The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Demand for Grand Bahama Power Company’s (GBPC) electricity is down 10 per cent below normal levels, with its majority shareholder not anticipating a recovery before 2018.

Canadian utility giant Emera, which owns a majority 80.4 per cent equity interest in Grand Bahama Power, warned in its 2016 full-year results announcement that lower energy demand in the Bahamas would act as a drag on its wider Caribbean earnings in 2017.

Attributing the reduced energy demand to Hurricane Matthew’s aftermath, Emera said: “Post hurricane load is down approximately 10 per cent as compared to normal expectations.

“However, management anticipates that demand will recover to pre-storm levels by 2018.”

Much of the reduced demand is likely to stem from the continued closures of the former Memories property and much of the Grand Lucayan resort, since hotels are significant energy consumers. And some residential properties badly damaged during Hurricane Matthew may still have to be restored to the grid.

Emera pegged GB Power’s post-Matthew restoration costs at $28 million, a slight rise from previous estimates of $27-$27.5 million.

While GB Power is seeking to fully recover these restoration costs over the next five years internally, the Emera filing discloses that should it be unsuccessful, it can then seek to obtain the remainder from its customers via rate increases.

“GBPC’s generation and substation infrastructure weathered the storm well, [but] over 2,100 transmission and distribution poles and related conduits were damaged or destroyed, as were many connections to customer homes,” Emera said of Matthew’s aftermath. “Restoration efforts have been completed with the support of other Emera affiliates.

“Emera Caribbean has recorded $28 million of restoration costs associated with Hurricane Matthew, with no impact to net income. $21 million has been recorded as a regulated asset amortised over five years, and $7 million recorded as property, plant and equipment depreciating at an average 27 years.

“Both assets are included in rate base. In December 2016, the GBPA (Grand Bahama Port Authority) has approved the full recovery of the storm restoration costs in this manner.”

Unveiling GB Power’s cost recovery plan in late 2016, the GBPA said Grand Bahama residents and businesses would see no increase in their electricity rates “for the next five years”, with the utility absorbing the financial impact itself.

Confirming this, Emera’s results filing said: “This is achievable as the company’s fuel costs over this period are forecast to decrease. Fuel costs are managed through a fuel hedging programme, which allows predictability of these costs.

“Any over recovery of fuel costs during this period will be applied to the Hurricane Matthew regulatory deferral, until such time as the deferral is recovered. Should GBPC recover funds in excess of the Hurricane Matthew regulatory deferral, the excess will be placed in a new storm reserve.”

However, in something for Grand Bahama residents and businesses to watch for the future, Emera then added: “If the Hurricane Matthew deferral is not fully recovered at the end of five years, GBPC will have the opportunity to request recovery from customers in future rates.”

With demand for Grand Bahama Power’s supply unlikely to recover until 2018, Emera warned that “expected short term load decline” resulting from Hurricane Matthew would be a key factor in its 2017 Caribbean earnings coming in below prior year levels.

Caribbean electricity sales, revenues and volumes all declined for Emera in the 2016 fourth quarter, primarily as a result of Matthew’s impact in Grand Bahama.