By NEIL HARTNELL
Tribune Business Editor
The Grand Bahama Port Authority (GBPA) was yesterday urged to account for the $8.5 million in ‘economic development promotion’ fees it has extracted from Grand Bahama Power Company (GBPC) over the past 17 years, an MP also suggesting that the latter’s customers were “getting the short end of the stick”.
K Peter Turnquest, the FNM MP for east Grand Bahama, told Tribune Business that the island’s residents and businesses had seen nothing to suggest such a heavy investment in promotional activities by the GBPA - especially in recent years.
Responding to Tribune Business’s exclusive revelation that the GBPA receives $2 million per year in fees and ‘contributions’ from Grand Bahama Power, Mr Turnquest said the Port Authority should not be collecting an annual $500,000 ‘development promotion’ fee from the electrical utility.
He added that this payment was ultimately being borne by Grand Bahama Power’s business and residential consumers, who could “ill afford” it at a time when the economy was weak and electricity bills high.
And Mr Turnquest, a former Grand Bahama Chamber of Commerce president, also questioned the GBPA’s move to switch from a $2 per barrel throughput fee on Grand Bahama Power’s fuel imports to ‘flat rate’ levy on the latter’s electricity sales, saying this was good for the utility but not the consumer.
The FNM MP also called for Grand Bahama Power Company’s 80.4 per cent majority shareholder, Emera, to justify why it had taken out $7.37 million - in ‘advisory services and project management fees’ - from the Bahamian utility over a 20-month period.
Mr Turnquest yesterday described as “stunning” the $8.5 million that the GBPA has received from Grand Bahama Power over the past 17 years for ‘economic development promotion’ .
He told Tribune Business: “We certainly haven’t seen that kind of promotion. Where’s that money go? Where’s it being spent?
“As a matter of fact I’m quite surprised to hear they [the GBPA] get $500,000 a year for that purpose. Where do they spend that money, and how is it justified? It doesn’t seem right to me.
“I understand the Power Company has a responsibility to assist in the development of the city, but in a period where electricity bills are already high, how do you justify that pass through?”
The FNM MP added: “It seems to me that the Port Authority ought not to be in the business of extracting development fees from the Power Company.
“The Power Company operates like any other licensee in Freeport. It has licence fees it is obligated to pay, which is reasonable, but all the other fees being levied are being passed on to the consumer, who can ill afford it at this point in time.
“It seems to me to be a little bit excessive for the Port Authority to expect the public to pay these fees through the Power Company. It’s a tax, at the end of the day, if you will. It’s a bit unfair to expect the public to pay that.”
Tribune Business revealed on Monday that apart from the annual $500,000 licence fee that has been paid since 1996, Grand Bahama Power also pays the same yearly amount to the GBPA for “promotion” of the island’s economic development.
And, up until July 1 last year, the GBPA levied a $2 per barrel fee on all the fuel purchased by Grand Bahama Power Company - a sum that totalled another $1 million per annum on average.
But, as part of GBPC’s tariff restructuring, the per barrel throughput fee was dropped in 2012 in favour of imposing a $0.0031 (less than one cent) per kilowatt hour (KWh) levy on electricity sold.
Grand Bahama Power Company’s accounts show the GBPA earning $909,000 and $1.142 million in its 2011 and 2010 financial years, respectively, from the $2 per barrel throughput charge on all oil purchased by the electricity utility.
But the financial statements for the year to August 2012 noted: “After rate negotiations and effective July 1, 2012, the Port Authority ceased the throughput charge and replaced the charge with a levy in the amount of $0.0031 per kWh billed.
“For the year, the company [Grand Bahama Power] incurred charges of $389,000 in throughput charges under the original agreement and $178,000 in levies under the current agreement.”
Like the oil throughput fee, the per kWh levy is a burden that falls directly on Grand Bahama Power’s customers. It appears that this is designed to be ‘neutral’, in that it will still generate around $1 million in revenue per annum for the GBPA.
But, expressing concern over the ‘throughput fee’ switch, Mr Turnquest told Tribune Business: “That works for them [the Power Company], but it doesn’t work for the public.
“The Power Company is able to reduce its upfront costs in terms of the throughput fee, but the Port Authority is getting it back on the levy on sales. While that works for the Power Company, it does not work for the public, because they’re getting the short end of the stick.”
Mr Turnquest added that Emera also needed to explain to Grand Bahama Power’s 19.6 per cent Bahamian minority ownership, who hold their investment via BISX-listed ICD Utilities, what the ‘advisory services and project management fees’ related to.
The utility’s financial statements show that during the 20 months to end-August 2012, Emera extracted $7.37 million from its Bahamian asset in this way.
Some $4.796 million of that sum was paid to Emera in 2011, with the $2.574 million balance handed over during the eight months to end-August 2012. Much of this sum likely relates to the construction of Grand Bahama Power Company’s new $72 million, 52 Mega Watt (MW) West Sunrise Plant.
Mr Turnquest told this newspaper: “Not knowing the details of it, they should certainly be made to explain to the minority shareholders exactly what this $7.37 million represents, particularly since they suspended dividend payments.”
The FNM MP was backed yesterday by Grand Bahama attorney Osman Johnson, a leading Power Company critic, who said he was “shocked but not surprised” about Tribune Business’s revelations concerning the GBPA’s $2 million earnings.
Mr Johnson said Grand Bahama Power’s position as a major source of revenue for the GBPA impacted the latter’s ability to effectively regulate it.
He called for the Government to introduce legislation to regulate Grand Bahama’s energy sector, something that would conflict with the provisions of the Hawksbill Creek Agreement.