The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition's finance spokesman yesterday blasted the Government for a "weak and feeble response" to the hike in water rates that will be imposed on Grand Bahama residents and businesses from next month.

Kwasi Thompson, also the east Grand Bahama MP, yesterday demanded an "immediate intervention" by the Davis administration that would delay the increases until the situation was reviewed by a "third party" to determine if they were justified and what the extent of the hikes should be. However, any intervention by the Government is complicated by the fact that neither itself, nor a national regulator, has authority to oversee utilities in Freeport.

He suggested that this assessment be performed by the likes of the Utilities Regulation and Competition Authority (URCA), Water & Sewerage Corporation or an international organisation with water industry experience after the Ministry for Grand Bahama again reiterated the Government's opposition to the Grand Bahama Utility Company's rate increases.

The tariff hikes were approved earlier this week by the Grand Bahama Port Authority (GBPA), its regulator, but the ministry's statement alluded to the glaring conflict of interest this poses. This is because the GBPA is effectively regulating itself since GB Utility is directly owned by its affiliate, Port Group Ltd. Both the GBPA and Port Group Ltd have common shareholders, namely the Hayward and St George families.

The Ministry for Grand Bahama also reiterated that a consultation period of just over two weeks, given that the GB Utility rate increases were announced on April 13, was insufficient time for consumers and the wider community to study the move and the impact it will have on them.

"We are of the view that a reasonable consultative period could not have realistically occurred within the notice period," the ministry said. "As many residents continue to piece their lives back together in the aftermath of Hurricane Dorian, we do not support this rate increase, as approved by the GBPA. A satisfactory case for the proposed increase has not been made.

"It is also noted that Intercontinental Diversified Corporation (IDC) holds common shareholding in both GBPA (the regulator) and GB Utility (the water provider). The issue of regulatory independence is currently before the court, and we eagerly await the outcome. Again, the Government is dedicated to tackling the long-standing obstacles that have hindered progress on Grand Bahama."

Intercontinental Diversified Corporation (IDC) is the company that sits at the top of the GBPA and Port Group Ltd ownership structure, and is the parent entity through which the Haywards and St Georges own and control Freeport's quasi-governmental authority. It is unclear which court action the ministry was referring to, but it appears to be Grand Bahama Power Company's battle with URCA over whether the latter has the ability to regulate utilities in the Port area.

Mr Thompson, though, yesterday queried why the Ministry for Grand Bahama and wider Davis administration would be waiting on the outcome of that legal dispute given that it has no relation to, or bearing on, GB Utility's water increases. While he has yet to fully consult his constituents on the matter, he added that they were likely to be "extremely disappointed but unfortunately not surprised" by the GBPA's approval.

"This involves the conflict of interest between the Port Authority and GB Utility," the MP told Tribune Business. Referring to the regulatory framework agreement between the two entities, he added: "My particular view is that the entire agreement is an inherently unfair position because they are owned by the same shareholders.

"Even if what they are saying is true, and they have taken these steps, the very fact it is the Port Authority that made this decision taints the entire process." The GBPA, in announcing the approval of the rate rises, said its regulatory committee had accounted for "the concerns expressed by residents and stakeholders" as it sought to balance their needs with maintaining a financially viable water supplier for the island.

"What I would like to see happen is the Government fight for the people of Grand Bahama," Mr Thompson said. "I would like to see the Government take some action against the decision that was made. The Government could ask for a third party to look at the entire matter. They could ask for representatives from URCA, they could ask for representatives from Water & Sewerage, to come in and look at the entire situation.

"They could also ask for a delay, and could have met with the Port Authority and demanded a delay, but none of that - through their statement - would appear to have been done. It has been a complete failure on behalf of the Government. It is a situation where it requires a separate person to review the entire matter, and the Government unfortunately has not taken any action to prevent it from happening."

The Ministry of Grand Bahama's statement did not detail what specific steps it may have taken to intervene with the GBPA and GB Utility, having learnt of the water tariff increases at the same time as the public, since they were unveiled on April 12. Nor was there any mention of any further action planned by the Government.

This led Mr Thompson to blast its reaction as a "weak and feeble response", arguing that it had failed to act "despite the big talk and heavy promises". He also accused the Davis administration of being "long on talk and photo ops but short on action and effective governance".

However, any government intervention in the GB Utility water rate increases is complicated by Freeport's founding treaty, the Hawksbill Creek Agreement. This gives regulatory authority for all utilities in the Port area to the GBPA, including for water, electricity and communications. This has caused numerous difficulties and legal battles over the years, and it lies at the heart of GB Power's current battle with URCA.

James Carey, the Grand Bahama Chamber of Commerce's president, told Tribune Business in a recent interview it was possibly time for the Hawksbill Creek Agreement to be reviewed and ensure it remains fit for purpose given that the world has changed markedly over the past 70 years.

"The Hawksbill Creek Agreement is 70 years-old this year," he said. "It should be reviewed, and reaffirmed or changed as the case may be. It was good 70 years ago but the world has changed drastically. Maybe it's time to look at that and see if it's still relevant for the world today."

Speaking to the water rate increases, Mr Carey yesterday said the GBPA needed to become more transparent with residents and business licensees if it is to continue to enjoy their support. Speaking specifically to the GB Utility hikes, he added: "As stated in a previous exchange, the process perhaps needs to be revisited.....not perhaps; the process ought to be revisited in terms of approval, the participation of communities, and hearings or something would certainly be in order.

"But while they [the GBPA and GB Utility] say it's necessary, there's been no sharing of data in terms of the financial standing of GB Utility and what has been spent etc, etc. They speak about the hurricane and the damage that it did to the wellfields and all that sort of stuff, but there's been no specifics about what they may have recovered in terms of insurance claims if any.

"Again, transparency is a good thing, and it's something that's not forthcoming," the GB Chamber chief added. "I may have said on previous occasions elsewhere that governments make decisions and do things, and the public responds by changing them if they're dissatisfied, but the same opportunity is not there with the GBPA. It's a private company."

Mr Carey said there was "a prescription for dealing with the GBPA", which appeared to be a reference to the clause in the Hawksbill Creek Agreement that allows for its quasi-governmental powers to be devolved to a local government authority if 75 percent of licensees vote in favour of this. However, as he acknowledged, this mechanism has never been acted on.

"So some more information needs to be shared," Mr Carey said of the rate increase. "I think it's something we need in this town if we are to continue supporting what the Port Authority does. They do do a lot of good things but it can certainly be a more viable proposition if they have more public support, and that will come through transparency, I'm sure."

GB Utility, seeking to justify the recovery of at least some of its $15m Hurricane Dorian restoration costs from its customers, said that while the $5m investment in a reverse osmosis system will provide extra supply resilience and sustainability in the future this has come at a significant increase in operating costs and “a financial loss”.

“Reverse osmosis systems are extremely expensive to operate in comparison to well water plants, adding an additional $2.5m to the utility’s annual operating costs from 2021 at a financial loss to the utility. This additional operating cost, to date, will not be recouped in rates retroactively,” GB Utility said in a presentation.

“GB Utility also experienced $3m in Hurricane Dorian-related infrastructure storm damage. In addition, there was approximately $2m in uninsurable losses associated with Hurricane Dorian including over $500,000 in costs to operate the free water depots for residents and 25 percent discounts given to residents for water usage.

“These costs were at a financial loss to the utility and will not be recouped in rates..... GB Utility deferred the rate case for two years, at a significant financial burden and cost to the utility. To defer any longer will result in higher cost accumulation and consequently rates, and jeopardises the utility’s ability to maintain and produce potable water and remain functional.”

GB Utility, in its rate increase application, pledged that 40 percent of its customer base - those who use 2,000 gallons or less per month, and are likely to be lower income residential users - will not see any price hikes from the adjusted tariff structure that is due to take effect in June. Average consumption among this group is 600 gallons per month, and the average bill is forecast to remain at $12.83.

The water provider, in a statement, said a further 47 percent of clients - who consume between 2,001 and 10,000 gallons monthly - will only see an $8.16 per month tariff increase that will take their average bill from $28.13 to $36.29. This equates to an annual water cost increase of $97.72 - less than $100.

GB Utility is clearly expecting large volume users, namely higher income residents and the business community, to bear the brunt of the increases. Those consuming between 10,001 and 20,000 gallons per month, and representing 8 percent of the customer base, will see their bills rise by around $20.73 per month - representing a jump from an average $71.42 to $92.14. This is equivalent to a $248.76 annual increase in water costs.

Users of more than 20,000 gallons per month, chiefly hotels and Freeport’s large industrial companies who comprise 5 percent of customers, will see their tariffs jump by $125.74 per month to an average $558.67 compared to the present $432.93. This is equivalent to a $1,508.88 annual increase.