The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s leader is challenging whether electricity regulators are “endorsing” Bahamas Power & Light (BPL) breaking the law by asserting it has made an “adequate case” to hike its fuel charge by up to 163 percent.

Michael Pintard told Tribune Business that the Utilities Regulation and Competition Authority’s (URCA) short three-paragraph statement affirming that BPL’s rolling fuel charge increases are justified was “quite puzzling” given that the October 4 plan unveiled by both the utility regulator and the Davis administration seemingly breaches the Bahamas Electricity Corporation (Amendment) regulations.

These were issued in the Government’s gazzette on June 26, 2020, and the Free National Movement (FNM) leader asserted that they do not permit BPL to create two distinct fuel charge rates for consumers as set out in the October plan that has now been implemented.

Mr Pintard, emphasising that he was “not pushing for costs to be passed on to Bahamian consumers” unnecessarily, nevertheless argued that the Government and BPL plan to protect vulnerable and low income households by creating two energy consumption categories had no basis in law or the regulations.

“We maintain the question of whether or not there were violations of the Electricity Act (sic, BEC Act) regulations,” the Opposition leader charged. “What they seem to have done is that they are providing a different rate for consumers based on consumption, and creating different categories of consumers. Our initial reading of the Act amendments is that it does not make provision for different categories of consumers.

“URCA would seem to have endorsed BPL taking actions not supported by law, with different rates based on consumption levels.” BPL, in unveiling the rolling series of fuel charge hikes that businesses and households will see on their bills throughout 2023, segmented its customer base into two based on energy consumption in a bid to mitigate the impact on those who can least afford the impact.

Consumers who use less than 800 kilowatt hours (kWh) of energy per month, meaning small, low income and vulnerable households, will see quarterly increases of two cents per kWh whereas larger customers (especially hotels and other businesses) using more than that amount will experience more than double that trajectory at 4.3 cents per kWh every quarter.

The former’s fuel charge is forecast to peak at 18.5 cents per kWh next summer, at the peak of consumption, while the latter’s will be almost 50 percent higher at 27.6 cents per kWh as the Government and BPL hope businesses bear the brunt of the hike.

However, the BEC (Amendment) Regulations make no provision for two separate fuel charge customer categories. They merely state that the fuel charge “shall be a monthly amount per kilowatt hour representing the total cost of fuel required to produce and deliver each kilowatt hour of electricity to consumers”, and add: “The fuel adjustment charge shall be the total cost of fuel consumed in the previous month’s billing period divided by the total amount of units billed for that corresponding period.”

They thus seem to back Mr Pintard’s contention that the regulations are being broken by BPL’s and the Government’s efforts to protect low income and vulnerable families from the worst of the blow. URCA, though, said that following its review it was “satisfied that BPL has made an adequate case for the rate increases outlined in its press statement dated October 4, 2022”.

Carlton Smith, URCA’s chief executive, was said to have been in a meeting on Friday when Tribune Business called for comment and did not return the call despite a detailed message being left for him. A voice mail message left for Jonathan Hudson, the URCA official said to now be in charge of electricity regulation, was also not returned before press time.

The Opposition leader’s analysis was backed by an energy industry insider, speaking on condition of anonymity, who questioned how URCA reached its ‘no objection’ conclusion even though there was no provision in law or regulation for BPL to divide its consumer base into two categories with respect to the fuel charge.

Querying why the Government did not simply amend the regulations at the same time as it raised the VAT exemption on electricity bills to $400, the insider charged: “The question becomes for URCA how did it arrive at approving this when clearly it is in violation of the law. How do you square that circle?

“Can you please share the analysis that you are talking about. To say you have no problem with this, on what basis does this square with the law? If that’s put to them [URCA], I don’t think they have a case because it’s a clear violation of the law. This doesn’t square with the law.”

The source said pressure will likely grow on URCA to publicly disclose its full assessment given that it is also responsible for consumer protection when it comes to the electricity sector. They queried how well URCA is upholding this aspect of its mandate given that it is Bahamian households and businesses that are set to increasingly pay the price for the Davis administration’s decision not to execute the trades that would have further strengthened BPL’s fuel hedging initiative.

“URCA is responsible for the consumer as well as the utilities. They have to play both sides and balance in the middle,” the source said. “Serious questions need to be asked. Consumers are now being over-charged or unfairly charged because you’re putting the bulk of the fees on small businesses and larger consumers and that’s not fair.

“URCA should have been in there from day one. The consumer does not have a voice, and URCA gives them that voice. The question becomes: Are they fairly representing the consumer?” Mr Pintard, meanwhile, also queried whether URCA’s analysis had factored in that the fuel charge hikes would have been unnecessary if the Government had given the go-ahead for the hedging trades, asserting that there had been “a deafening silence” from the regulator on the issue.

The fuel charge component of BPL bills is set to increase by up to 163 percent compared to the stable 10.5 cents per kilowatt (KwH) enjoyed by the utility’s customers for the just over two-year period to October 2022. Without the cut-priced fuel produced by those trades, BPL has increasingly been purchasing its oil at spot market prices from late 2021 onwards but not passing the full cost on to customers - in contravention of the Electricity Act regulations - for some months.

With BPL’s mounting debts to Shell, its fuel supplier, increasingly unsustainable, the Government has reached an agreement to pay the global oil giant $90m over a nine-month period at $10m per month. It is this payment, and BPL’s huge hiking of the fuel charge to recover this debt and government loans previously made to support the 10.5 KwH price, that has prompted Opposition charges that the Davis administration has cost the Bahamian people over $100m.