The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An ex-Cabinet minister is challenging the Government’s energy reforms to lower all-in costs below the FNM’s fuel hedging price while asserting BPL’s new tariff structure failed to cut rates this summer.

Dionisio D’Aguilar, in a recent interview with Tribune Business, disclosed that a survey of his 11 Superwash laundromat locations revealed that their all-in electricity cost increased slightly from 35 cents per kilowatt hour (KWh) in July to 36 cents per KWH in August. 

Revealing that these rates stripped out both VAT and the effects of summer’s higher consumption on BPL bills, he argued that the increase between July and August called into question the Government’s assertion that Bahamas Power & Light’s (BPL) new Equity Rate Adjustment tariffs would reduce energy costs for all but the utility’s largest general service users representing less than 1 percent of all customers.

Given that Superwash is a round-the-clock, 24/7 business, it appears likely that the company will fall into the general service category and not the 88 percent of smaller commercial customers that the Government asserted will enjoy lower energy bills via the new rates.

However, Mr D’Aguilar told this newspaper that “everyone is complaining about electricity prices” following receipt of their July and August light bills as he challenged the Davis administration to match or beat the 25 cents per KWh all-in electricity cost achieved under its predecessor’s fuel hedging strategy.

The Superwash chief, who served in the Minnis administration’s Cabinet as minister of tourism and aviation, said August 2024’s 36 cent per KWh total rate is some 11 cents or 44 percent higher than the FNM achieved during its final two years in office as a result of the BPL fuel hedging strategy it implemented.

Noting that BPL’s all-in costs under the current administration peaked at 41 cents in summer 2023, some 64 percent higher than the hedged rate, Mr D’Aguilar said the failure to extend the fuel hedge had cost Bahamian businesses and households “hundreds and hundreds of millions of dollars” and been “devastating to the bottom line” for many companies.

And, while expressing hope that the Government’s energy reform strategy succeeds, he argued that it “cannot thump its chest and think it’s done a great service” if all-in energy costs either do not match or fall below the 25 cents per KWh achieved with the fuel hedge. August’s 36 cents per KWh rate is only five cents, or just 12.2 percent, below last summer’s 41 cent peak showing how much work remains.

Describing his 11 laundromat locations as “a fairly sizeable sample”, and “all roughly the same” in size, Mr D’Aguilar recalled how BPL’s all-in rate soared in just eight months from 25 cents per KWh in October 2022 to 41 cents in June 2023. 

“When you’re going from 25 cents to 41 cents, it’s a 64 percent increase,” he told Tribune Business. “Everybody’s power bill went from a scenario they were consistent and low to inconsistent and high. From October 2022 to June 2023 it went up by 16 cents per KWh and stayed up there for three to four months.

“It then started to trend back down, and went from 41 cents to 32 cents for January and February 2024, and from March it started going back up again. From the cancellation of the hedge [October 2022] to now it’s 44 percent higher today than it was when the hedge was abandoned. The price is 44 percent higher than it was in October 2022. Two years later, they are still higher.

“It’s got to be hundreds and hundreds of millions of dollars that have been diverted to pay these increased energy costs, no doubt about it.... Obviously, when your business is impacted by a 64 percent in electricity costs it’s significant. It’s devastating to your bottom line. It was very difficult I’m sure for many, many businesses to weather that storm.”

The Davis administration, acknowledging that the present energy industry environment of high prices and heavy reliance on fossil fuels is unsustainable, has moved to outsource New Providence’s electricity grid and much of the island’s baseload generation to private partners in the form of Pike Electrical/Island Grid and Bahamas Utilities Company respectively.

However, Mr D’Aguilar told Tribune Business that its strategy can only be justified and reap the necessary rewards if it reduces all-in energy costs below the 25-cent mark achieved by the previous administration as well as address BPL’s unreliable supply and provision of “dirty power”.

“It was kind of amusing that the Government is touting how they are going to reduce energy costs, how they are going to bring them down,” he said. “I hope they do, but when they came to office it was 25 cents. I keep hoping that whatever they do will take us to 25 cents and even lower.

“If they come, after all this, and say we’re back to 25 cents, don’t be thumping your chest and think you’ve done us a great service.... Whatever they’re doing I’m looking forward to it coming down to 25 cents and lower, and improving the reliability and dealing with this dirty power. Don’t come to me and say we’ve got it down to 31 cents.”

The Government has yet to reveal what range the all-in cost of energy will fluctuate between once all its energy reforms including renewables and the switch to liquefied natural gas (LNG) are completed. It has also yet to announce the terms of the power purchase agreement (PPA), including cost and duration, that it is negotiating with Bahamas Utilities Company for the 177 mega watt (MW) new plant at Blue Hills.

As a result, Bahamian consumers still have no idea of the likely price they will ultimately pay or the cost savings they will enjoy from a generational deal that will last the better part of three decades. Dexter Adderley, chief executive of FOCOL Holdings, Bahamas Utilities Company’s parent, previously said annual savings to the Government will be around $100m.

Mr D’Aguilar, meanwhile, said the Government’s reforms must go beyond energy prices to address BPL’s constant outages and an inconsistent supply that continues to fry expensive electrical equipment. “First and foremost is the cost, and then the reliability,” he added. “Many, many places in this country have been experiencing unreliable power supply; on and off, on and off.

“If you want to say you’ve brought prices back to 25 cents hopefully you’ve also improved the reliability and cleanliness of the power. There are so many sinks, dips and brown-outs that the cost to the consumer from this dirty power supply to equipment in the home is huge. When it drops you get brown outs, and when it comes back on you get spikes.

“How do you factor that in? Everybody knows that if you go to BPL they won’t give you anything because they don’t have money. You just have to accept it. You have to import the stuff again, pay duty and VAT and all the cost of importing it, and BPL doesn’t give a damn. Nobody cares. That’s what it is in The Bahamas,” Mr D’Aguilar continued.

“It affects your motors, it affects the computer boards on your equipment. That stuff can be enormously costly. It can put you out of business. You have to replace it, order it in. You don’t store the parts to weather such a traumatic event.”

The Government has since said September’s all-in electricity costs will be reduced compared to July and August via a reduction in BPL’s fuel charge. It is unclear, though, whether this is due simply to a reduction in the price of fuel that BPL bought on the spot markets at a particular time.

“If the Government was attempting to show the public that the price of electricity has gone down, as you can see it increased because it didn’t go down; at least for businesses,” Mr D’Aguilar said. “They’ve brought Pike on board and hopefully they’re going to improve the reliability of distribution of power.

“It’s absolutely critical. Businesses are suffering with high costs, unreliable power supply and dirty power. Nobody else can do this but the Government. It’s the Government that provides the power, they have a monopoly. It’s up to them to make it less costly and cheaper to do business, and encourage more people to get into business and increase the likelihood of their success.”