~ Second Chamber upset about revoked subsidy ~
THE HAGUE--Concerned about the prospect of skyrocketing electricity prices for consumers in St. Eustatius in 2019, the Second Chamber of the Dutch Parliament is demanding clarity as to why the Ministry of Economic Affairs and Climate EZK has not been forthcoming with a subsidy arrangement to keep electricity affordable.
The Second Chamber’s Permanent Committee for Kingdom Relations sent a stern letter to State Secretary of Home Affairs and Kingdom Relations Raymond Knops on Thursday in which he is asked to explain before the end of this month what is happening with the electricity price in St. Eustatius and how this will be solved.
The price of electricity threatens to become totally unaffordable because the EZK Ministry so far has not been forthcoming with the subsidy for 2019.
The ministry informed St. Eustatius Utility Company STUCO in August 2018 that it had pulled back its earlier pledge to make subsidy available for 2017 and 2018 to help cover the cost of electricity.
This promised subsidy was calculated in the tariff decision of Netherlands Consumer and Market Authority ACM. The main reasons for the ministry to pull back the subsidy were reportedly the poor governance at STUCO, the company’s lack of long-term vision and the cross-subsidising whereby the profits from electricity were used to compensate the losses from drinking water.
According to the Parliament committee, the grounds used by the ministry hold no grounds: The governance of the company has been strengthened with the appointment of two new members of the Board of Directors put forward by the Ministry of EZK and the Ministry of Infrastructure and Water Management I&W; plans were drafted to restructure the drinking water provisions, and a good cooperation has been established with the shareholder, the public entity St. Eustatius.
Cross-subsidising is prevented by the law, the Committee noted.
STUCO has filed a formal objection against the ministry’s decision, but apparently this hearing at the EZK Ministry will only take place late January or early February. The ministry’s decision is putting a severe strain on the affordability of electricity prices in St. Eustatius.
The Parliament committee provided figures in its letter to illustrate the vast increase in the electricity prices. The fixed user tariff for electricity for the lowest connection group of 3.2 kilo-volt-amperes (KvA) would increase from $3.64 per month in 2018 (including subsidy) to $20.45 per January 1, 2019 (excluding subsidy). The ministry’s subsidy for 2018 was set at $15.86 per month, resulting in a cost-covering tariff of $19.50.
For the second connection group, the fixed user tariff will increase from $21.71 per month in 2018 (including subsidy) to $49.20 per month per January 1, 2019 (excluding subsidy). The Parliament committee was informed during its visit to St. Eustatius on January 7 this year that 70 per cent of STUCO clients resort under the first two connection groups.
“There is an increasing risk that STUCO will have to pass on the cost-covering tariffs for electricity without the ministry’s subsidy to its clients, because the tariffs have gone in effect per January 1, 2019, and until now there is no clarity as to whether a subsidy will be forthcoming,” stated the committee.
According to the committee, it did not seem realistic to expect of a small utility company like STUCO that it would absorb the cost increase and sell its product under the cost price. The committee was informed during its visit that STUCO is facing a financial deficit for the years 2017 and 2018 with the pulling back of the subsidy.
The committee noted that the Ministry of I&W has kept its side of the bargain to structurally subsidise the price of drinking water in the past few years. “For 2019, the ministry informed STUCO that it again will grant a subsidy to guarantee the affordability of drinking water, but from the side of the Ministry of EZK there is no response regarding the affordability of electricity prices and the ministry is dodging this issue.”
In the opinion of the committee, the issue of the electricity prices also fits in the discussions to bring down the cost of living in the Caribbean Netherlands. The committee reminded Knops that according to the Regio Plan report, 43 per cent of the Statia people live under the poverty line.
“The small steps to improve the income position of this group will be significantly influenced per January 1, 2019, as a result of the ministry’s decision not to grant subsidy and in the event that no intervention takes place to undo the calculated steep increase of the electricity price, 70 per cent of the STUCO clients will be adversely affected,” stated the committee.
“The committee is wondering whether pears and apples are being compared here now that it appears that the issue of STUCO’s governance is being fought via an instrument, the affordability subsidy, which is meant to benefit the people. The issue that the ministry apparently has with the governance of STUCO should be addressed otherwise, in the committee’s opinion; namely, to sit at the table with all involved parties.
“In the meantime, the people should not become the victim,” the committee ended its letter.
