Deputy PM reveals the $450m cost of fixing BEC

Official Opposition Leader Philip 'Brave' Davis.

As of Tuesday, November 24, 2015

By KHRISNA VIRGIL

Tribune Staff Reporter

kvirgil@tribunemedia.net

WORKS Minister Philip “Brave” Davis yesterday said the Bahamas Electricity Corporation’s “disparate” system design requires a major capital investment of at least $450m over the next five years to resolve the many issues it faces.

While Mr Davis did not say how this cost will be financed, he suggested that this will be made possible under the management of US based company Power Secure, which will operate the cash-strapped organisation.

Speaking yesterday in the House of Assembly, Mr Davis said the corporation continues to incur $20m to $30m in losses every year due to an archaic rate structure, which is a financial and operational situation that is impossible to sustain.

He told parliamentarians that BEC is now unable to obtain a credit rating and therefore has no leverage with lenders or suppliers.

He spoke on the current state of BEC as debate began over the Electricity Bill, the Utilities Regulation and Competition Authority (URCA) Amendment Bill, and the Electricity Rate Reduction Bond Bill.

However, Free National Movement Leader Dr Hubert Minnis branded the three pieces of legislation as another tool for the government to impose additional taxes on the working class. He also said that the reform of the electricity sector would likely bring mass layoffs at BEC – as many as 500 job losses.

“For many years now, Bahamians and investors alike have complained that energy costs are prohibitive,” Mr Davis said. “Apart from the cost of energy, the security and reliability of energy supply are also frustration concerns.

“The single most important essential (element) to driving down costs that encourage investment, entrepreneurship and ownership relates to electricity.

“This government is committed to take BEC to a position of fiscal and operational good standing.”

Once the bills are passed, the corporation will be named Bahamas Power and Light (BPL).

He continued: “The bill also provides for the transfer of corporation staff to BPL and the abolition of offices and posts in the corporation. Every employee shall, during the transfer period, be employed by BPL under terms and conditions of employment that are no less favourable than those which applied to the employees’ employment with the corporation. Transfers for the purposes of pension and gratuity benefits, will be treated as continuous employment.”

Under the Utilities Regulation and Competition Authority Amendment Bill, URCA will be established as the independent regulator of the electricity sector. It will also enable URCA to discharge its regulatory function in the new electricity supply regime.

URCA will be able to fine BPL in the event of frequent power outages.

Mr Davis further explained that the Electricity Rate Reduction Bond Bill would facilitate bonds in the amount of approximately $600 million, likely to be issued in amounts of around $100m Bahamian dollars and $500m US dollars.

“In the first instance, it will refinance existing financial liabilities of BEC, including bank debts, bonds, and other non-current financial liabilities outstanding,” he said.

“Secondly, it will also be a source for currently unfunded pensions and other benefits and rights vested in employees or former employees of BEC, which also represent liabilities of BEC today,” Mr Davis said.

However, Dr Minnis questioned the purpose of these bonds and their financial impact on Bahamians.

Dr Minnis said: “The bond will be obtained from Blue Chip Bank and in my mind these bonds will be issued by some foreign bank and the bonds will be issued in American currency at astronomical interest rates presumably six per cent.

“What are the purposes of these bonds? How can we pay these bonds? According to the Electricity Bill there is a bond reduction rate fee, a tax to the consumer.

“Consumers are already paying VAT on electricity, they paying VAT tax on everything and now we are going to have another tax, a bond reduction rate tax. I don’t care if you call it a fee whatever you want to call it – it’s a tax. Then in addition to that and the VAT there is a surcharge that is another tax.”

Mr Davis has refuted that the government is attempting to impose another fee on Bahamians.

The bills were passed in the House of Assembly last night and will repeal the current Electricity Act and the Out Islands Electricity Act.

Economist 9 years, 1 month ago

No partnership with the Private Sector?

Why borrow money when you can get someone to invest it?

Sharonm 9 years, 1 month ago

I have no issue with paying taxes if that is what is needed to get BEC to finally become a profitable entity, debt-free entity but taxes without transparency is tyranny reigned down on the people. If BEC will put this tax as a line item on bills and not lump it in with all the other charges and fees so that it can be tracked and aggregated then it would be more palatable. We are all struggling to pay our bills but we need a modernized BEC in order to see lower electricity costs and higher reliability over the medium to long-term and clearing the debt may help. If there is a plan for fixing BEC (via diverse energy sources and outsourcing energy production to young, talented Bahamians) that they are willing to publish and be held accountable to via timely annual reports and audits, then impose the fee. Otherwise, stop imposing hardship on the Bahamian people and cut back on all of the perks and benefits that the executives enjoy, the absurd overtime that is rumored to still be taking place albeit less blatantly, and the unfavorable vender contracts that provide little value to operation but are a windfall for foreign and local contractors alike.

themessenger 9 years, 1 month ago

Sharon, you mussy be sipping the wine early to suggest additional taxes and please don't ever associate the word accountable with either BEC or the tubby Minister in charge who has himself declared them insoluble. BEC and their employees have been gouging the Bahamian public for generations without the benefit of us receiving reliable affordable generation in return. We have been taxed for their fuel and ridiculous pensions for years so the very thought of paying additional taxes to dig them out of the 600 million dollar hole they have dug for themselves is repugnant to say the least.

John 9 years, 1 month ago

POOR MANAGEMENT and no forward planning results in astronomical expenses. BEC should be on an equipment replacement cycle where it's engines are upgraded/replaced on a cyclical basis and everything does not become old all at once. The new thing in power generation is extended solar power using sea salt. Large tanks are filled with salt and water and the tanks are heated using solar panels. As the salt heats up it produces electricity and continues producing electricity for several hours w/o sunlight. The value of salt just doubled. A similar plant uses solar energy to heat up oil to 400 degrees, rather than burning it. The heated oil puts off energy that again is converted to electricity.

asiseeit 9 years, 1 month ago

The only saving grace in this whole ordeal is the fact our corrupt, inept, government will no longer be in management of BEC. The whole Bahamas should be grateful for this minor miracle. There might be a chance BEC can actually be a benefit to The Bahamas without sleezy politicians interfering in its day to day operations.

asiseeit 9 years, 1 month ago

Also Mr DPM, not all Bahamians are so dumb that they can not see you are loading another tax on us, we also expect you to charge VAT on that tax because we know you politicians are the greedyest creatures on this earth.

sheeprunner12 9 years, 1 month ago

BEC (now BPL) will continue to be a liability unless it removes the Shell/FOCOL fuel monopoly from around its neck ............... but will Brave throw Snake under the bus???????

Economist 9 years, 1 month ago

Why do we cling to the idea that the government should continue to own these corporations?

When will we recognize that if we encourage legitimate (none of the Renew Bahamas types) to invest and run these corporations that we as a nation would be better off.

No country wastes money on a national airline like we do.

In the US, Canada and Europe all have private companies running their electricity production, transmission and distribution, why can't we?

Chucky 9 years, 1 month ago

Hey Economist, don't be fooled by what you think you see in USA, Canada and Europe, their electrical and other "now private " utilities have only become more and more expensive since going private.

Once private, these bills we've been have will seem cheap!

Ontario Canada has what they call a "debt retirement fee" added to their electricity bills, that fee; to reduce the "debt" is higher than the KWH rate, and their debt has never come down.

We're just following the "WTO" agreement and rules here, having to open our doors, and soon to sell everything government off to the "private sector".

Notice with government you can at least have the "hope" (false usually) that they will operate with the prime goal of serving the people. World wide, the private sector serves only the shareholders, and in some jurisdictions it's required by law that those in charge do everything they can to earn the biggest return for shareholders.

But as long a one has organized a trough to feed at, you're ok, but if you work for a pay check, it's a race to the bottom.........

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