The Tribune

• Gov’t told: ‘Act now’ on regulatory conflict

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government “must act now” and directly intervene to prevent the Grand Bahama Port Authority (GBPA) “regulating itself” over imminent water rate hikes, the Opposition’s finance spokesman charged yesterday.

Kwasi Thompson, the east Grand Bahama MP, told Tribune Business his constituents are “up in arms” over the Grand Bahama Utility Company’s proposed increases and view the approval process as “ridiculous”. This is because the GBPA, as the regulator which will make the final decision, enjoys the same ownership as GB Utility - the very entity it is supposed to be providing independent oversight for - via the Hayward and St George families.

Pointing out that the GBPA’s “first legal obligation” is to its owners, and not Grand Bahama’s water consumers, Mr Thompson argued that the rate approval process is “tainted” by the obvious conflict of interest stemming from the common ownership.

As a result, he asserted it was “impossible” for any decision to be viewed as fair and impartial, and urged the Davis administration to intervene and work with the GBPA to develop an independent review mechanism or body to handle GB Utility’s rate increase application.

Ginger Moxey, minister for Grand Bahama, responded to Mr Thompson’s concerns during yesterday’s House of Assembly sitting by asserting that “our administration is on top of it”. She added, though, that Mr Thompson, who was her predecessor as minister of state for Grand Bahama, would be aware of the difficulties facing any government intervention because Freeport’s founding treaty gives the GBPA the power to regulate all utilities within the Port area.

Noting that the east Grand Bahama MP “would have gone through all this we are going through now with the GBPA”, Mrs Moxey said: “You understand the Hawksbill Creek Agreement and how it works. I can assure you this government from day one has been addressing these issues with the Grand Bahama Port Authority.... Our administration is on top of it.”

She also referred to a Supreme Court action involving Grand Bahama Power Company, which is fighting a legal battle challenging the Utilities Regulation and Competition Authority’s (URCA) efforts to assert regulatory authority over itself and other Freeport utilities. However, Mr Thompson argued that this was separate and distinct from the GB Utility matter as URCA does not yet have national regulatory authority for water.

And he argued that the Davis administration, and Ministry for Grand Bahama, “must go further” than the latter’s statement last week in which it said the GBPA and GB Utility had not allowed sufficient time for public consultation given that a decision on the rate increase was due by May 1. It also demanded that the two entities provide “a business case that makes sense” to justify the water tariff hikes and the size of increase.

“I’m calling on the Government to intervene. It cannot just let it die,” Mr Thompson told Tribune Business. “What we did is continue to call upon the Government to act. They must reach out to the Port Authority, sit down with the Port Authority and come up with a mechanism that the people of Grand Bahama are satisfied with... I don’t believe the people of Grand Bahama will be satisfied until they see a result where there is an independent body that will review the matter.

“At present it’s an unfair situation where we have the Port Authority regulating itself, and I don’t believe anyone would agree that is an acceptable position given the maturity Grand Bahama has achieved. It’s incumbent on the Government to act, it’s incumbent they sit with the Port Authority and come up with a mechanism people will be satisfied with.”

With the May 1 decision date looming just 11 days away, Mr Thompson continued: “I think the Government must act, and they must act now. A decision is going to be made, we have been told, very shortly, and so the Government must act before a decision is made.

“I will not have confidence in the Government’s ability to act until I see a tangible, real result that shows there’s an independent person reviewing this. Just saying you understand and appreciate the situation, and that you have called on the Port Authority to do certain things, is not enough. What we are hoping for is to be able to see tangible results with an independent body that is going to regulate the situation.”

Asked how Grand Bahama residents view the situation, Mr Thompson replied: “The people in my constituency are up in arms. They are very upset. They are very dissatisfied with the process as it stands. Some people are calling it ridiculous that a company can regulate itself and those involved don’t see anything wrong with it.

“I’m someone who pays for water, and I believe it’s an unsustainable position. My view is shared by many constituents that I have spoken to who feel the same way. And there are many businesses and other residents who share the same view. Something has to happen. It really requires that the Government act, and that the Government act now.”

Speaking earlier in the House of Assembly, Mr Thompson argued that the GBPA - a unique entity with quasi-governmental powers - is “not accountable to the people of Grand Bahama” but, instead, to its profit-driven shareholders, the Hayward and St George families. As a result, its “first legal obligation” is to its owners and not the interests of Grand Bahama water consumers who, in its regulatory capacity, it is supposed to protect.

GB Utility is owned via Port Group Ltd, the GBPA affiliate that is also controlled by the same two families. “The GBPA, in a statement, committed to a fair and transparent process, which will be impossible when a decision is made by the GBPA where the shareholders are the same as GB Utility,” the east Grand Bahama MP told the House of Assembly.

“The process will not be fair and transparent if left to themselves. The Government has made a statement, but must go further. Do not allow the GBPA to simply say this is the way we are going. Their response was: This is the way it is, we regulate ourselves. We cannot allow that to be their response. We cannot be satisfied that is their response.”

Pledging the Opposition’s help if needed, Mr Thompson said GB Utility’s rate increase proposal came against the backdrop of many consumers having appliances ruined through the provision of “salty water” following the wellfields’ inundation by Hurricane Dorian’s storm surge.

While the water provider has pointed out that it gave consumers a 25 percent discount on their bills as compensation, the MP also argued that the extent of the water rate increase needs to be better justified. “We all lived in Grand Bahama, and suffered having to bathe and cook with salty water,” Mr Thompson said. “They made the case they decreased the rate, but we had to suffer with salty water that we were paying for.”

Calling on GB Utility to expand its infrastructure and provision of water to more Grand Bahama communities, and thus generate more revenues, he added: “Who is looking at the rates we are paying in Grand Bahama for water? Is this a fair rate compared to what others are paying in New Providence and the rest of the Caribbean?

“We would be able to say, based on what the rate is in Nassau, and in Barbados, Jamaica and Florida, and the rest of the Caribbean, that this is a fair rate. Others have reminded me the water rate was one-third of what it is today. That is what was presented to me. The rate is significantly lower than it is today. Who’s justifying that? Who’s reviewing the situation? The independent body should be looking at this and reviewing the entire situation.”

GB Utility, in justifying its application for a water rate increase, said 40 percent of its customer base - the lowest volume users - will see no hike at all, while another 47 percent will suffer an average $8 per month rise. It 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.

“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.”