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  • The Government is to establish an Energy Stabilization Fund to receive and manage the resources generated from the oil hedge programme.
  • Minister of Finance and Planning, Hon. Dr. Peter Phillips, made the announcement during the closing of the 2015/16 budget debate in the House of Representatives on Wednesday, March 25.
  • Dr. Phillips told the House that a Ministry Paper is to be tabled shortly outlining the relevant governance arrangements for the Energy Stabilization Fund, including reporting and transparency arrangements.

The Government is to establish an Energy Stabilization Fund to receive and manage the resources generated from the oil hedge programme.

Minister of Finance and Planning, Hon. Dr. Peter Phillips, made the announcement during the closing of the 2015/16 budget debate in the House of Representatives on Wednesday, March 25.

The resources include the proceeds from a portion of the additional $7 per litre of specific Special Consumption Tax (SCT) on petrol – specifically $5 per litre – as well as any future payment from the hedge contract, should future oil price movements lead to such payments.

“These resources will flow into a dedicated sub-account in the Bank of Jamaica for the (Energy Stabilization) Fund, which will be administered by the Development Bank of Jamaica in conjunction with the Ministry of Finance,” Dr. Phillips informed.

He noted that these resources will be made available to service the cost of implementing the initial hedge transaction, any future hedging, as well as a number of possible energy stabilisation initiatives, where the resources permit.

Dr. Phillips told the House that a Ministry Paper is to be tabled shortly outlining the relevant governance arrangements for the Energy Stabilization Fund, including reporting and transparency arrangements.

“We also intend to bring legislation, in the not too distant future, which will establish, in a binding and transparent way, the energy stabilisation purposes for which these resources may be utilised,” he said.

“We intend to establish a transparent, binding covenant with taxpayers, regarding the use of their tax dollars for the purposes for which we have asked them to contribute,” the Minister pointed out.

He said the hedge programme will enable the Government to more effectively manage how the country responds to the vagaries of oil price management and energy dependence over the short, medium and long term.

He noted that in order to reflect the cost of implementing the hedge programme on the expenditure side of the budget in fiscal year 2015/2016, an allocation has been made in the Ministry’s contingency provision in relation to expenditures for this transaction, which was based on preliminary discussions held.

Turning to the re-introduction of the General Consumption Tax (GCT) at the standard rate on monthly residential electricity consumption above 350 kilowatt hours (kwh), Dr. Phillips said this was a conservation measure.

“It is deliberately designed to exclude most of the current residential customer base and will be borne substantially by the higher income consumers. This measure is very targeted in that, based on current levels of usage, only the top six per cent of residential customers will be impacted. So, for those who feel exposed, it is recommended that you step up your energy conservation,” Dr. Phillips advised.