The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Grand Bahama Power Company is suffering a “very real impact” from the delay in reviewing and approving its proposed new rate structure after getting “caught in the crossfire”, it was disclosed yesterday.

Dave McGregor, the electricity utility’s president, told Tribune Business that failing to obtain the go-ahead for its planned 6.3 percent base rate rise by the January 1, 2025, target date has “reduced our cash position” and forced it to cut-back and hold off on the network investments that were planned.

Revealing that GB Power is “not earning what we should be”, due to a combination of cost increases and the forecast rebound in revenues and customers failing to materialise, he added that it had still managed to improve generation reliability “a lot” over the last three to four months to put last summer’s frequent outages firmly in the past.

These outages prompted the Grand Bahama Port Authority (GBPA), in its capacity as GB Power’s regulator, to defer consideration of the latter’s three-year tariff adjustment proposal until the outages and blackouts were eliminated. Emera, the Canadian utility giant which owns 100 percent of GB Power, in its recent 2024 financial results said review of the application “is expected to be completed in 2025”.

Mr McGregor declined to go into detail on this, other than to confirm that “discussions are happening behind the scenes” over the rate proposal. He added that the ongoing court battles over who has supervisory authority for the electricity sector in Freeport - the GBPA or Utilities Regulation and Competition Authority (URCA) - need to be resolved to give GB Power regulatory certainty and predictability.

Noting that these qualities are vital to investor confidence worldwide, Mr McGregor acknowledged that this was “not what we have currently” amid the ongoing regulatory battle that has spawned not one but two separate court cases. Besides GB Power’s action, which was launched in 2016 challenging URCA’s authority to regulate it, the latter last year initiated its own legal challenge against the GBPA over the same issue.

Emera, in its 2024 fourth quarter results filing, asserted that it did not foresee “a material impact” from the legal fight over regulatory authority in Freeport. “With $340m of assets and approximately 19,500 customers, GB Power owns 98 MW of oil-fired generation, approximately 90 kilometres of transmission facilities and 994 kilometres of distribution facilities. GB Power’s approved regulatory return on rate base is 8.52 per cent,” Emera said.

“On June 1, 2024, the Electricity Act 2024 took effect. The legislation purports to remove the jurisdiction of the GBPA over GB Power, and to have URCA, another Bahamian regulator, regulate GB Power. The GBPA has opposed the legislated removal of its regulatory authority over GB Power, citing conflict with the Hawksbill Creek Agreement, the 1955 agreement with the Bahamian government that provided for the development and administration of the Freeport area.

“Management expects the matter of regulatory jurisdiction over GB Power to be the subject of legal proceedings, however, does not foresee that the legislation or the outcome of such proceedings will have a material impact to Emera.”

As for GB Power’s proposed three-year tariff adjustment, which would cover the period through to end-2027, Emera added: “On August 1, 2024, as required by the GBPA operating protocol and regulatory framework agreement, GB Power filed a rate plan proposal. Review of the rate application is expected to be completed in 2025.”

Mr McGregor, yesterday confirming that approval of the new tariff structure is “critical and fundamental to our operations”, declined to comment in detail on whether the GBPA has re-started its review or when it will be completed now that GB Power has addressed electricity supply reliability on Grand Bahama.

“There are discussions going on behind the scenes,” he said. “We are hopeful for an outcome this year but we have no specific information at this point. Discussions are happening behind the scenes, and we’re hopeful that it gets resolved this year. There are a couple of court actions taking place that we need to let play out. We’re caught in the crossfire.”

Asked about the impact on GB Power’s finances and operations from failing to obtain the required approvals to-date, Mr McGregor told Tribune Business: “It’s really reduced our cash position, so we’re having to be very careful with cash. It’s reduced our expenditure. It’s a very real impact.

“We really needed that rate adjustment. It was always not for no reason, the adjustment, because costs have adjusted and customers have not materialised as forecast. We’re not earning what we should be. It’s really a cash issue.”

The new tariff structure was designed to generate sufficient cash flow to finance some $53m in capital improvements GB Power planned for its network infrastructure over the three years to end-2027. “That’s been delayed,” Mr McGregor said of the proposed investments. “It has delayed implementation of that.

“We are still continuing the work on generation reliability, which has improved a lot over the last three to four months. We’re back to where we should be, absolutely. We’ve managed to continue that work.

“The other work, especially solar and battery storage infrastructure, that’s really been put on pause until the rate situation is resolved. We’ve not cut back on safety and reliability, but enhancement and the renewable transition is on hold until this gets resolved.”

Given the uncertainty over the identity of its regulator, and the supervisory regime it will face moving forward, Mr McGregor said the ongoing court battles are impacting confidence for GB Power, its owner and even other investors.

“The other thing that investors in many countries, not just The Bahamas, want is some regulatory and political uncertainty,” he added, “and that’s not what we have currently. This uncertainty is not good for investor confidence.”

Of the $53m in planned capital investments, some 55 percent of this sum will be allocated to grid modernisation - substations; protection and control; and battery storage. Of the remainder, one-quarter or 25 percent is planned to go on energy Infrastructure such as generation, engine overhauls, capital spares and upgrades, with the final 20 percent “sustaining capital” for facilities, IT and customer service enhancements.

GB Power has consistently asserted that 75 percent of its customers will experience either no increase or a decrease in overall electricity costs under the proposed new three-year tariff structure despite the request for a 6.32 percent base rate rise. The base rate rise is expected to be offset, or cancelled out, by a forecast reduction in the fuel charge component of consumers’ bills.

Under the original plan, residential consumers who use less than 600 KWh (kilowatt hours) per month would see a modest $1 reduction in their all-in total monthly electricity costs in 2025 when compared to current rates.

However, residential consumers using above 600 KWh per month were forecast to see a slight increase in their monthly bill of $1. And commercial customers using from 1,000 KWh per month to 50,000 KWh per month would have seen their all-in cost jump by between $3.10 to $67.97, or 0.79 percent to 0.37 percent, based on GB Power’s submission.

While estimates for commercial customers will vary based on their specific demand, GB Power’s estimates showed all classes of customers - from the smallest residential user to the large industrials - will see their total monthly energy costs rise in 2026. The extent of the increase will range from $2.64 to $803.91 (largest users), representing a rise of between 4.05 percent and 4.52 percent in percentage terms.

“In outlining the all-in rate impact on various customer classes, GB Power’s filing states that residential, general service large, and large industrial customers’ all-in costs will remain relatively unchanged in the first year, with less than a 1 percent change from current all-in costs,” the GBPA added.

“While there will be varying adjustments each year, the all-in cost is projected to reach its maximum increase of 4 percent in 2026 before levelling off with a 2.5 percent change in 2027 from current rates.” GB Power said it is targeting an increase in average base rate revenue from $269.9m in 2023 to $277.5m over the next three-year period - a rise of $7.6m.

It is forecasting that a 10 percent increase in electricity sales over the three-year period through end-2027, calculated in mega watt (mWh) hours, will help it to achieve this base rate increase. Sales are forecast to jump from 286,431 mWh in 2023 to 315,177 mWh driven by increases in all GB Power’s major customer categories - residential, commercial and general service/industrial.