The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Electricity Corporation (BEC) could generate multi-million dollar savings for its long-suffering customers by simply bringing its fuel burning efficiency in to line with the global industry average, it was revealed yesterday.

Judson Wilmott, a Bahamian engineer employed by oil services company, Haliburton, said the biggest immediate impact to this nation’s energy costs would be delivered by replacing BEC’s aged, inefficient generation equipment.

Speaking at the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) Energy Security Forum, Mr Wilmott revealed that the amount of fuel required by BEC’s Blue Hills and Clifton Pier plants to generate electricity exceeded the industry average by 54.5 per cent and 16.5 per cent, respectively.

Thus, with an average heat rate of 9,708 BTUs (British Thermal Units) for its Nassau plants, BEC is essentially burning a fuel volume that is 34.8 per cent higher than electricity industry averages to generate the same amount of power.

The higher heat rate, Mr Wilmott explained, results from BEC’s inefficient generation turbines. And, with fuel being the main component of generation costs, which account for 85-90 per cent of a power utility’s total costs, the higher fuel quantities required by BEC are inevitably passed on in higher prices to BEC’s business and residential consumers.

“Heat rate is a big problem at BEC,” Mr Wilmott said. “It’s one of the primary problems we have.

“If we fix it, without changing anything else, such as fuel, we can have a big impact on performance.”

Taking a power plant in line with the 7,000 BTU power industry average, and basing it on a 1.5 billion kilowatt hour system (KWh) with an average cost of $20 per million BTUs, Mr Wilmott said the 2,708 BTU differential with BEC’s New Providence average heat rate would generate $81.2 million in annual fuel savings.

And, taking his analysis a step further, Mr Wilmott said that switching fuels to pipeline gas priced at $6.50 per million BTUs, with a base heat rate of 7,200 BTUs, would result in $221 million worth of fuel savings to BEC’s New Providence customers annually.

Mr Wilmott’s presentation, which highlighted all the moving parts contributing to the woes being experienced by BEC and its customers, repeatedly emphasised that the biggest positive impact will come from lowering the Corporation’s fuel costs - both from a price and quantity perspective.

And, to achieve this, BEC’s rundown generation plant must be completely replaced in one go, Mr Wilmott recommending that a new $700 million power plant be constructed in the Clifton Pier area.

His analysis suggested that all of BEC’s woes stem from its generation inefficiencies, rather than the overtime situation and ‘union greed’ angle that its executive chairman, Leslie Miller, has been pushing in the media in recent weeks.

Mr Wilmott yesterday said also BEC has also been purchasing the wrong type of generation equipment, focusing on “industry grade” units that typically add only 20-30 Mega Watts (MW) of additional capacity.

These are more inefficient and burn extra fuel, he added, in comparison to 40 MW-plus, “utility grade” type generation units that BEC should have been acquiring.

Mr Wilmott also recommended that BEC switch fuel supplier, telling the Forum: “Shell Western is historically more expensive than if it bought the fuel from the US Gulf Coast.

“Just by changing where we buy fuel from, you could realise some savings.”

BEC’s reliance on Bunker C fuel was also contributing to “hidden/unaccounted” generation losses, Mr Wilmott said, with $14 million lost annually due to the fact that 7 per cent of this fuel became ‘sludge’ and was not burnt to produce electricity.

And, identifying a further potential cost saving in the generation side, well in excess of BEC’s annual overtime costs, Mr Wilmott said the widespread use of lube oil was adding at least $15 million per annum to the Corporation’s cost base.

“A big cost associated with the generation of power is lube oil,” Mr Wilmott added. “That is a big, big cost. It’s either $15 million or in excess of $15 million on top of what we see related to the cost of fuel.”

Detailing the “economic repercussions of what is going on at BEC, Mr Wilmott said the Corporation was unable to eliminate its annual $30 million government subsidy (Stamp Duty exemption on fuel imports), and suffered from high accounts receivables, with consumers unable to pay bills and hit by a big fuel surcharge.

He added that BEC’s existing $320 million bank debt had “become a burden to the consumer”, with its unpaid $128 million fuel bill and $82 million unfunded pension liability further concerns.