Published On:Thursday, April 22, 2010

By NEIL HARTNELL

Tribune Business Editor

MORE than one-quarter, or 25 per cent, of the electricity generated by the Bahamas Electricity Corporation (BEC) is lost to stealing and meter tampering, plus system problems, an Inter-American Development Bank (IDB) report has revealed.

The IDB's 2010-2014 Country Strategy for the Bahamas, a copy of which has been obtained by Tribune Business, said internal BEC reports provided to it showed that for its 2007 financial year, the 100 per cent state-owned power producer suffered non-technical losses equivalent to 17.5 per cent of power generated, while technical losses stood at 8 per cent.

This means that 25.5 per cent of all electricity generated by BEC was lost, and the Corporation was unable to derive revenues from it. Technical losses refer to losses from the generation system, such as power being lost on the transmission wires between generator and end user, while non-technical losses - the most serious - are caused by theft (illegal hook-ups to BEC's system) and other offences, such as meter tampering.

The IDB's 2010-2014 report targeted the complete elimination of all central government subsidies to BEC, such as the $30 million payment made during the current fiscal year to pay down the $60 million-plus bill owed to Shell and keep the fuel supplies coming.

The bank also wants to, by 2014, reduce the combined level of technical and non-technical losses from more than 25 per cent to 20 per cent; have five independent power producers supply electricity to BEC; raise renewable energy to 10 per cent of BEC's system capacity; and generate energy savings of 5 per cent per annum through efficiency measures.

In its blunt assessment of BEC, the IDB said: "With new capacity not being rapidly implemented, increasing demand (3-4 per cent per annum) has led to intermittent power outages. There is also a need to access reliable energy, especially in the Family Islands.

"However, both would require changes in the current state monopoly in electricity supply, and an energy policy framework that provides appropriate incentives for conservation and the adoption of alternative technologies."

The Government's National Energy Policy committee has been working on such initiatives, but these have yet to result in anything concrete.

And, describing BEC as the supplier of 85 per cent of the Bahamas' total electricity demands, the IDB said the Corporation "currently operates under liquidity constraints resulting from the reduction of electricity tariffs, in real terms; elevated fuel costs, and an increase in non-billed electricity/. Furthermore, investments are biased towards deepening the dependence on fossil fuels".

Thus the IDB appears to back the Government's argument that an increase in BEC's basic tariff rate, which was cut in 2003, is required, rejecting the arguments of former chairman Al Jarrett. The comment about "biased investments" could also be related to the controversial $105 million Wilson City power plant.

Tribune Business understands that the average 5 per cent increase Bahamian businesses and consumers will see in their basic tariff rate is likely to take effect from July 1, 2010, coinciding with the start of the Government's fiscal 2010-2011 year.

The extra revenues, it is felt, will generate the extra cash flow necessary to return BEC to profitability, following three years when it has suffered net losses between $15-$25 million. While there will be concerns about the impact increased costs will have on businesses and consumers at a time when the economy is mired in recession, a basic tariff rate rise could be essential to keeping the lights on.

The IDB said the main risks to its strategy for BEC were "waning" interest if oil prices dropped significantly, reducing demand for alternative energy, and an inadequate policy framework that "provides insufficient incentives" for private power producers.

However, the "commitment of the Government of the Bahamas to move forward in the reduction of fossil fuel dependency is very strong".