The Tribune

• Regulator to evaluate charges it already approved

• Opposition chief asserts: ‘They are doing this late’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s leader yesterday asserted “it sounds a bid odd” that regulators now plan to examine the lawfulness of Bahamas Power & Light’s (BPL) fuel charges having previously approved them.

Michael Pintard said the Utilities Regulation and Competition Authority (URCA), based on its 2024 annual plan, is preparing to “audit” the very same BPL fuel charge ‘glide path’ strategy that it approved in late 2022 and which subsequently resulted in “sky rocketing” electricity bills for Bahamian households and businesses.

“My first reaction, if my recollection is correct, URCA approved the rate increases for BPL. If I’m correct, the approved the ‘glide path’,” the Free National Movement (FNM) leader told this newspaper. “It sounds a bit odd to me that they are now going to review the very thing they’ve approved.... They are doing this late. This ought to have been done prior to them giving BPL approval to proceed.

“I would like to see what the data says, but we are of the view that they justified the arguments being offered by BPL. What we argued was that the rate increase was not inevitable; it was the result of poor decision-making by the Government and BPL. They put forward a glide path in terms of the fuel charge and it increased over a period of time.”

URCA, in its just-published 2024 annual plan, affirmed that it plans to review and audit BPL’s fuel tariff to determine how it is calculated and whether the charges levied on consumers since 2021 comply with the Electricity Act and its accompanying regulations.

“This project aims to determine how the BPL fuel tariff is calculated and whether charges to customers since 2021 comply with the law and regulatory frameworks. This project aligns with URCA’s mandate to ensure efficiently incurred costs, consumer protection and efficient operation per the Electricity Act,” the regulator said.

“By reviewing and auditing fuel tariffs, URCA can ensure that energy prices reflect reasonably incurred costs and are fair to consumers, supporting goal two of the National Energy Policy (NEP).” In so doing, URCA will effectively be reviewing a strategy - which it approved just over 14 months ago - that hiked consumer’s fuel charges by up to 163 percent over an eight-month period.

As BPL’s regulator, it late last year approved the very strategy and actions that has made electricity increasingly unaffordable for all. “As the regulator for the country’s electricity sector, URCA conducted a comprehensive review of BPL’s fuel charge increase proposal. At the conclusion of that review, URCA determined that it is satisfied that BPL has made an adequate case for the rate increases outlined in its press statement dated October 4, 2022,” URCA said.

Seeking to soften the blow from its verdict, URCA promised to undertake ongoing monitoring and reviews of BPL’s fuel charge during 2023 to ensure the utility is operating efficiently and levying the correct charges on customers.

“The regulator notes that BPL’s justification for the changes to the fuel charge is based on conditions that are likely to change,” URCA added. “Therefore, it is URCA’s intent to revisit that matter to ensure that BPL is operating efficiently and charging customers appropriately. URCA has advised its licensee (BPL) of its intent to review its fuel charge again during the projected glide path fuel charge recovery period, and it will make public notice of the same as necessary.”

URCA has never disclosed the full analysis, or review, that it conducted to justify its conclusion that BPL fuel charge hikes of up to 163 percent were warranted. And the timing of its review, and news release, was more than one month after BPL had already begun to implement the phased increases.

BPL is now in the final stages of its so-called fuel charge ‘glide path’ strategy, having forecast an 18 cents per kilowatt hour (KWh) rate for consumers using over 800 kilowatt hours per billing. This compares to the peak 27.6 cents per KWH levied between June and August this year, and the 25 cents charged between September and November 2023.

Mr Pintard, meanwhile, said the Opposition had forecast the increased cost burden that would be imposed on all Bahamians as a result of the Government’s failure to execute the additional trades that would have secured extra cut-price fuel to support BPL’s hedging strategy.

“What is clearly obvious, as we predicted when they [the Government] refused to execute the rolling trades, we expected the sky-rocketing of electricity rates due to the fuel charge and, unfortunately, that turned out to be the case,” the FNM leader told Tribune Business. “Residents and businesses got a hard hit in terms of electricity costs.

“URCA has to be careful that it functions in the capacity of a regulator working in the best interests of customers and not let political interference result in it cherry-picking the functions at BPL that it’s going to evaluate and comment on publicly.”

The Government exacerbated the impact of failing to execute the trades by keeping the fuel charge at an artificially-low 10.5 cents per KWh between late 2021 and October 2022, even though BPL was paying a far higher price for its fuel by having to now purchase the extra quantities it needed on the open spot market.

Mr Pintard yesterday reiterated that URCA had failed to address whether the Davis administration had broken the law by providing funding, either via a loan or subsidy, to BPL to enable it to maintain the 10. cents price during that period. The repayment of that funding, and eliminating prior fuel cost under-recovery, was why Bahamians paid such steep prices for electricity in summer 2023.

The Bahamas Electricity Corporation (Amendment) Regulations 2020, which were enacted to facilitate the state-owned energy monopoly’s fuel hedging initiative, required BPL to pass 100 percent of its fuel costs on to consumers. However, summer 2023’s bills and prior fuel charge under-recover suggest this did not happen between late 2021 and October.

The FNM leader yesterday questioned, too, whether the two-tiered fuel charge that saw consumers using over 800 KWh pay a higher rate was permitted by law and regulations. For the Government has never precisely stated how much BPL’s fuel “under-recovery” has cost the Bahamian people and businesses.

However, it is likely to be somewhere between $90m and $150m. Alfred Sears, ex-minister for public works and utilities, who then had responsibility for BPL, last October informed the House of Assembly that the utility’s debt to Shell was around $90m as he unveiled the plans to pay it off in a series of $10m monthly installments through to June 2023.

And the last Fiscal Strategy Report revealed the extent of BPL’s financial woes and the need for government support. “The recent disclosure of approximately $150m of payment arrears of Bahamas Power & Light (BPL) represents a significant unbudgeted liability of the Government,” it said. “To ensure continued provision of essential electrical services to the public, the Government has committed to ensuring payment of this liability by the corporation.”

Government loans to state-owned enterprises (SOEs) and agencies also near-tripled during the first nine months of the 2022-2023 fiscal year to $110m, which Simon Wilson, the Ministry of Finance’s financial secretary, previously confirmed was to help BPL pay off its fuel arrears to Shell.