By NEIL HARTNELL
Tribune Business Editor
Renewable energy providers yesterday warned it was “imperative” that the government clarify its plan to make users pay the debt servicing fee for Bahamas Power & Light’s (BPL) mega $650m refinance.
The industry reacted with surprise to Desmond Bannister, minister of works, informing the House of Assembly that persons with self-generating renewable energy systems or seeking total disconnection from the BPL grid must contribute to the state-owned utility’s financial rescue.
The minister, detailing changes to the legislation that will underpin the $650m National Utility Investment Bond issue, said “clarity” was needed over “the BPL customers who will be responsible for paying the rate reduction bond fee to provide investors with comfort regarding the adequacy of the revenue stream to satisfy interest and principal payments”.
Mr Bannister conceded that the government itself was of “particular” concern, given that itself and its agencies “today do not make regular payments to BPL” despite being among its largest customers and greatest energy consumers.
“Investors may be concerned that one of the largest consumers are not, in practice, required to pay monthly,” he added, while warning that a cultural change will also be needed among regular consumers when it comes to paying BPL bills in full and on time. Mr Bannister said BPL’s planned $30m investment in smart meters will enable it to disconnect delinquent payers remotely at the flick of a switch.
However, the minister said renewable energy use was another concern for potential BPL bond investors. “Rating agencies and investors also becoming increasingly concerned about net metering and similar arrangements, and about battery storage which would result in disconnection from the grid because of the potential impacts on cost recovery,” he confirmed.
BPL, the bond issuing vehicle and the government see the attainment of a credit rating for the $650m capital raise as critical to its pricing and structuring, which will also have implications for Bahamian consumers in terms of how much they pay to service this debt.
Mr Bannister said existing Electricity Rate Reduction Bond Bill’s existing language on which consumers will be responsible for servicing the debt was “inconsistent, and in some cases ambiguous”, and therefore needed to be tidied up.
The solution, he added, was to “add language to make clear that any person connected to the transmission distribution system of BPL, including the following, will be responsible for payment of the rate reduction bond fee.
“The government, self-generating customers who may be required to pay a rate reduction bond fee with respect to the electricity that they generate, if so provided in the Financing Order, and customers who request disconnection from the grid, and who may be required to pay a rate reduction bond fee as a condition of disconnection.”
Guilden Gilbert, vice-president of Alternative Power Sources (APS) Bahamas, told Tribune Business in response: “It’s imperative we get further clarification on this before they implement. It’s only fair to power users.
“How is the government proposing to charge a fee, for want of a better word, to a customer that has a system that doesn’t draw power from the utility? How is the government going to charge a person for not using power? That doesn’t make sense to me. We need clarification on that.”
He added: “As to the comment on the rating agencies having concerns with net metering and battery storage, I have to disagree with that. I’m not sure of any rating agency that has issues with batteries because batteries do not compromise anything with the utility.
“Batteries allow consumers to self-generate 24 hours a day. The guys we work with have done over 500 Mega Watts (MW) of solar and I’m not aware of any rating agency expressing concerns with a battery-based system. The rating agencies rate the utility and its performance and creditworthiness, not the make-up of the energy mix in the country.”
Philip Holdom, president of Alternative Power Supply (APS), told Tribune Business that the plans to levy the BPL debt servicing charge on renewable energy users was “quite incredible”. He blasted: “Taxing off-grid systems is ludicrous considering they are not connected to the grid and don’t use any of the infrastructure.
“They also seem to imply that if you chose to go off grid they would tax you anyway. So how is that being pro-renewable energy?.. We don’t think it is right that the public who had no say in the management of BEC for decades should have to pay back the debt incurred by irresponsibility.”
Mr Holdom instead urged the government to properly “deregulate” the Bahamian energy industry, arguing that the proposed $650m bond issue will only “prop up a failed model” that has been “flawed for many years”. He likened the capital raise to “betting on a dead horse”.
His comments were echoed by the Sustainable Energy Association of The Bahamas (SEAB), which called for an “urgent restructuring” of the energy sector. “We demand a fundamentally new, 21st century regulatory model, built on distributed renewable generation, and based on Bahamian investments which the entire population can be part of,” it said.
“There is enough real estate and Bahamian capital to generate 80 percent of our energy nationally from renewable resources within five years. The total cost would be way less than paying off debt for 20 years and would create thousands of jobs.”
It proposed that the government “create the Bahamas Power Exchange (BAPEX), together with the Utilities Collection Agency as a digital clearing facility to manage transactions between consumers and energy providers”.