By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government last night demanded the Grand Bahama Port Authority (GBPA) and its water affiliate make “a business case that makes sense” for tariff hikes that it argued cannot be subject to “proper public consultation”.

The Ministry of Grand Bahama, responding to Grand Bahama Utility Company’s application for water price hikes that will impact up to 60 percent of its customer base, made clear its displeasure that it was not informed of the move in advance while asserting that 16 days was insufficient time for consulting affected customers given that the GBPA is expected to give an approval decision by May 1.

The Davis administration’s response came amid calls for government intervention due to concerns over whether the assessment of GB Utility’s application will be “fair, transparent and independent”. Kwasi Thompson, Opposition finance spokesman, asserted that the GBPA is “in essence regulating itself” because GB Utility is owned by its affiliate, Port Group Ltd. Both the GBPA and Port Group Ltd have common shareholders, namely the Hayward and St George families.

With the situation also prompting renewed calls for the Utilities Regulation and Competition Authority (URCA) to take over utilities regulation in the Port area, the Ministry of Grand Bahama said it only learned of the GB Utility rate increase application on Wednesday, April 12, when the public notice was released.

“[The] GBPA claims to recognise the Government as a key stakeholder but informed the Government of the rate adjustment request the same day the notice of application was published. In any event, we do not believe that a proper public consultative process can occur between now and May 1, 2023, the date GBPA indicated it would make a final decision,” the ministry said.

“GBPA indicated that it would seek to ensure the most vulnerable are not adversely impacted, but has made no case to the Government or the public regarding who that includes and how that is possible. We will urge the GBPA to approach this matter more deliberately and to demonstrate a business case that makes sense, while giving timely public consultation as a responsible utility provider should.

“As we move forward with the future development of Grand Bahama, our government remains fully committed to addressing the historical and systemic challenges that have impeded growth in our nation’s second city.” The manner in which the GB Utility rate increase has been handled is thus once again threatening to increase tensions between the central government in Nassau and the GBPA over Freeport’s governance.

GB Utility, in its rate increase application, pledged that 40 percent of its customer base - those who use 2,000 gallons or less per month, and are likely to be lower income residential users - will not see any price hikes from the adjusted tariff structure that is due to take effect on May 1 if approved by the GBPA. Average consumption among this group is 600 gallons per month, and the average bill is forecast to remain at $12.83.

The water provider, in a statement, said a further 47 percent of clients - who consume between 2,001 and 10,000 gallons monthly - will only see an $8.16 per month tariff increase that will take their average bill from $28.13 to $36.29. This equates to an annual water cost increase of $97.72 - less than $100.

GB Utility is clearly expecting large volume users, namely higher income residents and the business community, to bear the brunt of the increases. Those consuming between 10,001 and 20,000 gallons per month, and representing 8 percent of the customer base, will see their bills rise by around $20.73 per month - representing a jump from an average $71.42 to $92.14. This is equivalent to a $248.76 annual increase in water costs.

Users of more than 20,000 gallons per month, chiefly hotels and Freeport’s large industrial companies who comprise 5 percent of customers, will see their tariffs jump by $125.74 per month to an average $558.67 compared to the present $432.93. This is equivalent to a $1,508.88 annual increase.

GB Utility, seeking to justify the recovery of at least some of its $15m Hurricane Dorian restoration costs from its customers, said that while the $5m investment in a reverse osmosis system will provide extra supply resilience and sustainability in the future this has come at a significant increase in operating costs and “a financial loss”.

“Reverse osmosis systems are extremely expensive to operate in comparison to well water plants, adding an additional $2.5m to the utility’s annual operating costs from 2021 at a financial loss to the utility. This additional operating cost, to date, will not be recouped in rates retroactively,” GB Utility said in a presentation.

“GB Utility also experienced $3m in Hurricane Dorian-related infrastructure storm damage. In addition, there was approximately $2m in uninsurable losses associated with Hurricane Dorian including over $500,000 in costs to operate the free water depots for residents and 25 percent discounts given to residents for water usage.

“These costs were at a financial loss to the utility and will not be recouped in rates. The 25 percent discount and free water depots were in place from 2019 to December 2022 at a financial cost to GB Utility.” The water provider said Hurricane Dorian’s storm surge had left the freshwater lens responsible for providing much of the island’s supply contaminated with salt water.

“Hurricane Dorian flooded the utility’s infrastructure and did unprecedented damage to the freshwater aquifer located at Wellfield 6, which before the storm provided 60 percent of residents with a premium supply of drinking water,” GB Utility said.

“GB Utility deferred the rate case for two years, at a significant financial burden and cost to the utility. To defer any longer will result in higher cost accumulation and consequently rates, and jeopardises the utility’s ability to maintain and produce potable water and remain functional. It will also impact the ability to storm harden and make the utility resilient against future storm events and jeopardises the ability to recover after major storms like Hurricane Dorian.”

The Ministry of Grand Bahama, though, appeared unconvinced by GB Utility. “It is understood that the utility incurred millions of dollars in unexpected costs as a result of Hurricane Dorian,” it said. However, it then added: “Many in Grand Bahama would have suffered the loss of homes and livelihoods and have yet to fully recover financially to meet the burden of increased water rates.

“It is also noted that water with high salinity was delivered to many homes in Grand Bahama after Dorian with no compensation from the utility company.” Mr Thompson, meanwhile, argued that the application process is “tainted” - and should be stopped - because the GBPA, as regulator, and GB Utility, as applicant, both have common owners and shareholders and are thus conflicted.

“It is very concerning that the owners of the GBPA are the same shareholders with respect to GB Utility,” the east Grand Bahama MP said of the Haywards and St Georges. “You are in essence regulating yourself. At least with the Government you have where the Government is responsible to the people and held accountable to the people.

“With the GBPA it’s not the same thing. It’s a private company. You have a private company accountable to its shareholders in essence regulating themselves.” The GBPA has already pledged “a fair and transparent review process” that will balance GB Utility’s interests with that of consumers, and has the statutory responsibility for regulating utilities in the Port area by virtue of Freeport’s founding treaty, the Hawksbill Creek Agreement.

However, the potential conflict of interest again sparked calls yesterday for URCA to take over regulation of utilities in Freeport. James Carey, the Grand Bahama Chamber of Commerce president, said: “Not to debate the value of URCA, but I believe URCA should be playing a role in utilities in Grand Bahama as it does in Nassau. At least it gives some semblance of independence.”

However, both Grand Bahama Power Company and Cable Bahamas are still challenging URCA’s bid to regulate utilities in the Freeport area via the Supreme Court. And Mr Thompson yesterday said he was resisting calls for URCA’s involvement with the GB Utility matter because it has yet to assume responsibility for water regulation outside Freeport, as this still lies with the Water & Sewerage Corporation and the Government.

He added: “What I’m calling for is the Government to sit with the Port Authority and come up with an independent mechanism that the people of Grand Bahama have confidence in in terms of making an independent, correct assessment given the position of GB Utility.

“One understands they have made investments and a significant improvement since Hurricane Dorian. One understands the position they are in, but it must be an independent, fair and transparent this goes through in order for people to feel confident with the outcome. It doesn’t look like a fair and transparent process because, in essence, you are regulating yourself and that cannot be right...

“This is a unique situation and it demands that the Government sit with the Port Authority and come up with an independent mechanism.... The Grand Bahama Utility Company is an affiliate company of the Grand Bahama Port Authority. The shareholders are the same. It is therefore impossible for the GBPA to act as a regulator of itself.”