The Tribune

By NEIL HARTNELL

and YOURI KEMP

Tribune Business Reporters

Grand Bahama Power Company is justifying its proposed rate adjustments by asserting that it needs to increase annual base rate revenue by almost $5m due to recent hurricanes.

The energy monopoly, in a presentation posted on the website of its regulator, the Grand Bahama Port Authority (GBPA), said it needs to recover a $2.3m increase in insurance costs stemming from claims submitted over the damage inflicted by hurricanes Matthew and Dorian.

Taking 2018 as a benchmark, GB Power’s presentation showed insurance premium costs rising from $2m in that year to $4.3m in what it described as “a test year”. The utility, though, can only obtain insurance for its generation plant, with its extensive transmission and distribution network going uninsured because underwriters perceive the risk of storm damage as just too great.

“The growth in insurance is the result of significant premium increases for the electric industry in the region in general from marked increases in tropical storm and hurricane activity, and GB Power specifically from the claims that have been paid out for both hurricanes Matthew and Dorian,” GB Power said.

GB Power says base rate revenue needs to increase by $4.8m per annum, or 7.8 percent, from $61.7m in the 2018 benchmark year to $66.5m. Included in that $4.8m is the $2.2m “amortisation of regulatory assets”, which is the utility’s recovery - spread out over time - of costs associated with restoring its transmission and distribution network following Hurricane Matthew in 2016.

“In the 2016-2018 approved rate plan, GB Power was authorised to amortise regulatory assets at a rate of $3.5m annually,” the presentation said. “After Hurricane Matthew these amortisations were stopped with the understanding that they would be resumed once sales levels recovered.

“Hurricane Dorian and the impacts of COVID-19 have prevented the resumption of these amortisations prior to a new, approved three-year rate plan. GB Power is proposing to resume these amortisations at a rate of $2.2m in 2022, $2.4m in 2023 and $2.2m in 2024.”

GB Power said these figures had been “determined by the difference between a fixed fuel rate and actual fuel costs”, adding that the former is slated to be 10 cents [likely per kilowatt hour] in 2022; 10.9 cents in 2023; and 11 cents in 2024.

Meanwhile, GB Power will recover its Hurricane Dorian rebuilding costs separately via the new hurricane recovery charge that was added to consumer bills earlier this year and is set to continue through 2022-2024 if the rate proposal is approved as is by the GBPA.

Between 2021 and 2024, GB Power will thus recover a total $34.9m in combined Matthew and Dorian costs, plus what it calls “base amortisations”, via the new rate structure. That will still leave an outstanding $34m to be recovered post-2024.

Then there are GB Power’s proposed capital investments in its existing infrastructure plus renewable energy. Total spend between 2022 and 2024 is pegged at $41.9m, with “base rate investments” over that same period set at $36.7m.

Promising that 15 percent of Grand Bahama’s energy will be produced by renewable source come 2026, the utility added that a 5 Mega Watt (MW) solar plant is to be commissioned by late 2022/early 2023 while agreements with two independent power producers (IPPs) will be under review at the same time.

GB Power is also promising to install 5,000 automatic meters by year-end 2021, with the remaining 75 percent of customers outfitted with these in 2022. To hit its revenue requirements, GB Power is relying on the economy’s post-COVID re-opening to drive increased electricity sales.

It is forecasting a 10 percent increase in electricity sales between now and 2024, rising from 273,279 mega watt hours (mWh) in 2021 to 300,900 mWh. As for the impact on consumer bills from the rate adjustment proposal, Grand Bahama’s greatest consumers - Freeport’s industrial sector - are forecast to see between a $1,448 and $2,119 increase in monthly bills as high as $51,957.

GB Power says all classes of commercial customer will experience a 6.3 percent base rate rise if the proposal is accepted as is, with electricity bills rising by between 4.3 percent to 4.4 percent. However, the greatest residential energy users will suffer the biggest proportionate increases, with their base rate increasing by 9.4 percent and overall bill up by 6.2 percent.

Meanwhile, a Cabinet committee met yesterday to discuss GB Power’s planned rate increase. It has already met with the GBPA to inform it that the “Cabinet will not support a rate increase on any portion of the customer base at this time”, Clint Watson, the prime minister’s press secretary, said.

The Cabinet committee features three ministers with strong Grand Bahama connections. Besides Ginger Moxey, minister for Grand Bahama, they include her predecessor, Dr Michael Darville, now minister of health and wellness, and Obie Wilchcombe, minister of social services and urban development, who is also MP for West End and Bimini.

The committee’s other members include Alfred Sears, minister of works and utilities, who has responsibility for Bahamas Power & Light (BPL), and Ryan Pinder, the attorney general.

Cleopatra Russell, GB Power’s spokesperson, said: “This adjustment that we’ve filed is the first one that we’ve done since 2016. In 2016, when we would have failed to recover the costs for Hurricane Matthew, we would have made a commitment and the regulator would have asked us to hold rates steady, which means that we did not change rates at all since 2016.

“So this adjustment that we filed actually is requesting that 42 percent of our customers; their rates either decrease or have no change at all. Just under half of our customers will either see a decrease or would see no increase at all. It asks for a 4 percent average increase for the rest of our customers.”

There is a 45-day consultation and review process that GB Power’s application must undergo. Mr Watson said: “We are waiting for the 45-day review process the Power Company is going through and we will see what their outcome is. It is our hope it is stayed. The committee has been very clear and very vocal in talking to the Port Authority about its position, and our position remains just that.”