The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A prominent advocate for Bahamian small businesses yesterday said most of his clients and members have ceased complaining about high energy bills and power outages because it is “so normal”.

Mark A Turnquest, the 242 Small Business Association and Resource Centre’s (SBARC) founder, admitted to Tribune Business it was “terrible” that so many in the private sector have accepted Bahamas Power & Light’s (BPL) high costs and unreliable supply as he urged the Government to provide greater clarity on the benefits of its energy reform strategy and when this will be felt.

“It’s a big killer for small business owners,” he reiterated of energy costs. “When it comes to summer and load shedding it’s always a problem. For the small business owner, are most significant expenses are rent, salaries, loan payments and, of course, our energy bill. Those are top for all of them. Those prices are killers.

“Unfortunately, a lot of small business owners, we don’t own our own building. We rent, so we can’t put solar panels up on the building we are renting from. We are at the mercy of BPL and, as a result, we are exhausted. That’s why you don’t hear a lot of small businesses complaining about high energy costs and outages.

“It’s so normal to pay high energy costs and power outages that we don’t even complain. That’s terrible because in the ease of doing business climate we’ve not had a very good climate for paying light bills for a very long time.”

Even though many small businesses have become desensitised to high electricity costs, especially over the past two years as a result of up to 163 percent hikes in BPL’s fuel charge due to the hedging controversy, Mr Turnquest said his members have focused on reducing energy consumption by acquiring the most efficient devices such as ductless air conditioning (AC) units.

Food stores have reduced the number of freezers they operate in a bid to cut costs, and he added: “We have been conforming to our strategy for years now. We were not relying 100 percent on the Government to make the change. We welcome any reduction in the light bill, especially as summer is coming, but we don’t know how soon the Government’s strategy will be reflected in our bill.

“We want to know when we will be in a better position, if we are currently spending $1,000 a month on energy, to say it has gone down to $700 a month. We want to know what year and what time. We’re still a year or two away. We have to do what we have got to do.”

Mr Turnquest spoke as the Government yesterday unveiled a revised BPL rate structure, set to take effect from July 1, that is designed to incentivise reduced consumption and greater energy efficiency by residential consumers while also easing the financial burden on the most vulnerable Bahamian families. 

Jobeth Coleby-Davis, minister of energy and transport, billed the Equity Rate Adjustment as an initiative that “will make bills more affordable for many Bahamian families” as the Government launches reforms designed to drive down costs and boost supply reliability over the next two years ahead of a likely 2026 general election.

These reforms, it added, “could lower fuel costs by at least 10 cents per kWh compared to our most current fuel charge” which is around 19.5 cents per KWh, thus implying a drop to around 9.5 cents.

The new BPL rate structure will eliminate the base tariff rate for the first 200 kilowatt hours (KWh) of energy consumed by all residential customers, while the next 600 units - up to 800 KWh per month - will attract a 2.5 cents discount to the “average rate”.

However, the portion of the bill above 800 KWh per month will attract a base rate some 1.5 cents per KWh above the “average”, potentially raising energy costs for high-consuming middle class and wealthy Bahamian families. This portion of the bill is often the greatest, especially in the summer months.

A similar strategy is being employed with BPL’s fuel, the other component of customer bills. The first 800 KWh consumed will attract a rate some 2.5 cents below the monthly fuel charge that is calculated by BPL based on the cost of its prevailing fuel purchases, but the portion of the bill above 800 KWh will be hit with a rate 1.5 cents higher than the actual fuel charge.

Mrs Coleby-Davis, meanwhile, said BPL’s Equity Rate Adjustment is designed to slash what she described as a “$20m subsidy” that the present tariff structure provides annually to the utility’s largest customers - the likes of the resort industry, food stores and manufacturers.

This group, known as “general service customers”, will see their base tariff rates increase by between 14.9 percent and 45.16 percent depending on which portion of the bill is being assessed. Robert Sands, the Bahamas Hotel and Tourism Association’s (BHTA) president, said he had not read the Government announcement but the move is likely to fuel cost competitiveness concerns for tourism and other sectors.

“With the existing tariff structure, residential customers and SMEs (small and medium-sized enterprises) are presently subsidising general service customers (high energy users),” Mrs Coleby-Davis said. “The Equity Rate Adjustment is a reduction in the base tariff rate for residential consumers. The adjustment creates a more equitable balance to the current tariff structure and encourages energy conservation.

“All residential consumers with low and moderate electricity usage will benefit, as the base rate tariff for the first 0 to 200 KWh will be reduced to zero. The upper bands will stay the same, but even if you are a resident with a bill of around 600 KWh you will still benefit from the rate of your first 200 KWh being reduced to zero. Note that everyone will still have to pay for the fuel charge for every unit they consume.”

She added: “We are also amending the fuel charge by reducing the charge for the first 800 KWh by 2.5 cents and increasing the charge above 800 KWh by 1.5cents. Consumers who use less energy will enjoy a lower fuel charge. This is important as the more electricity used on the grid, the more BPL must utilise generators which are more expensive to run.

“The new rates will be in effect until a comprehensive tariff review is completed, and new rates are approved by the government and URCA.” Mrs Coleby-Davis signalled that SMEs and companies that do not fall into the “general services” category will also see a slight reduction in their base tariff.

“The commercial base tariff will drop slightly from 15 cents to 14.5 cents, and the temporary supply base tariff, which particularly affects the Family Islands, will drop from 16.38 cents to 15 cents. Again, they will both continue to also pay for their fuel charge,” the minister added.

“The general service base tariff will rise from 8.7 to 10 cents for the first 900,000 units, and from 6.2 to 9 cents for units above 900,000 units. Currently, general service customers receive a subsidy of about $20m from other BPL customers every year, but they will still be paying less than all other energy classes and will still benefit from a more modest subsidy.”

The Prime Minister’s Office, via a posting on its website, said only 300 “general services” customers - representing 500 accounts and less than 1 percent of BPL’s total customer base - will see an increase in their light bill as a result of the revised rate structure. It hinted that the rise would only be temporary until the full effects of a reform strategy to lower the cost of energy supplied by BPL takes effect.

“However, their electricity bills will still be lower than during the same months of the prior year, and they will gain enormously from new energy reforms, as transmission and distribution upgrades will increase efficiencies and improve reliability which, along with the integration of solar power and natural gas, will produce meaningfully lower prices in the coming years,” the Prime Minister’s Office said.

Their electricity bills will almost certainly be lower than summer 2023 because that was when BPL’s fuel charge peaked as it sought to regain previously under-recovered fuel costs. As for the impact on residential consumers, the Prime Minister’s Office added: “All residential consumers with low and moderate electricity usage will benefit.

“For the first zero to 200 KWh the tariff base rate will be at a cost of zero for all customers.... including those who use more than 200 KWh. For electricity usage between 201-800 KWh per month, the rate will be discounted by $0.025 per KWh below the average rate. For electricity usage above 800 KWh per month, the rate will be slightly higher at $0.015 above the average rate.” 

As for the fuel charge, it said: “BPL will continue to calculate the total amount it spends on fuel per billing period and divide it among the total units of electricity consumed during that period. However, the first 800 units (KWh )consumed will be billed at 2.5 cents less than the calculated average. Above 800 KWh will be calculated at 1.5 cents above the average.

“If the average is 20 cents per unit (KWh), then the customer will be billed 17.5 cents per KWh for the first 800 units. The remaining units (KWh) will be billed at 21.5 cents.”