By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
The Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC) chairman yesterday gave the ‘new BEC’s’ manager two years to lower energy costs to “a consistent norm”.
Gowon Bowe, speaking after PowerSecure signed a five-year contract with the Government to manage BEC’s new operating subsidiary, Bahamas Power & Light (BPL), described lower energy costs and improved supply reliability as “the number one” priority for the private sector.
While these objectives were critical to the sustained profitability, and survival, of many Bahamian businesses, Mr Bowe tempered expectations about how quickly PowerSecure could achieve these objectives.
Explaining that energy reform was now moving to the execution stage, the Chamber chairman said it was critical for the Government to hold the New York Stock Exchange (NYSE) listed company accountable for what it has promised.
Asked how quickly PowerSecure should be expected to deliver lower energy costs, Mr Bowe told Tribune Business: “To be honest with you, I don’t think people should expect any changes in the next day, week or month. It would be a bit aggressive to believe that in the next two months we will see the target rate achieved.
“But over 18 months we should see a gradual decline. By the end of 18 months to two years, we should have rates we consider the norm and being consistent going into the future.”
As for its importance to the Bahamian private sector, Mr Bowe added: “Many would argue that this is priority number one. This is because of the exorbitant costs experienced in the last three-five years of a recessionary period.
“While crime is a big factor in the cost of doing business, due to security investments, energy has become like a second mortgage.
“This is dollars and cents in the till, and is a critical element to the sustained development of many of our businesses.”
Mr Bowe said the Bahamas was currently enjoying ‘an artificial reduction in energy prices”, much touted by Deputy Prime Minister Philip Davis, due to low global oil prices. Fuel costs make up between 60 per cent and two-thirds of BEC’s tariffs.
“If we can get the correct structures in place, then we can expect this [energy reform] will ultimately reduce rates on a sustained basis and get them further reduced in the future,” he added.
PowerSecure’s ultimate goal is to reduce BPL’s rates by between 30-40 per cent, compared to the roughly $0.40 per kilowatt hour tariff that Bahamian businesses and households were paying prior to the recent global oil price decline.
Yesterday’s contract signing marks the conclusion of a two-and-a-half year energy/BEC reform process that began in August 2013, and has undergone fundamental changes in structure over that time.
The process was initially targeted for completion by May 2014, and envisaged splitting BEC into two separate units - generation, and transmission and distribution (T&D).
This objective, though, was altered in favour of the so-called ‘NAD model’ pioneered for the Lynden Pindling International Airport (LPIA), where the Government retains 100 per cent ownership of BEC and BPL, but places management into the private sector’s hands.
“The energy reform process has been a long time in the works,” Mr Bowe said, and the key elements are to get moving on the actual reform process.
“It’s not to downplay the significance, but these are the ceremonial aspects,” he added of yesterday’s contract signing. “It is now to focus on delivering, for PowerSecure to ensure they deliver on the targets and are held accountable for the things they have committed to delivering in the management services contract.”
Mr Bowe said he expected PowerSecure to introduce hedging techniques that locked in BPL’s fuel prices long-term, ensuring that the utility monopoly and its customers obtained “a fair price” while eliminating the “volatility” that has plagued energy costs in the past.
Apart from better fuel management and sourcing, Mr Bowe said he anticipated PowerSecure upgrading BEC’s existing generation plant and bringing in new equipment.
Many observers believe BPL requires a new power plant to combat its generation woes, yet neither PowerSecure nor the Government has referred explicitly to this as one of the key energy reform goals.
The Deputy Prime Minister has suggested BEC (BPL) requires $450 million worth of investment over the duration of PowerSecure’s five-year contract to enhance the existing infrastructure, implying that a new power plant is in the works.
Mr Bowe agreed that this was likely to be “a key feature” of the new management company’s plans, “separate and apart” from a strategy to maximise BEC’s existing generation assets and determine their useful life.
The Government and its advisers also have to deal with BEC’s legacy debt, which will be refinanced via a proposed $600 million Rate Reduction Bond (RRB).
Existing Bahamian businesses, ranging from large hotels to ‘Mom and Pop’ stores, have long complained that high energy costs consume a disproportionate share of their income, squeezing cash flow and preventing them from investing in job-creating expansion.
The issue has also undermined the Bahamas’ economic competitiveness, and effectively limited the types of industries and businesses it can attract.
Comments
John 8 years, 1 month ago
Bahamians should not depend on PowerSecure to bring them relief from high energy bills and unreliable service. When the Water Corporation was pumping dirty, rusty water or just faucets belching air and now pressure, Bahamians came off the system and relied on their own wells and bottled water. Now manny, many years later (since Roker Pure) as it was called. WSC has gotten rid of most of its rusty pipes, gotten some water pressure in its pipes, learned how to treat the water and keep it reasonably safe. It now has the task of rebranding itself and marketing and selling its product to consumers who abandoned it many generations ago. In one West African country the is off more often than it is on. In fact persons have adapted their lives to living without electricity. So now the government has embarked on a project to ensure that each household is outfitted with enough solar power to run at least one light and a refrigerator. This project is designed not only to help individual consumers, but to help take the load of the power grid when it is up and running. It will also help reduce fuel costs that had the power company challenged, as well as pollution from the burning of fuel. Each Bahamian household should follow this example by seeking solar to power their refrigerators and at least two lights in their homes. One inside and one outside. In fact they should go even further and invest in a solar water heater, as heaters are one of the largest consumers of electricity. Once PowerSecure or BEC or Freeport Power see that consumers are no longer willing to pay exorbitant fees for power or depend on unreliable service, they will get their act together
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