The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Dr Hubert Minnis yesterday asserted that energy regulators have “exonerated” his administration over the fuel hedging strategy it introduced during the COVID-19 pandemic after finding it generated a “net benefit” for Bahamas Power & Light (BPL) consumers.

The former Killarney MP, speaking to the Utilities Regulation and Competition Authority’s (URCA) summary of the BPL fuel tariff probe, which contradicted the Davis administration by concluding the hedge produced “significant savings” in 2022, told Tribune Business: “I’m glad they came out with it. It certainly exonerates my administration as to what we thought was right.

“The same thing with the National Food Distribution Task Force. The new government was accusing us of all manner of things with the food programme, and the report by the Auditor General exonerated us and spoke highly of us…. that we saved the nation from starvation.”

URCA’s summary backed the former Minnis administration by asserting that BPL’s first fuel hedging strategy, implemented in 2020 during the COVID-19 pandemic when oil prices were relatively low due to subdued global demand, generated “a net benefit to BPL consumers”.

This somewhat contradicts the narrative employed by Jobeth Coleby-Davis, minister of energy, utilities and aviation, during the last parliamentary term when she argued that the Minnis administration’s hedge failed - and produced no savings - because BPL had to rely on more expensive automated diesel oil (ADO) fuel as opposed to the cheaper heavy fuel oil (HFO) on which the strategy was based.

While the greater-than-expected use of ADO fuel reduced the anticipated cost savings from the Minnis administration’s hedge, BPL’s former chief executive, Shevonne Cambridge, subsequently said it was “in the money”. Dr Minnis yesterday also contrasted the current spate of BPL blackouts and outages with the utility’s performance during his administration.

“You must remember that, when everyone was indoors at the height of the COVID-19 pandemic and running air conditioning all day long, we never had any load shedding,” he told this newspaper. “There were complaints about us purchasing Wartsila engines for BPL. That was the right thing.

“We had a programme where Wartsila staff would remain for a period of time to service the engines. They [the Davis administration] cut that short and then they had challenges securing parts. We also had a programme that the engines would be serviced in winter.

“If they review a lot of the programmes done under my administration, they’ll spend the next few years exonerating and praising my administration for what we had done. This news coming out with the food programme, and now the BPL fuel hedging initiative, I’m happy with that,” Dr Minnis added.

“I can only say that what was done under my administration was done in the best interests of the Bahamian people, not the best interests of any political party. The Bahamian people, the people, came first under my administration, not a political party.”

URCA’s summary report revealed that the pain inflicted on Bahamian businesses and consumers by up to 163 percent hikes in BPL’s fuel charges failed to achieve the Government’s goal of wiping out the utility’s fuel arrears as a near-$38m unpaid bill remained.

The eight-page document on the probe it commissioned into Bahamas Power & Light’s (BPL) so-called 2022-2024 ‘glide path’ strategy, which was implemented to recoup under-recovered fuel costs, reveals that it missed the Davis administration’s main objective of eradicating unpaid arrears that peaked at close to $120m in February 2023.

The report also affirmed that the burden imposed on BPL customers, namely Bahamian businesses and consumers, to pay-off the utility’s past due fuel bills to its supplier, Shell, “became onerous”. And this impact “was magnified” because the Davis administration and BPL elected to impose the peak hike - an up to 163 percent increase in the latter’s fuel charge compared to October 2022 levels - between June and August 2023, when summer consumption was at its highest.

The electricity regulator, in an analysis of the findings, said BPL’s ‘glide path’ strategy was ultimately flawed - and did not wipe out the utility’s arrears - because it failed to match customer charges and billings with the actual cost and what it was paying Shell. It added that splitting BPL’s customer base into two groups, those who consumed more or less than 800 kilowatt hours (KWh) per month, resulted in businesses paying more and “subsidising residential customers”.

Pledging to “take regulatory action” based on the findings from the review of events between late 2022 and early 2024, URCA said it will enact “new fuel charge regulations” that deal with issues including how revenues generated from this portion of customer bills are used. The “timing of when fuel charges will be passed through” to BPL consumers will also be addressed to prevent a repeat of early 2023’s near-$120m fuel arrears.

Other issues that URCA is promising to address involve “changes to the costs” that factor into the fuel charge’s calculation; how this charge is passed on to consumers to “smooth out recovery”; and the use of incentives/imposition of penalties “regarding the efficient procurement and use of fuel”. It noted that BPL has to submit a full tariff submission to it by next year, including fuel charges, which are set to take effect in 2027.

As for the charges imposed on Bahamian businesses and households during the ‘glide path’ strategy, URCA said BPL reduced the fuel tariff from its peak for commercial customers in September 2023 and all users come December 2023. However, splitting its customer base into two - based on the 800 KWh threshold - meant that businesses and heavy users paid a higher rate and effectively shouldered the bulk of covering BPL’s unpaid fuel arrears.

“As a result, the average unit costs experienced by each rate class diverged from each other upon ‘glide path implementation. The consequence of this was that commercial customers subsidised residential customers,” URCA said.

“While BPL did increase the fuel charge rate in accordance with its glide path, it did not meet its objectives in recovering its current and accumulated fuel costs. At no point during the study period did BPL’s billed fuel adjustment charges reflect the actual cost of fuel. At the end of the glide path period, March 2024, the cumulative remaining under-recovered fuel balance was reported by the independent consultant to be approximately $37.6m.

“In summary, URCA’s ex-post review found that while BPL’s glide path responded to real fuel cost pressures, the approach did not consistently align billed fuel charges with actual fuel costs and created distributional impacts across customer classes. The review also underscored that reliability constraints and operational realities can drive higher fuel use during peak periods, reinforcing the need for a clearer, more predictable framework for fuel cost recovery.”