The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamian hotels were yesterday growing increasingly fearful that rising electricity costs will wipe out their profitability “breathing space”, with one saying: “We can ill-afford to give it all away.”

Robert Sands, the Bahamas Hotel and Tourism Association’s (BHTA) president, renewed calls for Bahamas Power & Light (BPL) “to do everything in its power to mitigate the cost of electricity” amid expectations that the fuel charge - which typically accounts for 50-60 percent of customer bills - is set to increase imminently due to the annual adjustment that has to be made under the utility’s hedging strategy.

Global oil prices have risen sharply over the past 12 months, although last night they were trading at just below $100 per barrel on both the West Texas Intermediate and Brent Crude indices. Speaking at the BHTA’s latest quarterly meeting, Mr Sands said the hotel sector would be among those industries feeling the greatest impact from any BPL price hike because it is “a massive consumer of electricity”.

Family Island hoteliers yesterday warned that power reliability woes were increasing as outages became more frequent, “inconveniencing guests” by disrupting both water supply and Internet connectivity. Unless rapidly addressed, they warned that the situation will both undermine The Bahamas’ tourism competitiveness and discourage fresh job-creating investment in the sector.

Carlton Russell, the former Atlantis executive who is now managing director at The Cove, Eleuthera, listed “the reliability and cost of electricity” alongside upgrades to North Eleuthera’s airport as “basic infrastructure impediments” that need to be fixed “as a matter of urgency” if the areas’s tourism industry is to continue thriving.

“We have been experiencing many, many disruptions that are causing great inconvenience for our guests as it relates to water supply, as it relates to the Internet. If we are to be competitive we must address these issues. If we don’t address them, we will discourage new investment in our industry, particularly in the Family Islands,” he warned.

Mr Russell’s message was echoed by Kerry Fountain, the Bahamas Out Island Promotion Board’s executive director, who said electricity outages were especially disruptive to water supplies for hotels on more far-flung islands where there is no Water & Sewerage Corporation infrastructure.

Noting that BPL costs, and especially its fuel charge, are likely to increase, Mr Fountain said: “We could stomach it if the increase comes with reliability. Quite often in the last few weeks I’ve heard from members that electricity is inconsistent. Quite a few function on water pumps, and they lose water and they lose Internet service, particularly down south.”

Significant uncertainty surrounds BPL’s fuel charge and overall electricity costs. Shevonn Cambridge, BPL’s newly-appointed chief executive, recently said the state-owned utility monopoly’s fuel charge will likely have to rise to keep it in line with the regulatory formula governing its fuel hedging programme, but the Prime Minister subsequently said the Government would not burden businesses and households with any cost increase.

Alfred Sears QC, minister of works who has responsibility for BPL, then indicated that the only way to escape higher electricity costs is for the Government so subsidise BPL’s fuel costs - something it is forbidden from doing by the regulations governing fuel hedging, which stipulate such costs must be passed on in full to the consumer. The Government’s critics, meanwhile, are asserting it is only in a bind because it failed to execute the hedging trades left by its predecessor.

Regardless, Mr Sands yesterday urged the Government to “do whatever it can” to minimise any electricity cost increase on the tourism sector and wider economy. “The other point that we mustn’t lose sight of is BPL and the cost of electricity,” he told Tribune Business. “You heard the pleas of a lot of Family Island members with reliability.

“Whatever the Government can do to mitigate..... We appreciate that geopolitical issues are well beyond the Government’s control, but whatever it can control and its ability to mitigate, would be extremely helpful to the sector. The sector is faced with supply chain issues and escalating costs in terms of food and the transportation of food.

“All of that impacts and takes away from any breathing space the industry had over the last couple of months, and we can ill-afford to give it all away.” Senator Michael Halkitis, minister of economic affairs, who was earlier quizzed at the BHTA meeting about the situation, said he “took the point” about electricity reliability and cost concerns although he gave no short-term specifics on how the issue will be alleviated.

Pointing to the Government’s approval of a 61 Mega Watt (MW) solar facility for New Providence, which is going through the approval and planning stages, Mr Halkitis said it was also eyeing the development of multiple micro grids on the Family Islands by private investors who will then supply power to BPL.

These projects, though, will only kick-in over the medium to long-term. “It is an area where we have been lagging behind for a long time,” the minister conceded of renewable energy and other reforms, “but I can assure you that we are addressing it as a matter of urgency. First of all, the cost, because it takes away from your bottom line, and then the reliability. We are taking steps in that area.”

Elsewhere, Mr Halkitis said the Government plans to relaunch the Central Purchasing Unit in an effort to achieve cost savings for the Bahamian taxpayer via consolidated bulk purchases of both goods and services. He added that the National Economic Council (NEC), effectively the Cabinet or an arm of Cabinet, is meeting on a weekly basis to approve investment projects and “get shovels in the ground as quickly as possible”.

Explaining the Government’s rationale for no new and/or increased taxes in the just-passed 2022-2023 Budget, Mr Halkitis said: “We believe the ‘no tax increase’ environment is needed at this time to support recovery.” He also pledged that the Government is “working very hard to beat forecasts” that The Bahamas’ economic growth rate will start to ease in 2023 and 2024 as the comeback to pre-COVID levels is completed.

“We are bullish on The Bahamas. We know as a government that we need to nourish the goose that lays the golden eggs, and have an open door to collaboration with those in the industry,” Mr Halkitis said. “We value that collaboration to make sure The Bahamas is always on the leading edge, and we continue to lead the industry. We are working hard every day to ensure you have the enabling environment that leads you to success.”

The minister also promised that more government services will soon be accessible online, enabling persons to complete the application process digitally from start to finish as a way to enhance the ease of doing business. Mr Sands identified the hotel licensing process, and the need to obtain approvals from multiple agencies, as a key challenge for the tourism and hotel industries.