The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Electricity Corporation’s (BEC) 109 complaints per 1,000 customers are triple those for any other Caribbean utility, with the energy monopoly among the region’s worst in other key categories.

Simon Townend, a KPMG (Bahamas) partner and head of the firm’s corporate advisory practice in the Caribbean, yesterday disclosed that BEC suffered from the Caribbean’s second highest level of system losses, while its fuel costs were the third highest.

Mr Townend, who together with his firm is a key adviser to the Government on BEC’s ongoing restructuring and wider energy sector reform, revealed these key measurements of electricity utility efficiency at a Bahamas Institute of Chartered Accountants (BICA) conference.

Drawing on data garnered from DNV Kema, the technical advisers to BEC’s restructuring/part privatisation, Mr Townend said the Corporation’s current fuel costs stood at 30.6 cents per kilowatt hour compared to the Caribbean average of 23 cents.

And BEC was losing 17 per cent of the energy it generated before it reached end-users, due to a combination of technical (system) and non-technical (fraud, theft) losses.

This compared to a Caribbean average of 10 per cent, leading Mr Townend to acknowledge that BEC was “right up there” as the second worst performer in the Caribbean.

BEC was also producing lower generation load factors in comparison to its regional peers, standing at 60 per cent compared to an average 71 per cent.

And, with the volume of customer complaints dwarfing those found elsewhere in the Caribbean, Mr Townend half-joked: “This either suggests BEC is really bad, Bahamians love to complain, or it’s a combination of both.”

While BEC was “not the worst” when it came to debt levels, these standing at 2 per cent, Mr Townend suggested “there are ways to control” its receivables.

He added that the Bahamas could adopt pre-paid electricity, which operated much like pre-paid phone cards, with consumers loading up meter cards and refilling them before the power goes out.

Analysing more of BEC’s current metrics, Mr Townend said much of the fuel currently being used for power generation was among “the worst possible fuel you can be depending on”.

Breaking the current cost of electricity, which on New Providence totalled 42 cents per kilowatt hour (kWH), the KPMG accountant said some 22 cents - 52.4 per cent - was acconted for by BEC’s fuel costs.

Describing this as “one of the key areas” of focus for the six remaining BEC bidders, particularly the four on the generation side, Mr Townend said they had all been asked to look at sourcing “cheaper, more reliable fuel supplies and generate power more efficiently”.

The remainder of BEC’s price on New Providence, Mr Townend said generation costs accounted for eight cents; transmission and distribution costs another eight cents; and line losses, the final six cents.

Family Island costs were even higher at 53 cents per kWH, largely due to the extra costs associated with the shipping of fuel, which totalled 25 cents. Generational costs on the Family Islands were 12 cents, 50 per cent higher than New Providence’s eight cents.

Mr Townend disclosed that BEC’s operational costs were equivalent to 15 cents per kWH, or almost 36 per cent of the total New Providence cost, with five cents - one-third of this amount - coming from wages and salaries.

The rest comprised of stocks and spare parts; operational and maintenance costs; depreciation; and interest.

While fuel costs were “the big elephant in the room”, Mr Townend said all the BEC bidders had been asked “to look at every single line item and say where they can make savings in these items.

“Bidders’ incentives will be based on cost savings to some extent, as oppose to revenue incentives, which do not give much incentive to bring decreased costs,” he added.

Noting that BEC had invested $500 million in capital projects and equipment over the past 15 years, Mr Townend said that while its New Providence generation capacity of 330 Mega Watts (MW) appeared to comfortably exceed the 233MW peak demand, such a margin would not be needed if its equipment worked properly.

BEC’s electricity sales dropped by 8.3 per cent year-over-year in 2012, to 1.431 million MW from 1.56 million MW in 2011, something Mr Townend attributed to the weak economy.