Minister of Public Works Desmond Bannister.
By RIEL MAJOR
Tribune Staff Reporter
THE Electricity Rate Reduction Bond Act 2019 was passed in the Senate yesterday.
The act, which will replace a similar piece of legislation passed previously by the former Christie administration, allows for Bahamas Power and Light to adjust its rates at a minimum semi-annually - to ensure that the collection of such fee will produce sufficient revenues to pay all ongoing financing costs.
Minister of Works Desmond Bannister has previously said the rate reduction bond will lead to a $20-$30 increase in BPL bills for 10 months in 2020 before these bills decrease. However yesterday Attorney General Carl Bethel said he was not sure if this figure was set in stone.
As he debated the legislation in the Senate yesterday, he said this is the first time the government has a “comprehensive strategy to resolve the long running and vexing electricity problem”.
He said: “This bill, the purpose of it is specifically stated section four. It’s to establish the legal framework for the organisation of the issuer, that’s the Bahamas Rate Reduction Bond Limited, a company that has been incorporated…is mandated to be formed by section five to serve as the issuer of the bonds. To establish the legal framework for the organisation of the issuer and the issuer of rate reduction bonds secured by the rate reduction bond property and other assets of the issuer.
“(It’s) provided by the sole purpose of the direct and indirect payment and satisfaction of the rate reduction bond financing liabilities. The Bahamas Rate Reduction Bond Limited also has the power to enter into contracts that the government of the Bahamas with BPL or any…utility with a servicer or financing entity and any other private or public entities. The plan is this Bahamas Rate Reduction Bond Limited will utilise the services of institutions abroad to place the balls into the financial markets abroad.”
Mr Bethel continued: “The first requirement is to obtain the ratings of the international ratings agency and then to put them to the market and those persons who invest would invest at a fix rate of term to be determined over a period of years would receive payments by the bond fee that will be paid by every consumer. The $30 which may go down and which may go up and there is power to make every 60 days in advance to make adjustments in that way.”
The attorney general said there are four old critical problems that must be addressed.
He said: “New Providence suffered as a result of the fact that between 2015 and 2019 there was no increase in the generating capacity of BPL and there was no what they call redundancies. When old generators having to be run 24/7 and when problems affected one or two there were no back-up generators to fill the void in generating capacity.
“A critical part of the intended use of the fund is to create redundancies…. We have the seven Wartsila engines and the government has also supported the purchase of another 32-megawatt electric generator. The third aspect is the Shell liquefied natural gas generating generators that we’ve brought on stream between now and 2021. This generator will give greater redundancies coupled with the Wartsila generators that are now coming on stream.”
He added: “The strategy for the people...is to guarantee regular, reliable, dependable, certain electrical supply 24/7. This is being achieved as we speak. Secondly by 2021 to drive the cost of electrical generating upwards of 40 per cent.
“When the bond is issued there will be an extra surcharge based on what is set by the fee. The figure of $30 has been thrown around, I’m not sure that is set in stone because we have to look at the terms of the bonds when they are actually issued to be able to determine of how to spread the load of how to pay for the fee.”
During his contribution yesterday, opposition Senator Dr Michael Darville slammed BPL’s Chairman Dr Donovan Moxey for refusing to comment on the hefty fine of almost a quarter of a million dollars by the Utilities Regulation and Competition Authority for “repeated and continuing breaches” of both the law and its license.
The House of Assembly recently passed the Electricity Rate Reduction Bond legislation to allow for the government to issue a rate reduction bond fee to be paid by Bahamas Power and Light customers. This legislation comes as a bail-out to “cash strapped” BPL for the refinancing of some $650 million necessary to repay debt owed to local banks amounting to $320 million and for desperate upgrades.
On December 15, the new $90 million-dollar Wartsila power plant engines, which is being tested now, are expected to be in operation.