution cable, engaging in diversification projects such as expanded natural gas distribution, and bio fuels production.”
Citizens, as well as the broader economy, are also to benefit indirectly from reduced dependence on energy imports and from progress towards achieving national energy targets, he added.
The operation will accelerate the integration of new technologies and promote competitiveness and private investment in energy generation and storage.
The loan has a repayment term of 20 years, a grace period of five and a half years, and an interest rate based on SOFR – the secured overnight financing rate that is a benchmark for dollar-denominated derivatives and loans that replaces the London Inter-Bank Offered Rate (LIBOR).
When he delivered the Budget in March, Straughn announced that the government would cover half of the expected increase in electricity fuel charges over the next three months to shield Barbadians from soaring global oil prices linked to the conflict involving the United States, Israel and Iran.
He said then that without state intervention, the average household electricity bill in April would have been about $32 higher than in March.
“The government is absorbing half of that difference, $16, so that Barbadians do not feel the full impact of rising energy prices,” Straughn told the House of Assembly.
He had also stated that the subsidy would complement another measure already implemented by the government to stabilise electricity generation costs.
(EJ)
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