The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Chamber of Commerce director yesterday voiced optimism that regulators are poised to take “the first step” in ensuring Bahamas Power & Light (BPL) fulfills its obligations towards consumers.

Debby Deal told Tribune Business she drew encouragement from the Utilities Regulation and Competition Authority’s (URCA) planned probe into how BPL calculates its fuel charge as a sign that it will increasingly bare its supervisory teeth towards the state-owned energy monopoly.

The head of the Chamber’s environment and energy committee, she said URCA’s just-unveiled draft 2020 annual plan also explained that a lack of funding and staff with the necessary expertise had impeded its initial efforts to properly regulate BPL.

“I can see now why URCA was not much in the picture as it didn’t have the resources to do what it needed to do,” Ms Deal added. “That’s good for us to know. A lot of us wondered why URCA was not in the picture - we saw a lot of fines for BTC on the communications side, but very little to do with BPL. They didn’t have the funds to hire the staff to do what they needed to do.

“Now they will expand their staff we’ll be able to see better results, maybe, in the actions of BPL if they are questioned as to what they’re doing. Whether that happens is a whole different ball game.”

Ms Deal added that URCA’s planned investigation into BPL’s fuel charge, which typically makes up 50-60 percent of consumer bills, was “good news even if they find nothing” as it suggested the regulator was prepared to act in the interests of consumers.

“I’m very grateful that this might be the first step in making sure their [BPL’s] actual mandate comes to fruition. BPL is supposed to provide safe, reliable and cost efficient energy, and for 40 years they’ve not given us safe, reliable and cost efficient energy,” she told Tribune Business. “Now they can start looking into some of this stuff.”

This newspaper reported last week that URCA is set to examine whether BPL customers have suffered “possible harm or mischief” after detecting “troubling trends” in how it has been calculating fuel charges.

The regulator, in its just-released 2020 draft annual plan and budget, pledged to impose “clear regulatory oversight” over how BPL determines this portion of customer bills given that it can create “inefficiencies causing significant cost to consumers”.

Identifying this as a major 2020 priority, URCA revealed it plans to “develop a comprehensive methodology” for how such fuel charges are calculated and applied at both BPL and throughout the wider Bahamian energy industry.

It admitted it had wanted to undertake such a “regulatory intervention” in 2019, but was thwarted by a “lack of available resources” - something that has plagued URCA’s efforts to oversee the Bahamian energy industry ever since it took on this responsibility in 2016.

However, the regulator said its New Year’s objectives are to ensure “the fuel charge accurately reflects the actual cost of fuel used by BPL in providing electricity to its customers”, and that “the fuel charge only reflects the fair and efficient costs of fuel used, and does not pass on costs resulting from failures by BPL to properly manage its electricity system”.

“Over the course of 2019, URCA has reviewed the gazetted rules pertaining to the calculation and application of the fuel charge, and tracked the posted fuel charge for the period,” it said, “noting trends which are of concern to URCA, particularly in relation to costs experienced during BPL’s period of supply challenges in New Providence during 2019.

“In reviewing the need to address any possible harm and/or mischief that may have been caused to consumers through the fuel charge during the period, URCA is currently seeking to address BPL’s power quality deficiencies during 2019 through a comprehensive investigation.”

URCA added that this probe will be able to address “any fuel charge impact” that BPL consumer suffered in 2019, and unveiled its “fuel cost recovery” regulation project for the new year.

“Moving forward, and noting that the fuel charge mechanism can result in inefficiencies causing significant cost to consumers, URCA considers it necessary to ensure that there is clear regulatory oversight of the fuel charge approach wherever it is employed in The Bahamas,” URCA said.

“URCA therefore proposes during 2020 to develop a comprehensive methodology for the derivation and application of fuel charges within the sector.”

The “fuel charge” portion of BPL bills is designed as a pass-through, meaning that the utility passes on to consumers the full costs associated with purchasing the fuel used to generate electricity. It is supposed to be a ‘cost recovery’ mechanism, meaning that BPL earns no profits from the fuel charge.

However, there have long been suspicions that BPL uses the “fuel charge” to disguise inefficiencies elsewhere in its operations, and wraps other items into this levy that further burden Bahamian businesses and households besides the pure costs of fuel.

The language in URCA’s draft 2020 annual plan will likely reinforce such fears, and suggests there may be some credibility to these concerns. The issue is a vital one for Bahamian households and businesses, especially if they are being forced to unduly pay for BPL’s inefficiencies, given the portion of customer bills that the fuel charge typically accounts for.

URCA’s ambitions are also likely to be greeted with some scepticism given its confession that the energy sector has operated without effective regulatory scrutiny despite being handed this responsibility in 2016 with passage of the Electricity Act.