The Tribune

By NEIL HARTNELL 

Tribune Business Editor 

nhartnell@tribunemedia.net

CONCERNS were voiced yesterday that Bahamas Power & Light’s (BPL) new rate structure could undermine economic competitiveness and increase inflation by raising energy costs for many businesses.

Jobeth Coleby-Davis, minister of energy and transport, confirmed to Tribune Business in writing that BPL’s revised fuel charge arrangement - which takes effect in less than three weeks’ time on July 1 - applies to “all classes” of customers, meaning residential as well as businesses of all sizes.

The changes, described as the Equity Rate Adjustment, will give all consumers a 2.5 cent per kilowatt hour (kWh) discount on the first 800 kWh that they consume. But, above that threshold, BPL customers will have to pay a 1.5 cent charge for every kWh used over and above BPL’s actual cost of fuel.

The Prime Minister’s Office, giving an example of how this would work, said: “If the [actual fuel charge] is 20 cents per unit (kWh), then the customer will be 17.5 cents per kWh for the first 800 units (kWh). The remaining units (kWh) will be billed at 21.5 cents.”

Mrs Coleby-Davis reiterated that the new rate structure “encourages energy conservation and protects low energy users. Those who use less, pay less”. However, multiple business community sources yesterday pointed out that enterprises of all sizes - right down to ‘Mom and Pop’ restaurants and shops - consume significantly more energy than 800 kWh per month especially during the upcoming summer period.

As a result, while the base rate for small and medium-sized enterprises (SMEs) has decreased slightly, there are now fears that this will be more than offset by increased BPL fuel charges especially over the high-consumption summer.

Mrs Coleby-Davis on Monday disclosed that the commercial base tariff will drop slightly from July 1, falling from 15 cents to 14.5 cents per kWh, but many in the private sector will now be scrambling to work out what this means for their business, its expenses and profitability, and if this will be enough to offset the now-anticipated rise in their electricity bill’s fuel component.

“There has to be clarity on that,” Mark A Turnquest, the 242 Small Business Association and Resource Centre’s (SBARC) founder, told Tribune Business of BPL’s new rate structure. “If that [fuel charge increases] is going to happen it’s going to affect a lot of small businesses in the country.

“I’m going to get back to the small business owners to give them a better understanding and sense of where we are going.... It’s going to kill us if it ups our costs. We will have to look at sales, and have to look at costs, and determine if sales out- weigh costs and if any uptick in sales might be more than the uptick in expenses.

“It’s got to be a strategic decision. You cannot lose money in business. I don’t care how you do it. You don’t want to make that decision to determine if you have to raise your prices, but decisions have to be made so we have to look at July and our bills to determine what need we need to do.”

The Bahamian private sector is already faced with an increase in National Insurance Board (NIB) contribution rates and the insurable wage ceiling come July 1, and the revised BPL rate structure is now another consideration entering their strategic planning mix.

“This is going to be a discussion we were not thinking about,” Mr Turnquest added, “but now we have to think about it. There are only two things we need to do: Absorb it, or give it to the customer. Everybody needs to look at their individual bill to determine how it’s going to affect their particular business. This is coming to us very fast. It’s so fast. From one thing to the next.”

The Prime Minister’s Office, in detailing the Equity Rate Adjustment’s impact, asserted that only BPL’s largest consumers - its 300 general service consumers representing around 500 accounts and less than 1 percent of the utility’s customer base - will see their light bills increase after July 1.

While it said energy costs for the likes of hotels, food store chains and manufacturers will be less year-over-year, that will not be difficult given that the same period in 2023 featured a 163 percent hike in BPL’s fuel charge compared to October 2022 in a bid to reclaim under-recovered fuel costs.

“Their electricity bills will still be lower than during the same months of the prior year,” the Prime Minister’s Office said, “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 Equity Rate Adjustment structure, though, is likely to be in place for around three years until the Electricity Act provisions governing the Utilities Regulation and Competition Authority’s (URCA) review of BPL’s tariffs kicks- in. And it will also likely be two to three years before the full benefits of the Government’s energy reform strategy are felt.

Robert Sands, the Bahamas Hotel and Tourism Association’s president, declined to comment on the likely impact of BPL’s new tariff structure prior to an industry meeting tomorrow that will discuss the issue. However, his brother Duane, the FNM’s chairman, argued that any increase in resort energy bills will further undermine the cost competitiveness of The Bahamas as a tourist destination.

“We are already not very competitive,” he told Tribune Business, “because of the cost of stay in The Bahamas whether you are talking about room rates, whether you are talking about food and beverage, whether you are talking about labour. Any additional charge to that sector will be reflected in more cost.

“They’ve already raised the taxes to come to The Bahamas. They have made this destination, particularly for stopover visitors, significantly more expensive. With this adjustment, by making us less competitive, we would ask if any economist did any modelling to determine what impact these changes will have.”

The Government, in cutting what it says is presently an annual $20m subsidy for BPL’s largest customers, is seeking to reverse this by having those very same big consumers subsidise the lowest and most vulnerable energy users. Eliminating the present 10.95 cents per kWH base charge for the first 200 kWh consumed by residential users will save these consumers some $21.90 per month or near $264 yearly.

However, one source, speaking on condition of anonymity, said: “It seems as if they’re going to subsidise the poor people who consume under 800 kWh. But I don’t think they appreciate that every single small business has to run air conditioning and consumes in excess of well over 800 kWh. A small mom and pop burns 3,000-4,000 kWh easily if they have to run AC.

“All the mom and pops, all the restaurants at Fish Fry, all those guys use in excess of 800 kWh. All of them will see an increase, and all of them will pass it on to consumers in the form of higher prices because they cannot afford to it. This will have a tremendous impact on the cost of doing business and instantly lead to higher prices and inflation.

“The tariffs are not being set on any commercial terms. You’re doing social welfare policies through the power provider and that’s not a recipe for optimal pricing. I don’t think its an optimal way to do it. If you want to give relief to small level consumers there are better ways to do it.”