The Tribune

By NEIL HARTNELL 

Tribune Business Editor 

nhartnell@tribunemedia.net

THE Bahamian energy industry regulator yesterday said it had “no involvement” in developing Bahamas Power & Light’s (BPL) new rate structure that takes effect from July 1.

Juan McCartney, the Utilities Regulation and Competition Authority’s (URCA) corporate and consumer relations chief, told Tribune Business that the newly-passed Electricity Act 2024 gives Jobeth Coleby-Davis, minister of energy and transport, the legal authority to set BPL’s tariffs without reference to the regulator for three years.

“URCA didn’t have any involvement in it,” he affirmed. “It’s section 38 (9) in the new Electricity Act. The minister has the power for three years to set specific tariffs. That’s under that power is how she’s doing it.” Mr McCartney said he understood Mrs Coleby-Davis either has to issue an order, table them in the House of Assembly or publish the new tariffs via the Government’s gazette.

“The minister has the power to do it for three years,” he added. “BPL cannot do it without it being approved. When BPL wants to set or change its rates, it needs URCA’s approval. The minister doesn’t. She has the power to do it for three years. It was changed.”

The end of that three-year period marks when URCA must review BPL’s tariff submission. Mr McCartney said the state-owned energy monopoly has to submit its application within two-and-a-half years to give URCA time to complete its analysis.

Duane Sands, the Free National Movement’s (FNM) chairman, was among those to yesterday question URCA’s involvement in the Equity Rate Adjustment tariff structure unveiled on Monday and which is due to take effect from July 1.

The Electricity Act initially stipulated that BPL and other electricity providers can charge different tariffs and prices to different groups of customers for a “transition period” of three years without approval from URCA.

After concerns were raised, the Government amended that provision to “ensure that URCA’s continued role in approving tariff changes under section 38(8) remains steadfast and unaltered”, Mrs Coleby-Davis said at the time, adding: “Some have said that URCA is being cut out as regulator, particularly regarding the approval of tariffs. This is not the case.”

Dr Sands yesterday suggested that the Equity Rate Adjustment move showed URCA is “out again. What’s it going to be? Is URCA in or out? It certainly doesn’t appear as if URCA is part of the equation now”. However, according to Mr McCartney, Mrs Coleby-Davis exercised her powers using a different section of the Act from the one he referred to.

The FNM chairman, though, argued that it was “voodoo economics” to assert that an increase in electricity costs for BPL’s largest consumers will not impact prices or the cost of living for everyone else. BPL’s “general service” customers - the 300 largest users with 500 accounts, representing the hotels, good stores and other major consumers - will see their rates and power costs rise under the new structure.

“The most concerning thing is they’ve used this arbitrary cut-off at 800 kilowatt hours to determine when your rate moves from what it is now to higher, and they assume that rate impact will not get passed back to the ordinary man and woman, which is an absurd concept,” Dr Sands blasted.

“The impact of increasing rates on the largest consumers means a higher cost of living for everyone else. This is voodoo economics. For those of us who use one light bulb and table lamp per month, your rates are going to go down, but for everyone else your rates are going up. If you are going to the food store, pharmacy and auto shop, all those products will be more expensive.

“The Government will now attempt to say it’s these greedy business people sticking it to you, not us, because we made an effort to reduce your cost of electricity and that is perhaps the most disingenuous thing of all in its impact.”

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, which applies to all consumers - homes and businesses. 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.

“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,” Mrs Coleby-Davis said.