Residents left reeling when they open their electricity bills can expect little relief before the end of the year despite declining world oil prices.

While the amount of the fuel adjustment charge on recent Belco bills often causes a double take, as the company purchases its fuel in supply shipments intended to cover 3.5 months, any benefit from falling prices will not be reflected in local bills until at least December.

"Belco needed to purchase 130,000 barrels of fuel in July to ensure adequate supply to meet the Island's needs; at the same time the price of fuel spiked to $146 per barrel," the company's senior vice president of corporate relations Linda Smith explained. Since that time the price of crude oil has fallen dramatically, yesterday dipping below $101 per barrel.

"Belco started using fuel that was purchased in July at the end of August; 130,000 barrels is approximately a 3.5 month supply, so this fuel will be used in September, October and November and into December; the precise time to use a shipment depends on factors including plant efficiency and demand for electricity."

The September fuel adjustment rate is even higher than past months at 20.50 cents per kilowatt hour — a 33 percent increase over the August rate of 15.50 cents per kilowatt hour, the company said. It was also 15.50 cents in July.

But Belco does not profit from the Fuel Adjustment Rate which is set monthly by the Price Control Commission, Ms Smith said: "The variable rate is intended to cover the costs of fuel purchased."

She added: "The rate is based on a calculation that includes the cost of fuel and projected usage; it starts with a base of $30.00 per barrel of fuel. The cost of the fuel for Belco is made up of: the actual cost of the fuel purchased on the world market, plus transportation via tanker and the Bermuda Customs duty of $15.10 per barrel."

Ms Smith said the company cannot say with any certainty when the rate may fall as much depends on consumption. For its next shipment however, set to arrive in September, Belco paid $134 per barrel of the heavy fuel it must purchase.

But the company also uses higher priced diesel for some of its generators, Ms Smith said, for which Belco paid $189 per barrel in July.

Bermuda is not alone in its energy woes, Ms Smith added. Other small isolated islands such as Cayman face similar challenges. "We have nothing to fall back on," she said.

Yesterday high electricity costs were directly linked to the Island's rising inflation rate as Government released its Consumer Price Index (CPI) for July. Inflation rose to 4.7 percent from 4.4 percent in June. May's inflation rate of 4.8 percent was the highest on record in 18 years.

"The fuel and power sector was the largest contributor to the 12-month increase on the Consumer Price Index," the Government report said. "The average cost for electricity was largely influenced by monthly increases in the fuel adjustment clause. As a result, the annual rate of price increase for this sector reached 30.8 percent."

According the Government's CPI report, the fuel adjustment clause rose 19.2 percent in July — when it was 15.50 cents per kilowatt hour — so upcoming reports should reflect an inflation rate continuing to be negatively affected by the fuel adjustments in August and September.

The CPI report also noted that rent and food sectors "also impacted strongly on the annual rate of inflation, as price shifts in these sectors were 2.5 percent and 5.1 percent respectively".