The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamians were yesterday warned to brace for electricity rate rises after the 2017 general election “no matter who the Government is”, a former Cabinet Minister arguing this was “essential to save” Bahamas Power & Light (BPL).

Phenton Neymour, who had ministerial responsibility for the then-BEC under the Ingraham administration, told Tribune Business that current politicians “lacked the guts” to come clean with the public on the extent of BPL’s problems.

Suggesting that the Government did not know the true cost of fixing BPL’s woes, and implying that it might be more than the $650 million targeted in the proposed rate reduction bond (RRB) issue, Mr Neymour said the failure to place this had effectively handicapped the utility’s new manager.

He argued that PowerSecure International was effectively being employed “as a scapegoat and excuse” for BPL’s problems, having been denied the necessary authority to introduce the reforms necessary to turn the energy monopoly around.

Mr Neymour also blamed a “lack of planning” by the Christie administration for the failure to bring BPL’s latest rental generators online, as it had not provided enough connections to meet the increase in their usage.

He suggested that the Government’s goal had been “to survive these summer months” without too many blackouts, and associated public complaints, and reach the next general election without too much fall-out in the voting booths.

“After the next general election, the Bahamian people must prepare themselves for a rate increase at BPL,” Mr Neymour told Tribune Business. “It is one of the things that will help to save BPL.

“There will be a rate increase shortly after the election. It will be a necessity. No matter who the Government is, that rate increase will be necessary to save the life of BPL.”

BPL’s chief executive, Pamela Hill, shortly after her appointment proposed a “modest” base rate increase for customers who consumed more than 400 kilowatt hours per month.

However, this was rejected by the Christie Cabinet, with V Alfred Gray, minister of agriculture and fisheries, subsequently telling the House of Assembly that the Government wanted electricity rates to come down, not go up.

The rates referred to by Ms Hill and Mr Neymour are BPL’s ‘base rate’ tariff, not the fuel surcharge. The latter effectively acts as a ‘pass through’, where Bahamian business and residential consumers repay the utility’s fuel costs.

The ‘base rate’ is the portion of customer bills that is intended to generate enough revenues/cash flow for BPL to cover its operating expenses, such as labour and maintenance, plus generate its profits.

However, BPL’s predecessor, BEC, has consistently generated annual losses of $25 million and more since 2007 - an almost unheard of failing for a monopoly.

This suggests BEC, and now BPL, is selling electricity ‘below cost’, and means a rate rise may be justified to place the latter on a sustainable financial footing and get it into profitability.

“The problem is this,” Mr Neymour told Tribune Business. “I want to make it very clear. The politicians today do not have the guts to admit to the Bahamian people the extent of the problems at BPL, and what it will take to solve them.

“I am very concerned because the PLP is going into an election, and does not want to deliver to the Bahamian people the true cost. I doubt they even know the cost.”

Mr Neymour declined to his own estimate for the amount of investment required to turn BPL around, although some observers have suggested that tackling the legacy BEC liabilities - plus upgrading its generation and distribution infrastructure - will cost more than $1 billion.

The former minister added that the failure to-date to place the RRB, which was initially pegged at $650 million, had handicapped BPL and its PowerSecure manager financially.

Without the refinancing of BEC’s legacy debts and liabilities, and their removal from its balance sheet via this funding, PowerSecure’s hands are effectively tied on making essential new investments.

“I am of the view that PowerSecure, as the management partner, is being used as a scapegoat and excuse for the problems at BPL because of poor decisions by the Government,” Mr Neymour said.

“PowerSecure has not been provided with the necessary resources, including funding, and the authority to initiate all the changes they desire to improve the service of BPL. They only serve to buffer public disquiet from the Government. They have not been brought in to manage and improve the infrastructure.”

Mr Neymour said the Government needed to “take full responsibility” for BPL’s current service levels (blackouts) and costs, adding that the rental generation capacity about to be installed now should have been secured from last year.

He added that the rental units acquired last year were for the winter months, and BPL’s need for more generation capacity this year was “an indication that the assets and generation are in their worst ever condition”.

Putting this down to poor planning and management, and a lack of funding, Mr Neymour said provision had not been made to bring the latest batch of rental generators online.

He explained that the former government had planned to use 40-60 Mega Watts (MW) of generation capacity per year, ensuring there would be no “hold ups” in connecting them to the grid.

“What is now the case is that they require more than 60 MW of rental generation, so they have to put in additional equipment for the connection for that rental generation, which they didn’t plan to do,” Mr Neymour said.

“This has created additional delays in adding rental generation. This is not being explained to the Bahamian people; it is due to the lack of planning. The people are suffering.”

Mr Neymour estimated that rental generators were now producing around one-third of BPL’s power load, which in turn was adding to the fuel surcharge burden on Bahamians.

This, he explained, was because the rental generators ran on the most expensive fuel type - diesel. “The Bahamian people are not only suffering but their costs have increased,” Mr Neymour told Tribune Business.

“What is amazing is that we’re going into the winter months and still need these rental generators.”