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‘Dumping BPL hedging deal may cost $200m’

Bahamas Power and Light headquarters.

Bahamas Power and Light headquarters.

By RASHAD ROLLE

Tribune Senior Reporter

and NEIL HARTNELL

Tribune Business Editor

FREE National Movement Leader Michael Pintard said the Davis administration must explain the status of Bahamas Power and Light’s hedging programme, saying the government’s tinkering with that contract could leave Bahamians facing higher electricity costs.

The Opposition leader’s claim came amid fears that BPL customers could suffer a $200m-plus hit over the next two years as a result of increased electricity bills stemming from the failure to renew fuel hedging contracts (see Tribune Business).

On Monday, BPL retracted a statement announcing a fuel charge increase of 3.2 cents to 13.7cents per kWh. The statement said the new fuel hedge would remain well below market prices and added that without that protection, customers could experience the effects of soaring oil prices that have been exacerbated by the Ukraine conflict. BPL said the now-shelved fuel charge hike would have resulted in an $8 monthly increase in electrify bills for low-usage consumers and a $19 rise for those using 600 kWh.

 In the retracted press release, BPL CEO Whitney Heastie said waiting to adjust the fuel cost after June 2022, when the existing hedge expires, would bring a higher per kilowatt hour increase.

 On Tuesday Alfred Sears, Minister of Works & Utilities, said the plan of BPL’s board was reversed because Cabinet had not yet discussed the matter. He said the recalled release issued by BPL was “premature”.

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FREE National Movement leader Michael Pintard.

 Mr Pintard said in a statement: “Why did the Prime Minister allow the Minister of Finance (to) overrule the decision by the board and executive of BPL, and no doubt the minister, that the hedging programme be continued? This must be explained, especially in the face of rising fuel costs which must ultimately be passed on to consumers. Who was it that made the ill-advised decision to essentially cancel the programme, resulting in a comedy of errors that has embarrassed the minister and the administration?”

 The first hedging transaction was executed in June 2020 in conjunction with the Inter-American Development Bank. That action locked the country into a fuel surcharge rate of 10.5 cents per kWh for 18 months.

 Mr Pintard said: “We call on the administration to come clean and explain to the Bahamian public the fate of the unprecedented fuel hedging programme left in place at BPL by the FNM administration, which has been definitively demonstrated to have saved Bahamians and the public purse about $55m to date as projected when the programme was initially put in place.

 “The Davis administration must come clean and tell the Bahamian public if the usual quarterly hedging trades were executed after the last trade that was conducted in June 2021 by the FNM administration. If subsequent hedging transactions were not executed by BPL and the Ministry of Finance, who gave the order to cancel these hedge transactions and on whose authority was this order given?

 “BPL announced in June 2020 that the fuel surcharge would drop to 10.5c/kWh. That price was significantly lower than any point in the previous five-year cycle, which saw fuel charges as high as 19c/kWh. The fuel hedging programme required a review after 12 months, and following the mandated 12-month review, in June 2021, the fuel charge remained at 10.5c/kWh and was scheduled to do so through June 2022.

 “By July 2021. . . the average residential customer bills were down by 24 percent versus June 2018 due mostly to the sustained reduction in the fuel cost underpinned by the fuel hedging programme. BPL reported that from August 2020 to July 2021, customers and the Public Treasury saved $15 million as a result of the fuel hedge programme. In fact, BPL executives were confident that if the current trend continued, the company could project savings of about $50 million to customers and public treasury from August 2020 to January 2022.”

 Mr Pintard yesterday demanded a “more believable explanation” as to why Mr Heastie would issue a public statement announcing a fuel price increase only to have to retract that statement about an hour later.

 “To call the release ‘premature’, given what must have happened before the statement was issued, is insufficient,” he said. “What is the extent of the Davis administration’s interference in BPL operations?”

Comments

Sickened 2 years, 4 months ago

The PLP don't like practices that don't fatten their pockets. They'll do hedging but it will go through a financial institution (or two) run by one of their boyz.

tribanon 2 years, 4 months ago

As the price of oil has skyrocketed on the international markets, the cash value of the remaining contracts hedging BPL's fuel costs has soared.

And it's that current high cash value that the corrupt Davis and Cooper led PLP administration (and no doubt Sir Snake) would like to now 'cash-out' so they can get their grubby hands on a pile of cash notwithstanding that doing so would leave BPL customers with outrageously high and unaffordable electricity bills in the immediate future.

It seems they are desperately looking for cash wherever they can find it to meet their own corrupt needs and to hell with the consequences for the Bahamian people.

tribanon 2 years, 4 months ago

P.S. : The Tribune should investigate the ownership of the entity that has entered into the hedging contracts. There's a possibility the hedging contracts may not even be in the name of BPL itself. But Neil Hartnell may not be able to get a free lunch or dinner to justify his covering that story. LOL

Maximilianotto 2 years, 4 months ago

So cabinet is running BPL - lenders will notice and draw their conclusions. Overruling a board? Not good.The loss won’t disappear you can’t make it disappear.🙏🙏🙏

sheeprunner12 2 years, 4 months ago

Agreed ............ why pay BPL executives/Board (and staff) these hefty salaries and perks if they cannot make any decisions??? It's ludicrous.

These broke-ass, entitled, inefficient SOEs are going to be the eventual downfall of our country.

TalRussell 2 years, 4 months ago

Mr Pintard asks, *Why did the Prime Minister allow the Minister of Finance to overrule the decision by the board and executive of BPL that the hedging programme be continued?...Think Pintard must've meant for de PM to ask himself being de Prime Minister is de Minister of Finance, ― Yes?

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