A major function of the Electricity Commission is to independently regulate (control) the electricity tariff (price) paid by Tongan consumers. The mechanism by which this is done is set forth at great length in the Concession Contract granted to Tonga Power Limited in July 2008.

There are two elements in the tariff (price of power), the fuel component and the non-fuel component. The latter has remained stable since early 2009 except for an annual inflation adjustment of +0.45 seniti/kWh in early 2010.

The fuel component is designed to allow Tonga Power to recover increased costs only for the efficient use of fuel purchased by them for electricity generation. It is not a "pass-through" mechanism allowing them to recover the whole of the additional fuel costs borne by them since the previous quarterly review of the fuel tariff.

It is an unavoidable fact the cost of electricity is driven primarily by the cost of diesel. The price paid by Tongan consumers is directly affected by fluctuations in worldwide diesel prices. Since January 2010 the landed cost of diesel at Nuku’alofa to be used for electricity generation has increased by 6%. Applying the Concession Contract fuel adjustment mechanism the Electricity Commission has required to allow Tonga Power to increase the fuel component for the next three months by 2.32 seniti/kWh, a rise of 4.86%.

Looking ahead, the Electricity Commission is closely engaged with H. M. Government in obtaining for the benefit of electricity consumers and the economy generally, a revamped supply chain. If a long-term supply agreement is negotiated with an oil-producing nation and that fuel is shipped to Tonga, without trans-shipment in such as Fiji, it is believed that substantial saving in landed cost can be achieved. The Commission will require that any savings are passed on to consumers by means of a price reduction.

The Commission is also fully supportive of Tonga’s Energy Road Map and renewable energy projects which have little or no requirement for diesel. This too will assist to lower the electricity price charged to users of electricity in Tonga. Electricity Commission, 19/05/10.