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Vat Exemption Level May Rise To Offset Bpl Levy

Minister of Works Desmond Bannister.

Minister of Works Desmond Bannister.

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The government is “likely” to raise the $300 VAT-free threshold on electricity bills to minimise the impact from Bahamas Power & Light’s (BPL) $650m refinancing, a Cabinet minister revealed yesterday.

Desmond Bannister, minister of works, told Tribune Business that Dr Hubert Minnis will make a public announcement on the issue amid fears the additional charge added to BPL bills for servicing this mammoth borrowing could push many Bahamian households above this mark and expose them to the extra burden of monthly VAT payments.

“That’s one thing the government is considering; raising the VAT threshold on electricity bills,” Mr Bannister confirmed. “I gave an indication that the prime minister will make an announcement, but it’s likely that what he’s going to do is increase the threshold for VAT.”

His comments come amid general anxiety as to what BPL’s upcoming bond refinancing will mean for already sky-high consumer electricity bills, coupled with the potential knock-on impacts for household finances and business profitability/investment.

The minister himself told the House of Assembly last week that “the average household” will likely have to endure a $20-$30 monthly increase in their electricity bills for some ten months in 2020 immediately after the bond is placed, and several Tribune Business sources had voiced concerns that even this small increase could push low energy users over the $300 VAT-exempt threshold.

Debbie Deal, head of the Chamber of Commerce’s energy and environment committee, told this newspaper: “Are they going to raise the threshold? Below $300 a month you don’t pay VAT on your bill. Say my bill is $285 per month, if you go up another $20-$30 you’ve gone above $300, so not only are you paying an increase but VAT as well. Have they thought about that?”

Mr Bannister’s remarks suggest the government has, and that it is conscious of the increased burden and potential “double whammy” that the BPL bond’s debt servicing charge could inflict on low energy users - the majority of whom are likely to be single persons and low income families - by pushing them above the threshold where they must pay VAT.

Paul Maynard, the Bahamas Electrical Workers Union’s (BEWU) president, told Tribune Business last night that he thought the light bill VAT exemption will have to be increased to $500 to offset the bond servicing charge and alleviate the potential negative impact for BPL’s most vulnerable consumers.

And he also questioned whether VAT will be levied on the debt servicing fee as well as the other portions of customer bills, adding that this would produce a potential revenue windfall for the Government if that happened.

“The bond is what it is,” Mr Maynard said. “The whole town is talking about it. I think they’re a bit off with the figures. There’s no way they are going to pay back $650m at $40m a year. They have to get the money first, and they’ve not even gotten that yet.”

Bahamian households and businesses are effectively being made to pay for years of mismanagement, poor governance and political interference at BPL by bailing-out the state-owned electricity provider through this bond issue.

Possibly the only monopoly to be losing money, what has made this new financial burden especially difficult for Bahamians to bear is the total lack of trust they have in BPL producing a more reliable, lower cost energy supply as a result of their outlay.

BPL and the Government, though, have remained consistent in arguing that the $650m refinancing - which will make $222m available for electricity infrastructure improvements, as well as removing $321m in debt from the utility’s balance sheet - will more than offset the bond debt servicing charge and result in total energy costs decreasing.

In the first instance, they say this will be achieved by the new 132 Mega Watts (MW) of Wartsila generation capacity that is due to come online this month. Besides enabling BPL to switch back to the cheaper Bunker C (heavy fuel oil) from more expensive diesel, these new engines also have a lower heat rate, meaning they require less fuel to generate the same amount of electricity as the existing engines.

This, in theory, will lower BPL’s fuel costs and result in savings that can be passed on to consumers. And the addition of liquefied natural gas (LNG) into the generation fuel mix via Shell’s power plant that is due to become operational in late 2021/early 2022 is supposed to further slash energy costs.

Yet concerns persist. Ms Deal said the Government “didn’t embrace us in any way” over the bond refinancing and its plans for BPL and wider energy sector reform. This, in turn, made it much more difficult for the private sector to approve of the plans.

“They’ve not addressed other issues besides new generation,” she added. “Transmission and distribution is also 60 years-old, and we’ve not addressed the back-up generation that was supposed to be temporary. Here we are eight to nine years later and we still have back-up generation. It doesn’t seem like the fix this country needs at this point in time.”

Mr Bannister’s House of Assembly presentation set out how BPL plans to use the bond refinancing proceeds for both transmission and distribution and renewable investments, with New Providence due to receive over $100m in the former area alone.

Yet doubts over Shell’s involvement in the energy reform mix persist, with Mr Bannister telling this newspaper that “the Shell decision is really going to be up to Shell. There are a number of things they have to do” for the proposed multi-fuel power plant at Clifton Pier to go ahead under its lead.

Speaking after Tribune Business was tipped that the Cabinet met on Friday to discuss the Shell deal, Mr Bannister said the project had obtained some but not all of the necessary government approvals.

“There are a number of decisions that have been taken, and a number of other things that have to be done,” he added. “We’ve taken a number of decisions in relation to Wartsila, done a number of approvals, and the Shell decision is really going to be up to Shell....

“As far as we are concerned the process with Shell is proceeding. Shell has gotten a number of approvals. The National Economic Council has given Shell a number of approvals. There are just a few issues that have to be resolved before they get all the approvals, but they’ve gotten a number of them.

“They have a number of issues they’re going to have to resolve, and once they resolve them they will have all the approvals to be able to move ahead.”

Comments

Porcupine 1 month, 2 weeks ago

Well now, a whole article discussing whether our BPL bills will be $20 to $30 higher, or $22.40 or $33.60 higher. Let's not argue with the Tribunes statement that, "Bahamian households and businesses are effectively being made to pay for years of mismanagement, poor governance and political interference at BPL by bailing-out the state-owned electricity provider through this bond issue." As to Mr. Bannister, they say, "His comments come amid general anxiety as to what BPL’s upcoming bond refinancing will mean for already sky-high consumer electricity bills, coupled with the potential knock-on impacts for household finances and business profitability/investment." I am on the edge of my seat waiting for the PM to speak on whether they will up the VAT exemption. Wow. And, I am so waiting on any further words to tumble out of Mr. Bannister's mouth. So enlightening.

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ThisIsOurs 1 month, 2 weeks ago

Who is this initiative supposed to help?

Raising the VAT exemption will do nothing to help poor people. You caught them already at "bills under 200 dollars". You won't catch them again even if you move the exemption to 10,000.

The higher they make the exemption, the less it's relevant for poor persons.

These guys have clearly not thought this through, I bet half of them haven't even read the bill. Heastie and Moxey cooked this up in an excel sheet laying out the money they thought they needed to get everything they wanted. The same amount of research went into this as when Moxey wrote the CEB bill. They added in a 30% cushion to account for cost overruns then they presented the number to Turnquest. He asked how we gonna pay for it, they said if we divide by our customers, they can each pay 30 for the next 25 years. At least that's the story I wrote in my fiction adventure novel

No thought whatsoever to any economic impact. This is the danger of having Turnquest and Johnson in those seats. Johnson is an excellent PR person but he's no economist, Im not sure what Peter Turnquest's skillset is.

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Well_mudda_take_sic 1 month, 2 weeks ago

Take it from me....Turnquest as a CPA was never even a stellar bean counter among his peers.

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ohdrap4 1 month, 2 weeks ago

Well the vat on my bill never reachedv 12.00.

Take 30 off and make me pay vat then.

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Well_mudda_take_sic 1 month, 2 weeks ago

Minnis, Turnquest, that white former Deloitte accountant Geoff Andrews, Bannister, Heastie and Moxey are all laughing at us as they get ready to give us the royal shafting in the form of pay-before-you-use electricity costs that the vast majority of Bahamians will never be able to afford. Yes indeed, the coming nights are going to be dark for many of us, not to mention the unbearably hot summers that lie ahead.

We can only pray that most voters in the Killarney constituency will remember all of this corrupt foolishness and give the very arrogant and nasty Minnis the big royal boot come the next general election, assuming he's not literally thrown out of parliament by the people before then.

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Bahamianbychoice 1 month, 2 weeks ago

They seem to forget that there are many persons who are aware of what has happened at BPL since this crew came to power...and I am speaking about very disappointed FNM's....arrogance is a dangerous thing....

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truetruebahamian 1 month, 2 weeks ago

Has Potcake and all those other indebted but allowed to sail on scot free been rounded up to pay for their bills due to usage and other incurred costs? If not, get them and take some of the load off of us.

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Chucky 1 month, 2 weeks ago

Sell the electric utility to a foreign company. Pay the debt with the proceeds and put the balance in general revenue.

The foreign company will provide cheap regular power.

This will get the corrupt idiots away from the controls.

We all win, except for the crooked bastards who have been pilfering from the utility.

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TalRussell 1 month, 2 weeks ago

Yeah, no. It's costly but unlike BPL - they have managed to keep lights turned on since 1958,
Get rid central government's hands-on ministerial comrades political interference, by turning over BPL to FREE port's since 1958's, privately owned and run electricity operation.

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BONEFISH 1 month, 2 weeks ago

Just toss out ideas as they go along.This idea only got mentioned,after it came apparent what a 30 dollar hike in the bill would mean to lower income persons.One thing with this government,they don't understand economics,finance or public policy.

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The_Oracle 1 month, 2 weeks ago

Emera is no better in electric costs than BEC/BPL, but they do keep the power on more consistently. The quality of their power is infinitely worse though. No, This over the top scam is beyond the pale, adding injury to insult. Forcing people to pay for Utility misfeasance opens the door for all sorts of "forced" billing, Added costs, easily challenged in the courts.

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Bonefishpete 1 month, 2 weeks ago

Sell to a Foreigner you say? No Foreigner Company would ever be allowed to shut off power meters of connected Bahamians. All a foreign company would be allowed is to lose money.

A company like Florida Power and Light wouldn't touch this situation with a ten foot pole

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Well_mudda_take_sic 1 month, 2 weeks ago

The worst case financial modelling done indicates that average billings per customer based on current usage of electricity would increase by well over $100 per month for more than a decade for residential customers and much more than that for commercial customers (businesses). This is because of the very large number of politically connected "do-not-disconnect" customers as well as the smaller customer base that would be able to afford to pay the significantly higher electricity consumption costs. Minnis, Andrews, Turnquest, Bannister, Moxey and Heastie need to come clean with the Bahamian people and stop feeding us with their hogwash.

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ThisIsOurs 1 month, 2 weeks ago

I suspect what they'll do is have a fee on there that says "Rate adjustment bond" and it will equal 20-30 dollars. Then they'll bump up the surcharge to make up the difference and tell you well you must be washing more clothes

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