The Tribune

• Pintard: ‘We didn’t know it was that much’

• Gov’t repaying supplier at $10m monthly

• PM defends delaying fuel charge hikes

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas Power & Light’s (BPL) $90m in unpaid fuel arrears owed to Shell is “substantially higher” than the Opposition and others had predicted, it was revealed yesterday.

Alfred Sears KC, minister of public works and utilities, yesterday gave an insight into how much the Government’s subsidy of BPL’s fuel charge is likely to cost Bahamian families and businesses - both as consumers and taxpayers - as he revealed how the debt due to company’s main fuel supplier will be repaid.

“The Government has been assisting BPL through various financing mechanisms to cover the arrears owing by BPL to Shell,” the minister told the House of Assembly yesterday. “A firm arrangement has now been arrived at whereby as of October 1, 2022, the Government will make a monthly subvention of $10m to Shell to be applied to BPL’s arrears.

“This arrangement will continue to June 2023. It is important to note that BPL, as it has been doing, will continue to meet current charges from Shell. The net effect of these arrangements will be the elimination of arrears, while remaining current with payments for fuel from Shell.”

Given that this payment arrangement with Shell lasts for nine months, and is priced at $10m per month, it can be surmised that the total amount due BPL’s fuel supplier is somewhere in the region of $90m. This sum is likely to have been included in the “tens of millions of dollars” that government and BPL officials referred to on Tuesday when asked how much it had cost taxpayers to hold the utility’s fuel charge at 10.5 cents per kilowatt hour (kWh).

The extent of BPL’s unpaid debts to Shell surprised Michael Pintard, the Opposition’s leader, who had told this newspaper at end-August 2022 that he understood the arrears to be in the region of $50m. “The arrears is greater than we had actually projected,” he told this newspaper yesterday. “We knew it was high, but it is substantially higher than even our approximations.”

It thus appears that the rolling series of increased BPL fuel charges, which will peak at a 163 percent jump compared to the current tariff between May 1-August 31, 2023, are critical to both covering unpaid debts owed to Shell as well as reimbursing the Government for subsidising the existing 10.5 kWh rate for many months.

The Prime Minister’s Office yesterday sought to defend the decision to delay raising BPL’s fuel charge by some seven months after the Free National Movement’s (FNM) deputy leader, Shanendon Cartwright, demanded an explanation for this in the House of Assembly.

“The legitimate question is why the delay? Why the seven-month delay? Why the delay? It’s a legitimate question,” Mr Cartwright said, adding that this had made the magnitude of the fuel charge increase set to burden Bahamian families and businesses even worse.

The Prime Minister, responding directly to the accusations, said the decision to delay was taken to give the Bahamian economy and jobs market more time to rebound from the COVID-19 pandemic’s ravages. “For at least seven months Bahamians had relief,” Philip Davis KC said. “They had relief. They did not have to pay a higher light bill for seven months. They delay was exactly because of that. Because of the state of the economy.”

BPL had at end-February 2022 sought to increase the fuel charge by 3.2 cents, or 30 percent, to 13.7cents per kilowatt hour (kWh). Tribune Business understands this was designed to get ahead of the total fuel charge increase that was necessary to bring the utility’s fuel hedging structure back into balance after the trades to acquire additional fuel volumes at below-market prices were not executed in September and December 2021.

The delay, though, is likely to have made the extent of the fuel charge correction and increase that much greater and it is unclear whether the Bahamian economy - and the financial position of families and businesses - has improved drastically as a result.

This was effectively admitted by Shevonn Cambridge, BPL’s chief executive, on Tuesday when he said: “Once you delay, you accumulate. There was an accumulation of arrears which we are now seeking to recover through the glide path structure.”

The Prime Minister’s Office, though, was moved enough to release a further statement on the matter last night following the Prime Minister’s rebuttal. Explaining why BPL’s February fuel charge increase was rejected, the statement referred to the “historic economic, unemployment and fiscal crisis” that the Davis administration met upon being elected to office on September 16, 2021.

“The Prime Minister understood that despite the fact that the economic recovery was underway, a great number of Bahamians were still looking for work. In addition, gas prices were rising, and global inflation was driving prices up across the board – making life even more unaffordable, especially for the unemployed,” the statement added.

“He decided to delay the increase so that Bahamians did not have to shoulder all these burdens simultaneously, and so that more Bahamians would have an opportunity to find work and so that summer electricity bills (when usage typically rises substantially) would not be too expensive for families to afford.” However, based on BPL’s scheduled fuel charge rises, which are due to peak between May and end-August 2023, that reality has only been postponed for a year.

Mr Sears, meanwhile, branded the economic and financial pain that BPL’s fuel hikes are likely to cause as “a necessary sacrifice to achieve the objective of energy independence and greater reliance on renewables; to give BPL a chance to modernise its operations and to improve the competitive index of The Bahamas so that the cost of doing business in our country is less burdensome and more attractive”.

Having exhorted Bahamians to accept what BPL is asserting will be short-term pain for long-term gain, even though it cannot guarantee world oil prices will enable the fuel charge to start declining from September 2023, Mr Sears argued that BPL would effectively collapse if the present situation is unaddressed. The cash-strapped government can no longer afford to subsidise a BPL fuel charge that is being billed to consumers at well below cost.

Describing BPL as being “on the precipice of financial fall-out if we do not act immediately to align the fuel charge with current global oil prices”, Mr Sears said the utility is now “at a crossroads” after diesel fuel prices jumped by some 100 percent.

“We are cognisant that an increase in the fuel charge may not be popular at this time,” he added. “However, I assure you that deferring it or refusing to do it will create greater hardships down the road or, worse case scenario, result in the catastrophic failure of BPL - something no right-thinking Bahamian could ever consider.”