PHILIPSBURG:--- Utilities are fundamental to everyday life, and affordable access to electricity and water is critical for households and businesses alike. A recent evaluation of electricity and potable water tariffs in Sint Maarten highlights a set of recommendations designed to relieve consumers of unnecessary costs, introduce greater transparency, and ensure fairness.
Reducing Utility Costs Through Adjusted Fuel Clause Mechanisms
One of the core issues affecting electricity and water tariffs in Sint Maarten is the fuel clause—a fluctuating cost component of tariffs tied to international markets for fuel. Misalignment between the actual costs incurred and the revenues generated through this clause has led to unnecessary burdens on consumers.
Key Recommendation
Introduce a correction mechanism for the fuel clause to reconcile differences between fuel costs and consumer payments. This would address surpluses and deficits on a monthly or quarterly basis, ensuring consumers are not overcharged for energy costs.
The Case for Action
Between 2022 and 2024, the current methodology resulted in surpluses totaling USD 6.9 million because consumers paid more than GEBE’s fuel costs for energy production. By implementing a correction mechanism, this excess revenue could be returned to consumers in future billing cycles, reducing electricity tariffs and alleviating household expenses.
Additional Adjustments
The recommendations also propose revising the fuel clause formula to ensure:
- Costs related to supplying electricity for water production (to Seven Seas) are allocated to water tariffs rather than electricity tariffs.
- Non-Revenue Electricity (NRE), currently estimated at a fixed 8.5%, is dynamically calculated based on actual monthly variations in operational losses.
By reallocating costs correctly and adjusting NRE calculations, the entire system could become more accurate and cost-reflective, directly reducing the financial pressure on consumers.
Price Regulation for Fuels Used in Electricity Production
Sint Maarten relies on Light Fuel Oil (LFO) and Heavy Fuel Oil (HFO) for electricity generation, both purchased from a single distributor, SOL. The lack of independent oversight has enabled the addition of unregulated markups, which unnecessarily increase fuel-related expenses and, consequently, utility bills.
Key Recommendation
Regulate the pricing of LFO and HFO under the Prijzenverordening (Price Ordinance), similar to the process for gasoline and LPG. The Ministry of TEATT (Tourism, Economic Affairs, Transport, and Telecommunication) would oversee this initiative, initially determining maximum fuel prices to safeguard affordability.
How This Helps Consumers
Ensuring transparent and fair pricing for fuels would directly reduce the upstream costs of electricity generation. The report highlights that GEBE’s purchase prices for fuels exceeded international benchmarks by USD 0.23–0.26 per unit between 2022 and 2024. Regulating prices at reasonable levels could cap these extra costs, creating an immediate downward impact on energy bills.
Revising Water Tariffs to Eliminate Inequities
The potable water pricing system in Sint Maarten displays clear gaps in fairness. Domestic consumers enjoy significantly lower rates than commercial users, with a tariff gap of over 400%. Meanwhile, the fuel clause for water is applied only to commercial entities, leaving domestic users exempt.
Key Recommendation
Reform the potable water tariff structure to enhance fairness and transparency by:
- Applying the fuel clause across all tariff groups, including domestic consumers, so costs are equitably distributed.
- Replacing the current fuel clause formula with one based on actual electricity costs incurred for water production.
Expected Consumer Impact
A more rational and equitable water tariff system will prevent excessive subsidization of domestic users by commercial users, creating fairer pricing for all. Importantly, revising the fuel clause formula to reflect real electricity costs could reduce inflated charges and ensure financial efficiency in water production and distribution.
Empowering an Independent Regulatory Body
The monopolistic nature of utility services in Sint Maarten has long hindered competition and accountability. Both SOL (the fuel supplier) and GEBE (the electricity and water provider) operate without stringent oversight, leaving consumers with limited recourse against inefficiencies or unfair practices.
Key Recommendation
Integrate the regulation of electricity, water, and fuel tariffs under an independent body, such as the Bureau Telecommunication and Post Sint Maarten (BTP SXM). This body would act as a neutral authority to periodically evaluate tariffs, oversee calculation methodologies, and ensure that price adjustments reflect the public interest.
Benefits of Oversight
Independent oversight would enhance transparency in tariff-setting processes and help restore public trust in the energy and water sectors. Regular tariff reviews could also identify inefficiencies and impose necessary corrections before costs escalate unreasonably.
Building a Sustainable Future for Consumers and Communities
Adopting these recommendations offers much-needed relief for consumers while also positioning Sint Maarten’s energy and water sectors for sustainable growth. The proposed reforms could lower utility costs, eliminate unfair practices, and build a system of checks and balances that benefits all stakeholders.
What Could This Look Like?
- Immediate Financial Relief:
- The addition of correction mechanisms and better pricing regulations would cut excess billing immediately, giving households and businesses a break from high monthly energy costs.
- Long-Term Transparency and Fairness:
- With transparent formulas, fair allocation of costs,
- With independent oversight, future tariffs will be equitable and easier for consumers to understand.
- A Trustworthy Utility Landscape:
- Restoring confidence in utility providers would create a stronger relationship between service providers and their customers. Trust is essential for any public utility system to function efficiently.
Implementing these changes ensures that Sint Maarten is moving toward a more equitable, efficient, and consumer-focused approach to utility services. As households and businesses reap the benefits of these measures, the island can set a regional standard for fairness and accountability in managing essential utilities.
Utility reform is rarely straightforward, yet the potential benefits for consumers are profound. By prioritizing cost reduction, transparency, and fairness, Sint Maarten has an opportunity to ease the financial burden on its residents and businesses while creating a more sustainable utility sector. Effective implementation of these recommendations isn’t just a win for consumers today; it’s a legacy for future generations.
