The Tribune

By Michael Moss

Ex-BEC executive

chairman

I had hoped that the Government would have made public the consultant’s report (presumably there was one) that led to the decision to break up BEC so that the rationale giving rise to such a determination would have been made readily available to whomsoever.

In the absence of such a report being made available, I consider it appropriate, and indeed prudent, for the benefit of the public and, more particularly, for BEC’s customers, to share a few thoughts of my own regarding the enterprise that is about to be broken up. I intend to touch on some of the peculiar challenges that BEC faces and examine potential approaches to address such challenges.

What the general public might not appreciate is that in addition to its New Providence operations, BEC owns and operates more power stations on more islands than all of the other utilities in the English-speaking Caribbean combined.

In spite of the foregoing, more of which will be outlined shortly, a September 2011 study undertaken by the Grand Bahama Power Company found that of 11 Caribbean utilities surveyed, only two, Aruba and Barbados, charged less for 600 kWh (kilowatt hours) of electricity than did BEC. Bermuda, the US Virgin Islands, Grand Bahama, Dominica, Montserrat, Antigua, St Lucia and Nevis, on the other hand, all charged more.

BEC owns and operates some 27 Family Island power stations. The generators installed at these power plants range in size from around 25 kW (kilowatts) to 12,000 kW. Some of these installations provide electricity service to only a handful of customers, while others supply several thousand customers.

The Corporation charges a uniform electricity tariff across the entire Bahamas. Except for the operations in Abaco, Eleuthera and Exuma, none of the Family Island operations come even close to meeting day-to-day operational costs. The handful of operations that just about cover operational costs nevertheless lose money when administrative and other expenses such as insurance, depreciation, etc are taken into consideration.

Island utilities, in the Bahamas and the wider Caribbean, face peculiar challenges unseen by North American and European utilities. Examination of the two major challenges facing these utilities will now be examined in some detail.

Interconnections between utilities in Europe. and similar interconnections in North America, make it possible for a utility that might not have nuclear power, coal, gas or hydroelectricity to benefit from the lower cost of generation by a utility with such cheap sources of power. Additionally, these utilities can depend on being provided with back-up power from another utility in the event of unanticipated generation shortfall.

Island utilities not only do not have access to cheap nuclear power, coal or hydroelectricity, but because they do not enjoy interconnection with other major utilities they must also expend far more capital than would otherwise be necessary to install surplus, back-up generating capacity.

BEC, because of its many Family Island operations, has far more challenges than other island utilities.

All of BEC’s Family Island power plants are fuelled by expensive diesel oil. The simple cycle gas turbines and combined cycle/ STAG (steam turbine and gas-turbine) plants at Blue Hills are also fuelled by expensive diesel oil.

Having outlined the two major challenges facing BEC, and most of the English-speaking Caribbean utilities, namely the lack of interconnectivity and high fuel cost, some of the fixes that ought to be put in place begin to become quite obvious.

While interconnection of BEC’s facilities with another major electricity supplier might not immediately be possible, although interconnection with Florida might once again raise its head for consideration, interconnectivity between several of BEC’s adjacent Family Island operations, though costly, is not only possible but also practical and ought to be pursued.

Interconnection between BEC’s New Providence power plant installations and nearby Family Island operations should also be pursued. Such interconnections will make it possible to relegate operations at smaller, higher cost Family Island facilities to emergency, stand-by status while focus is placed on further cost reductions at larger, more cost-effective generation facilities.

Having addressed the issue of interconnectivity, the second issue to be addressed is fuel cost. Based on studies I have been privileged to be exposed to, it should be possible for natural gas to be made available to BEC, whether as liquefied natural gas (LNG) or compressed natural gas (CNG) - a more likely prospect - at a cost about 20 per cent less than the cost of heavy fuel oil/Bunker ‘C’. Diesel oil costs about 50 per cent more than Bunker ‘C’. The cost to BEC of natural gas will therefore be about 60 per cent less than the cost of diesel oil.

BEC generates 40 per cent to 50 per cent of New Providence’s power needs from its Blue Hills Power Station while burning diesel oil.

Switching the operation of BEC’s simple cycle and combined cycle plants to burning gas rather than diesel will reduce fuel costs at Blue Hills by almost 60 per cent, and BEC’s overall fuel cost for New Providence by about 25 per cent. It should also be possible to provide natural gas infrastructure at BEC’s larger Family Island installations. Hence, once interconnection of select Family Island installations would have taken place with each other and with New Providence, further fuel cost savings will be realized.

The cost of operations of BEC’s power plants (fuel, manpower, materials, etc) account for approximately 80 per cent of the enterprise’s total operating cost, with transmission, distribution and customer service accounting for the remaining 20 per cent.

In my opinion, to achieve the optimum impact, BEC must pursue both fixes – interconnection and lower cost of fuel - and must do so with urgency. Further, given the level of investment that must be made to achieve interconnectivity, I believe this objective can best be achieved if BEC is privatised as is rather than being decimated. Moreover, separating generation from transmission, distribution and customer service will likely lead to increased costs to consumers, as there will inevitably be duplication of administrative and other overhead costs in the two organisations.

Finally, it is noteworthy that while there are any number of privatised electrical utilities in the English-speaking Caribbean, only one, the Trinidad and Tobago Electricity Commission (T&TEC), has to date been broken up in the manner the Government has proposed for BEC. In my view, this is because the T&TEC model has proven to be less successful than other models.