It is time to bring an end to the subsidy provided by the natural gas industry to Trinidad & Tobago’s electricity sector. While it is the National Gas Company who must provide the gas to T&TEC at rates way below the market price, the cost of this subsidy is indirectly borne by all of the players in the gas value chain. And while households, businesses and Government departments have all enjoyed the benefits of this subsidy, cheap electricity has meant that people are very wasteful in using electricity and the economy is very energy inefficient.
The electricity sector consumes a significant volume of natural gas, around 250 million standard cubic feet per day, and this gas is provided to the country at rates that are significantly below the prevalent prices in the petrochemical and LNG sectors. This imposes a significant burden on the gas industry which, under current market conditions, is proving to be too heavy a load to carry and is contributing to the sustainability challenges faced by the industry.
The Energy Chamber recognizes that dealing with the electricity subsidy is not an easy political decision, but there are measures that can mitigate the impact.
Firstly, it is important to recognise that the challenge is not the subsidy to low-income households. There are around 80,000 households in Trinidad & Tobago that use under 400 kwH of electricity in a two-month billing period – these are households that have electricity bills of under TT$ 104 (US$ 15.00). These households only use about 1 percent of the natural gas consumed by the electricity sector. The subsidy to these households is not a heavy burden to carry and there are very good social and economic reasons to ensure that every household is able to access basic electricity services. The Energy Chamber’s view is that the subsidy should continue for low-income households.
Secondly, higher electricity rates do not automatically translate into higher bills, if people become more efficient at managing electricity use. There have been studies in Trinidad that show that electricity consumption can be cut by 40% in most government and commercial buildings, through the simplest of electricity management programmes. There is no doubt that significant savings can be realized in the private sector and domestic market as well. As electricity prices increase with the reduction or removal of subsidies, the public and private sectors and individuals will not be faced with higher bills if they alter their consumption patterns.
An added national benefit is that there are many opportunities that exist for small and medium-sized businesses, if consumers decide to actively reduce their electricity consumption. This includes things like retrofitting buildings to make them more energy efficient, installing solar water heaters and more efficient air-conditioning systems.
In the Energy Chamber’s view, the public and private sector entities, as well as individuals, need to accept that the across-the-board subsidies on natural gas for electricity generation are not sustainable. If we are simultaneously going to meet the global climate change commitments and maintain a sustainable gas industry into the future, we must urgently move to remove the subsidy on natural gas for electricity.