The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Government last night asserted that its warnings of short-term “price pressures” and “inflated costs” do “not mean electricity prices are rising across the board” over the next three years.

Latrae Rahming, the Prime Minister’s communications director, told Tribune Business that the Davis administration was simply explaining The Bahamas is “still exposed to short-term fluctuations” in fuel prices beyond its control after it appeared to warn households and businesses they may have to endure short-term pain - in the form of higher energy bills - to secure long-term gain through greater cost savings.

The alert was issued on page 28 of the ‘Securing The Bahamas’ energy future’ document that was tabled by the Prime Minister in the House of Assembly yesterday. In a section titled ‘Short-term trends: Transition costs and near-term pressures’, the Government said the cost associated with up to $1.2bn of planned energy infrastructure investments will impose duress on energy bill prices until the projected savings kick-in.

“During the 2024 to 2027 transition period, consumers will experience short-term price pressures as capital investments are deployed and old systems phased out,” the report tabled by the Prime Minister stated. “Through these PPPs (public-private partnerships) and power purchase agreements, $1.182bn has been committed to generation, transmission, storage and smart metering infrastructure across the archipelago.

“While these investments will unlock long-term savings, they will temporarily inflate costs.” The report sought to attribute the “short-term pressures” to potential volatility in global prices for liquefied natural gas (LNG), the fuel that the Government’s energy reforms are heavily reliant on as a cheaper and cleaner source of generation.

“For instance, LNG pricing benefits are dependent on maintaining natural gas spot prices below $5 per MMBtu (one million British thermal units). As of the 2025 first quarter, Henry Hub prices average $4.12 per MMBtu, suggesting a manageable but still present risk to early-stage savings,” the Government’s document added. Henry Hub refers to the LNG distribution hub in Louisiana that is used to calculate global prices.

Emphasising that any Bahamas Power & Light (BPL) bill pain will be restricted to the short-term, the report added: “Family Island savings of $18.9m annually are projected to begin in financial year 2027. In the interim, the LNG roll-out is already producing benefits. The first phase yielded $40m in fuel savings in 2024, with $90m projected in 2025 and $125.6m expected annually by 2026.”

It is unclear what is meant by “LNG roll-out” as the contract to develop and construct the Clifton Pier-based LNG regasification terminal has only just been signed and, with the facility yet to be constructed, the fuel has yet to be used to generate electricity anywhere in The Bahamas.

It is more likely that the Government is referring to savings produced by an improved fuel mix at BPL, with more reliance on cheaper heavy fuel oil (HFO) to power its generators as opposed to the more expensive heavy fuel oil  (HFO). Mr Rahming, in a written response to Tribune Business inquiries, while acknowledging the mentioned “pricing pressures” asserted this did not necessarily translate into higher BPL bills for all.

He said: “‘Price pressures’ refer to the reality that, during this transition period, we continue to operate in a fuel price-volatile environment. Until the full suite of power purchase agreements (PPAs) and infrastructure upgrades are brought online, we remain partially reliant on legacy systems and global oil markets, which do not guarantee stable or predictable pricing.

“This does not mean that electricity prices are rising across the board; it means that we are still exposed to short-term fluctuations beyond our control. However, through the efforts of the ‘New Energy Era’, we are actively limiting our long-term exposure and risk. The $1.182bn in committed investments - delivered through PPPs and strategic financing arrangements - represent more than capital deployment; they are risk mitigation tools.

“By shifting our generation mix toward cleaner, more efficient technologies such as LNG, solar and battery storage, we are replacing the volatility of diesel and heavy fuel oil with the predictability of diversified supply and long-term energy contracts. These investments are already delivering results.”

Mr Rahming referred to the $40m in fuel savings enjoyed by BPL and its customers in 2024, adding: “We expect that figure to more than double in 2025 and reach over $125m in annual savings by 2026.” He also explained that the near-$19m Family Island savings will arrive “once microgrid deployment and generation upgrades are complete”.

“The reforms underway are not just about infrastructure - they are about transforming how we manage risk, stabilise costs and secure energy sovereignty for future generations. This transition is carefully staged to protect consumers now while unlocking long-term affordability, reliability and economic opportunity across The Bahamas,” Mr Rahming concluded.

A near-term increase in energy bills as a temporary consequence of far-reaching reforms is not unusual. A similar outcome was projected for the overhaul planned by the Minnis administration, as electricity costs were forecast to rise in the first two-three years due to the additional charge that was to be added to bills to repay investors who bought into the now-abandoned $535m rate reduction bond (RRB) refinancing.

That increased charge was to be ultimately offset by the savings produced from switching to lower costs fuels such as LNG, and efficiency gains in both generation and transmission and distribution (T&D), resulting in lower costs for consumers and decreased energy bills - just as the Davis administration is forecasting

Several observers, speaking on condition of anonymity, yesterday suggested the Government was trying to “obscure” the possibility that energy bills for both Bahamian businesses and households will likely increase between now and 2027 until the savings associated with switching to cheaper generation fuels, and more efficient generation and electrical grid systems, offset the costs associated with the upgrades.

“It was a 15 percent surcharge that was going to be added on to the base rate to cover the RRB element,” one source said of the Minnis administration’s plans. “Bills would have been higher in the interim until the long-term savings kick-in. I suspect something similar is going on here, but the Government needs to explain that.

“If their models tell them about the cost savings nine years from now, they will also have quantified any temporary increase. There’s no good reason they can predict savings nine years from now, but cannot quantify a short-term increase.”

The “nine years from now” refers to a subsequent section in the Government’s report that forecasts BPL consumers will enjoy “retail price reductions of up to 5.8 cents per kilowatt hour” by 2034 compared to what is described as the “diesel baseline”. The latter is not defined, but likely means fuel charges consumers will face without any reform and BPL relying mainly on the more expensive ADO fuel.

Another contact, with energy industry experience, said it was impossible to verify the Government’s multitude of figures and energy cost savings projections without it releasing all the PPA and other agreements it has entered into with independent power producers and Bahamas Grid Company, plus its economic modelling of the reforms.

“If these guys are serious they will make their arrangements public and the financial models public that lay out how they arrived at these savings,” the source added. Mr Davis has previously signalled he plans to do just that, and table all PPA agreements and other energy reform-related documents in the House of Assembly, once all documents are signed.

“Over the medium term, pricing reforms and energy diversification are expected to reduce end-user prices across all customer categories,” the report tabled yesterday said. “By financial year 2031, fuel savings from LNG and solar deployment are projected to reach $112m annually. Of this, up to $62m per year will be used to retire debt by financial year 2034.”

That debt is likely the $500m said to be owed by BPL, and the report added: “Retail price reductions of up to 5.8 cents per kilowatt hour are projected by financial year 2034. By eliminating expensive rental generation and reducing fuel import exposure, the utility will shed approximately $43m annually in avoidable operating expenses.

“Smart grid investments will drive technical losses below 8 percent by financial year 2028, further reducing the unit cost of electricity. This structural shift is expected to increase economic competitiveness. Tourism, logistics and manufacturing sectors will benefit from lower energy overhead, enabling reinvestment, job creation and better price predictability for local and export markets.”

The Davis administration also pledged to introduce a $240 energy credit for low income households numbering over 12,000. “The affordability agenda also includes safeguards for vulnerable consumers. A targeted energy credit programme of $240 per year is being rolled out for low income households,” the report added.

“An appliance efficiency programme is being developed to replace outdated refrigerators, air conditioning units and lighting, with anticipated energy savings of 12 to 18 percent per household. A new national database of over 12,000 vulnerable households is being created to coordinate outreach, financial support and demand-side education.

“Equity Rate Adjustment (ERA) protections will remain in place through at least financial year 2030 and be adjusted annually based on inflation and wage indexation.... In the short-term, targeted rate adjustments and fuel optimisation are shielding consumers from global price volatility,” the document continued.

“In the medium term, LNG, solar and operational efficiencies will drive prices lower. By financial year 2034, customers could see reductions of up to 5.8 cents per kilowatt hour compared to the diesel-based baseline. Affordability will no longer rest on subsidies alone. It will be embedded in system efficiency, smarter tariff structures and long-term resilience. Energy will no longer be a burden, but a platform for economic security, competitiveness and inclusive growth.”