The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government yesterday unveiled a major overhaul of the country’s energy regulatory regime to provide a platform for rescuing Bahamas Power & Light (BPL) from its $1bn debt and investment hole.

Jobeth Coleby-Davis, minister of energy and transport, tabled a new Electricity Bill that will facilitate BPL outsourcing “functions and assets” to subsidiaries that it wholly or partially owns along with a Natural Gas Bill that introduces an oversight regime for BPL’s planned switch to cleaner, more sustainable and potentially cheaper liquefied natural gas (LNG) for electricity generation.

Both Bills are set to be debated in Parliament next week, with well-placed Tribune Business sources suggesting the Government wants the legislation to be passed, gazzetted and to take effect from June 1, 2024, as it seeks to accelerate plans for wide-ranging transformation at BPL and in the wider energy sector.

The Bill, which is to repeal and replace the existing Electricity Act 2015, states in its “objects and reasons” section that it “seeks to modernise and consolidate the law” for electricity supply through several avenues including giving the Utilities Regulation and Competition Authority (URCA) the power to “regulate all aspects of renewable energy”.

However, its new provisions appear to go much deeper by effectively facilitating the potential break-up of BPL into separate generation, transmission and distribution, and back/office billing functions and creating a foundation for private-public partnerships (PPPs) that the Government hopes will rescue the ailing state-owned energy monopoly by attracting private capital and expertise.

The Bill’s section nine, three (c) details new clauses on page 15 that allow BPL to “incorporate one or more” 100 percent-owned subsidiaries or joint venture companies, the latter part-owned by the Government, to which it is able to transfer “functions and assets”.

And these newly-formed entities are also permitted by the new Bill “to enter into a management contract with a system operator to perform any or all of the functions of BPL”. This appears to creating the legal basis for the potential break-up of BPL into separate functions, and the outsourcing of the management of those functions to private sector companies and investors.

Kyle Wilson, the Bahamas Electrical Workers Union’s (BEWU) president, yesterday told Tribune Business he has received no further details on the Government’s plans for BPL beyond what he was told at his initial meeting with Mrs Coleby-Davis.

He previously confirmed that Pike Corporation and its subsidiary, Pike Electric, headquartered in the Carolinas, are the frontrunners to take over BPL’s transmission and distribution business based on his meeting with the minister and her adviser, former BPL chief operating officer, Christina Alstom.

Meanwhile, several sources have suggested that Shell North America, which under the Minnis administration won the bidding process for outsourcing New Providence’s base-load generation via the development of a new 225 Mega Watt (MW) power plant at Clifton Pier, may be a contender to take over generation again.

This may possibly be in partnership with BISX-listed FOCOL Holdings, which is presently engaged in a $40m preference share offering and could be tapped to participate in supplying liquefied natural gas (LNG) to BPL’s Clifton Pier plant.

The new Electricity Bill’s “objects and reasons” section, meanwhile, reveals that the likes of BPL and all other entities designated as “public electricity suppliers” will enjoy a “transition period of three years” after the legislation becomes law when URCA cannot interfere with the tariff rates or prices that they charge Bahamian households and businesses. They will, though, have to use that time to prepare a “comprehensive review” of their prices.

And the Bill also appears to give BPL and other electricity providers licensed by URCA the ability, for the first time, to charge different different tariffs and prices to different groups of customers and, also, different locations and islands. Currently, all residential and commercial customers are charged the same rate, respectively, and there is also no discrimination by island.

The Bill’s section 38 (seven) states: “Subject to the approval of URCA, a licensee may where no undue preference is given to any class of customer or locality, fix the charges under this section at different rates and scales for different classes of customers, including residential, commercial, general service and other service categories.”

One source, speaking on condition of anonymity, told Tribune Business last night that the Government - via the new Electricity Bill - appeared to have found “a sneaky way to circumvent the Grand Bahama Port Authority (GBPA)” and its regulation of utilities in Freeport via the Hawksbill Creek Agreement.

With tensions already inflamed by the Government’s demand that the GBPA pay $357m to reimburse it for costs incurred in providing public services in Freeport over and above the tax revenues generated by the city, the source said the BIll identifies Grand Bahama as a Family Island.

And it appears to make the Grand Bahama Power Company the “approving authority” for anyone submitting a proposal to supply electricity to the public in Grand Bahama. The Bill states that any approvals by an “authority” must also be given the go-ahead by URCA, and it was suggested this was a neat way of circumventing the GBPA’s utilities regulatory authority in Freeport and transferring it to URCA via GB Power.

The Bill explicitly states that it applies to Freeport even though GB Power’s 2016 Supreme Court action, where it sought an injunction to prevent URCA “from regulating, or seeking to exercise licensing and regulatory authority” over it, remains live.

GB Power’s action is founded on the basis that, as a GBPA licensee, it is licensed and regulated by the latter via the Hawksbill Creek Agreement - and not by URCA and the Electricity Act 2015.

It is arguing that the Electricity Act’s sections 44-46, which give URCA the legal right to licence and oversee energy providers, “are inconsistent, and conflict with, the rights and privileges vested in [GB Power] and the Port Authority” by the Hawksbill Creek Agreement.

GB Power’s statement of claim argues that itself and the GBPA “have been vested with the sole authority to operate utilities”, including electricity generation and transmission and distribution, within the Port area until the Hawksbill Creek’s expiration in 2054.

The new Bill, meanwhile, also repeals the Electricity Rate Reduction Bond Act, and does not replace it, so as to “remove the obligation to finance” BPL via this method. With no alternative method proposed in the legislation, it is unclear how the Government plans to refinance the state-owned energy provider’s $500m legacy debts and liabilities.

Mrs Coleby-Davis revealed to the House of Assembly in March that BPL’s financial needs total $1bn, evenly split between its legacy debts/liabilities and current capital investment needs.

“Mr deputy speaker, BPL has over $500m in debt. Yes, that’s right, over half-a-billion dollars and counting,” she confirmed. “It owes banks, it owes the Government and its employees’ pensions are underfunded by $120m. You heard me right. The employees’ pension [fund] is underfunded by $120m. Big change is needed.”

Mrs Coleby-Davis did not break down the $500m, which appears to represent total liabilities and not just debt, beyond the $120m employee pension fund deficit. The reference to “owes the Government” likely means the $184m debt, disclosed in the latest quarterly debt statistical burden, that represents the loan/subsidy provided to BPL to cover its fuel purchase costs after hedging trades were not executed.

The minister, though, provided more details on BPL’s capital investment needs which she also pegged at $500m or half- a-billion dollars. “BPL operates 29 power stations on 17 islands. Over the next five years, BPL will need an investment of over $500m to upgrade its infrastructure,” Mrs Coleby-Davis said.

This, she added, was broken down into a collective $300m investment in new generation assets spread across New Providence and the Family Islands; $130m to upgrade New Providence’s transmission and distribution network “in the next two years alone”; $35m for the roll-out of advanced metering infrastructure (AMI); and $70m in undefined “other costs”.

“Today, to fix, BPL we need over $500m to address its debts and over $500m to upgrade and improve its aged and deteriorated infrastructure. Mr deputy speaker, that’s over $1bn,” Mrs Coleby-Davis said.