By NEIL HARTNELL
Tribune Business Editor
A governance reformer yesterday blasted The Bahamas’ tendency to only address key problems “in a crisis” as he blamed its energy woes on “irresponsible governance” and bad fiscal habits.
Robert Myers, pictured, a principal with the Organisation for Responsible Governance (ORG), told Tribune Business that the country’s fiscal ill-health is directly linked to the Government’s seeming inability to do anything substantial about Bahamas Power & Light’s (BPL) New Providence generation shortfall in the near term.
With all fiscal “headroom” used up by the spending of previous administrations, Mr Myers argued that BPL’s daily load shedding and outages represented part of the “pain and suffering” Bahamians must endure to place their country back on the right path.
He added that BPL’s problems were a prime example of the lack of accountability that plagues government-owned corporations, and highlighted the “negligence” of successive governments - PLP and FNM - in not addressing the state-owned utility’s mounting financial and energy infrastructure challenges even though they were becoming increasingly obvious to all.
Mr Myers also warned it would be “a real disaster” if BPL’s load shedding and outages continued through November-December 2019 as that period represents the start of “peak tourism season” when “most businesses earn the majority of their money”.
Edmund Phillips, Wartsila’s business development manager, this week said installation of BPL’s new 132 megawatts (MW) of generation capacity is likely to be completed by mid-December, meaning that all hopes for an end to load shedding in time for Thanksgiving may have to pinned on milder weather and a corresponding reduction in electricity demand.
Meanwhile, Mr Myers said the unreliable energy supply had impacted his own group of companies by shutting down the Automatic Transfer Switch (ATS) that brings power back up after an outage. This, he added, had forced him to send head office and retail employees home two to three times, while also costing his businesses “tens of thousands of dollars”.
Tying BPL’s crisis directly to poor governance and fiscal polices, the ORG chief blasted: “If you go back to the core of it: Are their accountability issues? Are their management issues? Are their money issues? Yes, there are all those things. The core is if people were accountable, and we were fiscally prudent, we would not have these problems.
“A lot of these things stem from decades of poor accountability, poor governance and no fiscal prudence. Just spend, spend, spend until we can’t spend any more, and that’s where we’re at. We’ve got to work ourselves back into some sort of responsible pattern or we will create more pain.
“This [BPL’s crisis] is the pain I’ve been talking about. We’re not going to get through it without pain. It sucks. It’s rough on business. It’s rough on homeowners. It’s shame. It’s just upsetting that so many people were so negligent in their duties. It’s a culmination of an incredible amount of negligence by BPL and successive governments. It sucks.”
Emphasising that blame for BPL’s predicament cannot be laid solely on BPL’s present Board or management, or the Minnis administration, Mr Myers said that without improved governance and accountability “we end up in this crisis management”.
BPL’s road to its present ruin can be traced back to the 2004 cut in its base tariff, which generates all its profits and cash flow. This cut left BPL’s predecessor, the Bahamas Electricity Corporation (BEC), selling electricity below cost and ultimately plunged it into multi-million dollar losses from 2006 onwards - making it one of the world’s few loss-making monopolies.
Faced with annual eight-figure losses, among the first items to go were regular maintenance of BEC’s generation fleet and investment in new, more efficient engines. As a result, BEC was left with an aged, poorly-maintained and decaying generation capacity as well as a deteriorating transmission and distribution network by being starved of investment capital.
Michael Moss, appointed as BEC executive chairman by the last Ingraham administration, was able to claw back some of the base rate reduction and return the Corporation to “break even” with a $1,000 profit in 2011. However, his departure following the 2012 general election promptly plunged BEC back into “the red” with $20m losses.
Several reform efforts initiated under the Christie administration were never seen through to fruition. While the Minnis administration selected Shell North America as the preferred bidder to build, construct and operate a new power plant for New Providence, it left a three-year gap until this comes on stream.
Mr Myers, meanwhile, argued yesterday that the cash-strapped Public Treasury is a further obstacle to the Government’s ability to immediately tackle the present generation shortfall.
“The big overriding issue is they’ve [successive governments] spent us into a hole that’s very difficult to get out of,” he charged. “If we didn’t have a debt-to-GDP ratio of 60 percent-plus the Government might have some headroom, but they’ve spent us into a hole so there’s no catastrophe funding.”
Mr Myers, voicing concern over PLP chairman, Fred Mitchell’s, recent refusal to commit the party to upholding the principles of fiscal responsibility, added: “That’s the danger. You can be irresponsible and kick the can down the road, but you can only kick the can down the road so much until the IMF, IDB and World Bank come in and say you must do these things.
“Your fiscal mechanisms have completely failed, investors don’t have any confidence in your country, and you’re up the creek without a paddle. We’ve got to be disciplined and stick to the plan. There’s going to be pain and suffering. These [BPL] are the kind of incidents that create pain and suffering. The money’s not there to fix it. We’ve got to hold the course.”
Otherwise another “crisis” is inevitable, Mr Myers warned, as he urged BPL and the Government to ensure daily load shedding and outages are a thing of the past before the winter 2019-2020 tourism season.
“We don’t want to see it go into December; that would be a real disaster,” he told Tribune Business. “It’s peak season, so we’ve got to get it done before November. Kick whatever ass is needed before peak season - Thanksgiving, Christmas, New Year. We can’t have this crap going on in peak season. That’s when everyone makes their money.
“They need to get the right planning and management in there [BPL] to make sure we don’t come back here ever again. They have to have money for parts, go to pre-paid metering and collect their receivables. You can’t run a business where you’re owed something like $100m and can’t collect it. We’ve just got to get through it.”
Mr Myers said the importance of reliable, lower cost energy supply to the Bahamian economy’s competitiveness had been brought home to previous governments by studies such as the Oxford Economics report for the Chamber of Commerce, which highlighted the hundreds of millions of savings if power prices were reduced to around 21 cents per kilowatt hour.
He argued that this made it all the more baffling why reforms had not been implemented sooner, and added: “It’s simple straight stupidity not to deal with it as as early as we can. It’s just not been a high enough priority.
“In typical Bahamian fashion we deal with it in a crisis. It’s sad, but unfortunate. Stupid is what stupid does.”