The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Grand Bahama Power Company (GBPC) yesterday said the 69 per cent increase in its 2016 capital investment budget is being driven by the planned lighting switch-out, an initiative that will save customers a collective $1 million per year.

The energy utility, in e-mailed responses to Tribune Business questions, said that virtually all of the $5 million increase stemmed from plans to replace existing street and light guard lights with Light Emitting Diodes (LED).

“The increase in capital expenditure for 2016 is driven by a $5 million investment in the change-out of street and night guard lighting to LED technology,” GBPC said.

“The programme will actually save money for customers; about $1 million a year. The new lights should shave our peak load by approximately 2MW (Mega Watts) once all lights are swapped out, aiding in the deferral of new fossil-based generation over time.”

GBPC’s $13.527 million capital investment spend for 2016 represents the second consecutive year of increase, having risen from $7.3 million in 2014 to $8 million last year.

The bulk of this year’s investment is going towards the distribution side of its business, with $6.165 million earmarked for upgrades that include the LED transition. Some $1.952 million and $1.065 million, respectively, have been allocated to GBPC’s generation and transmission arms.

The monopoly provider, meanwhile, told Tribune Business that it had improved its fuel efficiency by 35 per cent over the past four years, generating major cost savings for GBPC’s 19,104 customers.

“At GBPC, our heat rate has declined steadily over the past five years, resulting in more efficient generation of power and a cost savings to customers,” the utility told Tribune Business.

“Since 2011, we’ve worked hard to see a 35 per cent improvement in fuel efficiency. This was accomplished by the installation of 52 MW of new generation at our West Sunrise Plant, and reduction in sludge by focusing on fuel quality and improvement in fuel filtration systems.

“In 2015, we ended the year with a Heat Rate of 8,456 btu/kWh. This has been on a constant decline since 2011 when the heat rate was 13,000 btu/kWh.”

An electricity producer’s heart/burn rate measures how much fuel it is consuming to generate energy. Any reduction in this rate allows it to cut the amount of fuel it needs to purchase, an automatic saving that can then be passed on to consumers.

Sarah McDonald, GPBC’s president and chief executive, told shareholders in BISX-listed ICD Utilities, the holding company for 50 per cent of the utility’s equity, that it had slashed sludge production by 75 per cent over the past four years.

Writing in ICD Utilities’ annual report, Ms McDonald said: “Also contributing to lowered rates for customers are operating efficiencies that have led to a reduction of the fuel charge.

“In electric utilities, heat rate represents a measurement of how much fuel is used to produce power. At GBPC, our heat rate has declined steadily over the past five years, resulting in more efficient generation of power and cost savings to customers.

“Further efficiencies were gained through a reduction in sludge, which is a by-product of heavy fuel usage. Less sludge production is an indication of more efficient fuel use, which means lower fuel costs. From 2011 to 2015, sludge production declined by over 75 per cent.”

GBPC’s equity shareholders enjoyed a 29 per cent year-over-year net income increase in 2015, as the bottom line rose from $11.204 million in 2014 to $14.459 million.

This, in turn, increased ICD Utilities’ net income from $5.501 million to $7.174 million year-over-year - a 30.4 per cent jump.

“Half of this [$3.3 million] increase was due to an increase in kWh (kilowatt hour) sales of 3 per cent over 2014,” GBPC said of its net income increase.

“We attributed the majority of the increased sales activity to the effects of ‘El Nino’, as temperatures were higher than normal and the warm weather trend lasted late into the year.

“The other half of this increase was due to cost savings in operations due to improved efficiency in planned generation maintenance programmes, and better prioritisation of work on our transmission and distribution side of the business.”

GBPC’s operating revenues decreased slightly, falling from $116.979 million in 2014 to $108.791million - a fall of 7 per cent. However, the big driver of improved shareholder returns was the 13.2 per cent cut in operating expenses, which dropped from $96.991 million to $84.193 million.

Explaining the latter reduction, GBPC said this had resulted from “improvements such as better generation heat rate; reductions in waste oil; workforce realignment; work planning improvements; and reductions in system losses to best in class levels. These cost reductions have directly benefited customers”.

GBPC added that the reduction in, and stabilisation of, its fuel charge had lowered total electricity costs for Grand Bahama business and residential customers back to 2008 levels.

“Operating efficiencies, combined with the lower price of oil, led to a reduction of the fuel charge by 40 per cent compared to 2014,” it told Tribune Business.

“[This] is forecast to be maintained over the next three-year rate period due to GBPC’s fuel hedging programme.”

GBPC added that its clients would have the opportunity to sell it any renewable energy they produce by the 2016 third quarter, through the development of its new Renewable Energy Rider rate.

“This rate allows customers to supply energy generated from energy sources such as Solar PV, wind turbines or other forms of renewable energy to the grid,” GBPC reiterated.

It added that it would implement Advanced Metering Technology or an AMI/SmartGrid over the next three years, with a pilot programme set to start in 2017.