The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Electricity Corporation’s (BEC) net loss for the 2012 financial year represents a negative $24.3 million swing from internal projections, a former executive chairman describing this as “a shocker” and adding: “Something seems dreadfully amiss.”

Noting that BEC had been projecting an $8 million profit for the year to end-September 2012, Michael Moss, who stepped down after the May general election, disclosed his surprise at the statements of his successor, Leslie Miller, who yesterday said the Corporation had instead made a $16.3 million net loss.

Suggesting that “something significant” must have occurred in the four months after he demitted office to propel BEC into such a heavy loss, Mr Moss said that being on the outside now, he could offer no explanation.

And, while he agreed with Mr Miller that issues such as BEC’s overtime costs and staff pension plan needed to be tackled, Mr Moss said these had carried through successive administrations who preferred to “acquiesce” to union demands.

In particular, he described BEC’s non-contributory, defined benefit pension plan, which at end-September 2010 had unfunded actuarial liabilities of $31.11 million, as “unacceptable”. Mr Moss said it was “regrettable” that such schemes continued to exist at BEC and other public Corporations.

While unable to comment on the specific figures Mr Miller disclosed to The Tribune yesterday, Mr Moss was able to give some insight, given that he held the executive chairmanship for the first seven-eight months of BEC’s 2012 financial year.

“The projected profit for the year was $8 million,” he told Tribune Business. “I does appear that something significant has taken place...... Something seems dreadfully amiss.

“Mr Miller should be asked what are the significant changes from the year earlier to produce such a negative result. What has gone wrong? Have revenues fallen off? It could be, but I didn’t see anything at the time I left. I could speculate on a lot of things that might have a negative impact.”

While acknowledging that he was speculating, and had no ‘hard facts’, Mr Moss said one possible explanation could be if BEC had failed “to keep on top” of the reconnection “leeway” granted by the former administration.

That worked on the premise that disconnected customers paid off an agreed portion of their arrears and kept pace with current payments, with the reconnection fee waived.

“If people were paying on their arrears but not held to account, that could have a negative impact,” the former executive chairman said. “That could create issues with bad debt, but if that was adhered to it should not impact revenue.”

Admitting that the figures disclosed by Mr Miller were “a shocker”, Mr Moss added: “Either revenues have fallen off or expenses have gone up dramatically. These two issues ought to be pursued further to get a better understanding of the issues.”

He also told Tribune Business that had the former government accepted his plan for BEC to recover $4-$5 million in Hurricane Irene costs, it would have generated net income of that magnitude for 2011, and produced two consecutive years of profits.

Mr Moss had proposed a temporary increase in BEC’s tariff rates to recover those costs, something he suggested would have been allowed by an economic regulator, but the Government did not.

If that had happened, BEC would have suffered between a $20.3 million to $21.3 million swing into the red in just one year. And even accounting for 2011’s small $706,000 loss, BEC finances seem to have experienced a $15.6 million negative lurch.

Thus prior to Mr Moss’s departure, BEC’s financial performance had started to trend in the right direction, following years when its net losses peaked at $26.424 million in 2009.

The former executive chairman, meanwhile, agreed with Mr Miller that BEC’s overtime costs and pension plan needed to be dealt with.

“Most of the issues he pointed out I agree with him that they need to be addressed, but they have been with BEC a long time,” Mr Moss said.

The former Board had moved to address overtime, and he added: “BEC provides employees with a defined benefit, non-contributory pension, which again, in my view, is something that is unacceptable.

“But, regrettably, it exists, not only in BEC, but it was also in BTC prior to its privatisation, and is in Water & Sewerage. These are issues that previous governments and Boards acquiesced to and gave into union demands, and they should not have been agreed to.”

These issues, Mr Moss said, would not have been responsible for driving BEC into a $16.3 million net loss.

Yet he explained that apart from all contributions to the staff pension plan coming from BEC, with the employees paying zero, the Corporation also had to “make up when there’s a shortfall” between performance and actuarial projections.

“I applaud Mr Miller for saying he wants to do something about it, but it will be a challenge,” Mr Moss told Tribune Business.

The Government had to ‘make good’ the BTC pension plan deficit prior to winding up the original plan as part of the privatisation, and the former chairman added: “If there’s going to be a change in other corporations like BEC, the Government has to be prepared to say: ‘As of today, this thing stops. We’re going to a defined contribution plan, but will meet all obligations’.”

This meant, Mr Moss said, that his successor would need the support of Perry Christie and his Cabinet.