The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Grand Bahama Power Company’s earnings exceeded its regulator-approved rate of return by $5.26 million for the 18 months to end-December 2013, with its bottom line undergoing an almost-$29 million year-over-year reversal.

The details on the rapid financial turnaround at Grand Bahama’s monopoly power provider, which has come under heavy fire from both residential and business consumers in recent months, are contained in the annual report for ICD Utilities, the BISX-listed holding company for a 50 per cent equity interest in the company.

But complaints over what many allege are the Grand Bahama Power Company’s ‘high rates’, which are seen as crippling commerce and households alike, are unlikely to be assuaged by the revelation that the utility’s earnings are exceeding its 10 per cent base return rate.

Under the mid-2013 agreement with the Grand Bahama Port Authority (GBPA), its regulator, the Grand Bahama Power Company is allowed to treat 50 per cent of its earnings above, or below, the 10 per cent return rate as either a deferred “regulatory asset or liability”.

The ICD Utilities annual report notes that the Grand Bahama Power Company has recorded some $2.631 million in earnings for the period July 1, 2012, to December 31, 2013, as a regulatory asset, implying that its earnings for that period were some $5.26 million above the Port Authority-approved rate.

The ICD Utilities report said: “As a component of its regulatory agreement with the GBPA, Grand Bahama Power Company has an Earnings Share Mechanism to allow for earnings above or below its approved 10 per cent return on rate base to be deferred to a regulatory asset or liability, at the rate of 50 per cent of amounts below a 9 per cent return on rate base, and 50 per cent of amounts above 11 per cent return on rate base, respectively.

“Grand Bahama Power Company recorded a regulatory asset of $2.631 million related to the Earnings Share Mechanism for the period of July 1, 2012, to December 31, 2013. Grand Bahama Power Company will amortise this deferral into income beginning in 2016.”

Elsewhere, Sarah McDonald, Grand Bahama Power Company’s president and chief executive, hailed the “vast improvements in its standard of performance” as a result of the new, more efficient West Sunrise plant and other operational enhancements that had boosted service reliability.

“The development of detailed drawings of infrastructure, testing and re-commissioning of all substation equipment, and the implementation of a formal preventative maintenance programme, has significantly improved our transmission and distribution system,” Mrs McDonald said in her message to ICD Utilities Bahamian shareholders.

“I’m pleased to say this work has reduced the frequency of, and response time to, outages so much so that we achieved a 50 per cent decline in the duration and frequency of customer outages in 2013, and look forward to even stronger performance in 2014.

She described the regulatory agreement with the GBPA as “one of the most advanced set of protocols in the Caribbean”, arguing that it “provides consistency and transparency around rate-setting, efficiency and reliability”, plus encourages Grand Bahama Power Company to invest in its infrastructure.

For 2014, the ICD Utilities annual report divulges that the utility is planning a 23 per cent year-over-year capital expenditure increase, growing this from $6.45 million in 2013 to $7.931 million.

The planned capital investment will be split into $1,622 million on Grand Bahama Power Company’s generation plant; $2.946 million on the transmission and distribution network; and $3.363 million on facilities, vehicles and equipment.

Mrs McDonald, meanwhile, lauding the regulatory agreement with the GBPA, said: “Protocol allows the GBPA to set performance targets and customer service standards which Grand Bahama Power Company is measured against to ensure we have a constant read on our performance, and that we continue to sustain our price to customers as one of the lowest in the region.

“Since establishing this framework I am happy to report our payout cost – the quarterly penalty fees payable when Grand Bahama Power Company misses a performance target – has decreased from $1,200 to $150 in three quarters.”

Mrs McDonald added that Grand Bahama Power Company had added more than 4,000 customers to its e-billing programme since it was launched in 2012, while the fuel charge had been kept below 16 cents per kilowatt hour.

This reality, though, may not be recognised by all Grand Bahama Power Company customers. Jeff Butler, owner of Butler’s Food World and a long-standing opponent of the electricity, said his business had been employing generator power for the past 18 months.

“There’s probably 200 companies in Freeport running on generator in the day, and going back on to Grand Bahama Power Company at night,” Mr Butler said.

ICD Utilities’ annual report revealed that Grand Bahama Power Company’s net income underwent an almost-$29 million turnaround in 12 months, recovering from a $17.149 million net loss in 2012 to an $11.766 million profit last year.

The 2012 results were hit by a $22.878 million disposal charge related to the replacement of old generation assets by the West Sunrise plant, otherwise Grand Bahama Power Company would have remained in the black for that year as well.

“For the year ended December 31, 2013, ICD Utilities’ net income increased $14.472 million to $5.789 million compared to a net loss of $8.683 million in 2012, primarily due to Grand Bahama Power Company’s new regulatory rate structure which became effective July 2012, and the recognition by Grand Bahama Power Company of a loss on disposal of assets of $22 million resulting from the West Sunrise Plant coming on-line and replacing older generating assets,” the BISX-listed holding company said in its annual report.

Mrs McDonald added that Grand Bahama Power Company was continuing to pursue the importation of compressed natural gas (CNG) from Florida, a plan that was undergoing regulatory review, as it bids to further reduce power costs on Grand Bahama.