The Tribune

By NEIL HARTNELL 

Tribune Business Editor 

nhartnell@tribunemedia.net

FREEPORT’S “few survivors” are being forced into ever “increasing losses” through cost hikes passed on by Grand Bahama Power Company and other major operators, a hotelier warned yesterday.

Magnus Alnebeck, Pelican Bay’s general manager, told Tribune Business that the 6.3 percent base rate increase proposed by the island’s electricity supplier poses a further threat to the “shrinking economy” and a deterrent to future investment in Grand Bahama.

Calling for GB Power’s submission to be reviewed by “someone other than the Grand Bahama Port Authority (GBPA)”, such as the Utilities Regulation and Competition Authority (URCA), he warned that the first place where employers will seek to cut costs is their payroll/workforce if pushed beyond breaking point.

Voicing scepticism over GB Power’s assertion that the base rate increase will be more than offset by fuel cost savings from its hedging initiative, with 75 percent of customers seeing either no change or a modest $2 per month decrease in their total light bills Mr Alnebeck told this newspaper that this was still susceptible to global oil price movements.

“It’s like every other cost that gets added on to hotels,” he said of GB Power’s proposal. “We are not talking about reducing profits in Freeport; we are talking about increasing losses. And, when we are increasing losses in the hotels, there are very few variable costs we can do anything about except payroll.

“It’s the usual Freeport problem. Our economy is shrinking drastically, constantly in Freeport, and the big companies are passing on costs to the few survivors which makes it even harder to attract future investment. Being Freeport, this is how it works in Freeport. It’s a shrinking economy and loss-making hotels. This will just mean that the losses get bigger.”

GB Power’s tariff proposal, which would cover the three-year period between 2025-2027 and take effect from the upcoming New Year’s Day, has to be approved by the GBPA as the utility’s regulator. However, Mr Alnebeck questioned why it was seemingly increasing costs for its remaining customers as a response to PharmaChem Technologies’ closure and lower-than-expected demand.

The Pelican Bay chief argued that GB Power’s base rate increase bid was akin to his resort, in response to occupancy levels decreasing from 40 percent to 30 percent, telling guests that room rates have to be increased to compensate.

Describing the push back from Ginger Moxey, minister of Grand Bahama, as “very encouraging”, Mr Alnebeck said: “Instead of trying to make it easier, it becomes harder. As seen in the minister of Grand Bahama’s statement, we’ve had more problems with the power supply this summer than ever, and historically Freeport has had better power supply than elsewhere, but we are quickly going in the same direction.

“My view is that it [the rate increase application] should be evaluated by someone other than the GBPA because they seem to not have a problem with it.” Nikita Mullings, GB Power’s chief operating officer, on Tuesday said the 6.3 percent proposal came after the loss of its biggest single customer, PharmaChem, and lower-than-expected demand by other industrial clients who account for one-third of electricity load.

In response, Mr Alnebeck said it appeared that “it’s only in Freeport that the charge has to be passed on to everyone still here. If that’s the case, it’s like running a hotel with occupancies going from 40 percent to 30 percent, and next week telling the guests that rates have gone up because occupancy has gone down.

“That seems like a great encouragement to attract future investment,” he added. “In my mind the best way to encourage future investment is to keep current investors happy. It’s not good at all, but there is very little one can do about it. There is no other power supplier, so all we can do realistically is say it’s wrong. The extension cord from Florida is not long enough.”

Mr Alnebeck said Pelican Bay’s occupancy rate is presently in the “low 40 percents” range, and added: “We are a little bit behind the same time last year. It’s up and down depending on what happens at the Shipyard, and now we’re getting into the time of year that if there are any hurricanes and tropical storms there is less and less commercial travel. There’s very little, if any, tourists coming here.”

James Carey, the Grand Bahama Chamber of Commerce’s president, told Tribune Business that the information and rationale released by GB Power to-date was insufficient justification for the base rate increase it is seeking.

“It doesn’t speak very much to the justification for the rate increase,” Mr Carey said. “It refers to some inflation figures but is not giving guidance as to how the company is being impacted by inflation. It’s difficult to appreciate what’s happening. There have been no Town Hall meetings and information coming out; it’s been very sparse.

“There are a number of things that are not clear right now. If the rate increase is to be justified, more information needs to be forthcoming. After Hurricane Dorian we were taxed to help restore the outside plant; the lines and that sort of thing. Many years ago, the Power Company used to insure the outside plant.

“There’s a quality of information missing to say it’s a justifiable thing. I don’t want at this stage to say it’s out of hand and shouldn’t take place. It will impact the community, impact businesses, and while some- one may say it’s only 6.3 percentage points it’s 3.8 percent of the whole” based on the base tariff accounting for 60 percent of the total bill.

“Adding 4 percent to someone’s light bill that’s already $500 a month, it’s still adding $20 per month and over a year it’s $240” Mr Carey added. “The whole picture needs to be looked at. We always seem to get a little curve ball coming back to us. The information is very scant. If they can show some justification as to why this increase is necessary there would be some level of understanding.”

Ms Mullings, in her statement yesterday, said: “With the impact of our fuel hedging programme, residential, general large service and large industrial customers are forecasted to receive a small reduction on an all-in basis while commercial customers would see a small, estimated increase of less than 2 percent.

“Since our last rate adjustment in April 2022, we have seen reduced sales from our general large service customer classes due to lower energy consumption, the loss of our largest customer and significant inflationary pressures.

“We know there is no good time to propose a rate increase, but the requested adjustment is essential to maintain and improve the efficiency and reliability of services, and to allow us to invest in critical infrastructure maintenance as outlined in our system resource plan to enable the integration of renewable energy sources in keep- ing with the Government’s targets.”