By NEIL HARTNELL
Tribune Business Editor
PowerSecure will receive a maximum $5 million annual fee for managing operations at the ‘new BEC’, Tribune Business can reveal, as the latter’s environmental liabilities start to weigh heavily on energy reform.
Tribune Business sources with knowledge of the talks between the Government and the management partner for Bahamas Power & Light (BPL), speaking on condition of anonymity, said there was a divide between the two sides over dealing with BEC’s legacy pollution issues.
These obligations, and PowerSecure’s role in tackling them, were said by contacts to be a key reason why the BPL management contract has yet to be finalised.
One source, requesting anonymity because they were not authorised to speak to the media, said the Government and BPL Board wants PowerSecure to complete environmental studies of all BEC sites within six months of assuming managerial responsibility.
They added that this was an aggressive timeline, based on the number of sites - and amount of data - that had to be collected.
Neither the BPL management contract, nor the 280-page Business Plan for BEC’s new operating subsidiary, have been made public yet.
However, another contact familiar with developments told Tribune Business that PowerSecure’s compensation for managing BPL has been capped at $5 million per annum.
They added that $2 million was guaranteed, with the remaining $3 million contingent on the US energy services provider hitting a series of performance-related goals - such as reliability, efficiency and profitability.
While PowerSecure’s management fee is relatively insignificant as a percentage of BEC’s revenues, which run into the hundreds of millions of dollars annually, it represents a charge that did not exist before.
Upon implementation of the proposed energy sector reform path, BPL’s business and residential customers will have to pay for PowerSecure’s management fee in their bills.
The Electricity Bill’s Clause 20 makes clear that the Utilities Regulation and Competition Authority (URCA) must approve the recovery of PowerSecure’s management fee (as well as the Rate Reduction Bond’s costs) in BPL’s first five-year tariff proposal.
The legislation states: “URCA shall, in determining the tariff rate, have regard to the need for revenue derived by BPL from sales, services and other sources to be sufficient to pay..... the compensation payable to any system operator (PowerSecure) under the terms of the management contract”.
BEC’s legacy environmental liabilities again came to the fore last week, after the Save the Bays group applied for Supreme Court permission to launch Judicial Review proceedings against the utility and three Cabinet minister for allegedly breaching their statutory obligations to clean up - and deal with - its pollution at Clifton Bay.
An affidavit sworn by Sam Duncombe, a Save the Bays director, in support of the Judicial Review application highlighted the vast discrepancy between the $20 million being allocated to deal with BEC’s environmental liabilities and previous estimates of remediation costs.
Deputy Prime Minister Philip Davis told the House of Assembly that a maximum $20 million would be assigned to deal with BEC’s legacy issues from the proceeds of the planned $600 million Rate Reduction Bond (RRB) issue.
Yet Mrs Duncombe recalled that Simon Townend, managing director of KPMG’s corporate finance arm in the Caribbean, gave a November 2013 interview to Tribune Business in which he said BEC’s environmental liabilities could exceed $100 million.
That sum is more than five times’ higher than the Government’s $20 million cap, and what makes the estimate more significant is that Mr Townend is a key adviser to the Christie administration on its BEC and energy reform process.
It is unclear whether Save the Bays’ latest action will impact the BPL management contract negotiations, but it threatens to add a further potential liability that PowerSecure will be extremely wary of.
Mrs Duncombe described Clifton Pier as “an industrial park” where, apart from BEC, all three major oil companies - Sol Bahamas, Rubis Bahamas and Shell (FOCOL or Freeport Oil Holdings - all have facilities and petroleum tanks in the area surrounding the Clifton Pier power plant.
“Whilst it is the case that the Clifton Pier area has been plagued by oil spills and discharge for a number of decades, the current application for Judicial Review relates to the Government’s and BEC’s failure (despite numerous announcements and promises of action and remediation that have come to nothing) to address the worsening situation at Clifton Pier,” she alleged.
Mrs Duncombe said two major spills in September and October 2014 had exposed the deteriorating environmental situation at Clifton Pier, with Save the Bays having already commissioned its own review of the area.
Despite being denied access to BEC’s facilities, Envirologic conducted 20 site inspections from the land, sea and air over the two years from August 2013 to present.
The environmental consultants acknowledge that some remediation steps at Clifton Pier became visible in August and September this year, with an oil containment boom stretching from the East Outfall to the BEC dock.
BEC personnel were also seen working in the coastal oil recovery pits, and a stockpile of oil absorbent booms was also present.
“The measures noted have not stopped the oil from seeping into open water and migrating towards Clifton Bay, or eastward depending on wind direction,” Mrs Duncombe alleged.
“While the oil containment booms are deployed, Envirologic did not observe much effort to remove the oil contained within the booms (beyond the use of absorbants pads and booms placed in the oil containment booms).
“The result of this, as reported by Envirologic, is that the oil simply escapes as soon as choppy conditions and squalls are experienced,” she added.
“Envirologic reports that the oil discharges are still occurring on a daily basis despite whatever measures are currently being applied to mitigate the release.”