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Fuel Price Volatility Management Plan

Sep 25, 2017Energy

Caribbean Utilities Company, Ltd. (CUC) purchases large volumes of No. 2 Diesel for electricity generation on Grand Cayman. No. 2 Diesel is a refined oil fraction; therefore, its pricing is heavily reliant on globally-priced oil.

CUC’s fuel costs are also a 100% pass-through to electricity consumers as a Fuel Cost component in monthly bills. Accordingly, the OfReg and CUC agreed in March 2011 to guidelines for a Fuel Price Volatility Management (FPVM) Plan to mitigate and manage customer’s exposure to fuel price volatility. CUC submits a FPVM Plan for OfReg review and approval, annually.

The goal of the FPVM Plan is to protect CUC customers against severe fuel price increases, like the price spike experienced in 2008, by employing a fuel hedging strategy that is non-speculative and transparent.