The Tribune

By NEIL HARTNELL

TRIBUNE Business Editor

nhartnell@tribunemedia.net

THE ELEUTHERA Chamber of Commerce’s president says the changed VAT treatment on uncooked food highlights the “big lack of support” for a business such as his that is aiming to cut up to $15,000 monthly light bills by 50 percent via renewable energy installation.

Thomas Sands told Tribune Business that the VAT switch, which has made the tax an “unrecoverable expense” for his food store and others on the bulk of their sales, undermines the much-needed “broader strategic plan” for power and infrastructure development by acting as a disincentive for them to invest in energy efficient equipment and renewable systems.

Explaining that the cost of such planned investment at his family’s The Market Supermarket, located in Rock Sound, has now increased due to the inability to recover or ‘net off’ most of the VAT paid on its inputs, he asserted that incentivising businesses to be less of a “draw” on Eleuthera’s electricity grid is a critical element in any plan to overhaul the island’s energy infrastructure.

Speaking after north and central Eleuthera endured a near four-day energy nightmare, triggered by an almost 24-hour power outage that started on Monday, and followed by constant rotational load shedding that only ended mid-afternoon yesterday, Mr Sands told this newspaper that Bahamas Power & Light’s (BPL) summer New Providence woes have given Nassau residents a glimpse of what his island has had to endure for years.

Acknowledging that Eleuthera’s problems stem from “antiquated” generation and transmission and distribution infrastructure, which is ill-equipped to meet the island’s current demand let alone the economic growth it is experiencing, the Chamber chief also conceded that “we are so far behind it will take time to get us where we need to be”.

Mr Sands said Eleuthera, and the wider Bahamas, needed to move beyond “reacting to crisis” in the energy sector through “broader” reform strategies that empower and encourage “community ownership” of the required changes. This, he added, involves incentivising businesses - especially in the Family Islands - to not only acquire and install energy efficient and renewable systems to reduce their own electricity costs, but also feed any excess power generated back to the grid.

Highlighting the VAT change as a regressive step in such an effort, Mr Sands warned that “we all pay the price” for the energy sector’s status quo with massive multi-million dollar sums leaking out of the Bahamian economy annually in payments to BPL’s fuel suppliers. The Government’s energy reforms focus on EA Energy’s development of a utility-scale solar, liquefied natural gas (LNG) and battery storage plant to meet Eleuthera’s generation needs, lower cost and boost reliability.

However, there has been no mention of any grid (transmission and distribution) reforms for Eleuthera or any of the Family Islands, with this having seemingly been left in the hands of cash-strapped, debt burdened BPL. Following Monday’s near 24-hour outage, which forced schools to close early for two consecutive days and caused water systems to run dry, power was only fully restored in central and north Eleuthera around 3.30pm yesterday afternoon.

“We have an antiquated system. That’s the reality,” Mr Sands told Tribune Business of Eleuthera’s latest blackout. “What you are experiencing in Nassau, from what I’ve been hearing, we’ve been experiencing for years.” He pointed to the disruption for his employees, some of whom had left work voicing concern over whether BPL supply had been restored to their homes after the previous “bad night”.

“We are thankful there is the movement on investment in infrastructure,” the Eleuthera Chamber president added, “but we are so far behind it takes time to get us to where we need to be, and we hope the investment made is significant enough to make a difference.

“I think we are reacting in a lot of instances without a broader strategic plans for development of the island. Eleuthera is on a growth path, as are a couple of other islands. We want to get ahead with strategic development. Technology is changing. From the economy’s perspective, we need to offer services at affordable price points.”

Agreeing that EA Energy’s proposed plant, set to be constructed near to BPL’s existing Hatchet Bay facility, could produce lower-cost and more reliable generation, Mr Sands added: “Transmission needs to be upgraded throughout the island to make this a hybrid approach. In the best interests of the island in the long-term, they need to incentivise and support businesses in upgrading into energy efficiency, and being able to use energy efficient equipment, as quickly as possible.

“Businesses are the biggest drawers on the grid. We are trying to import refrigeration to make us more efficient so that we draw less energy in totality. The next step we are trying to take is to integrate solar and battery storage as physical plant to reduce the cost of energy and reduce the draw on the system. That will put less strain on the grid.”

Providing more details on his family’s plans for The Market Supermarket, Mr Sands told Tribune Business: “On the energy side we are working on a proposal that will reduce my energy consumption by 50 percent. My bill in my supermarket is up to $15,000. I could more than cut that in half. That’s 6,000 square feet to serve at the level people expect.

“We are trying to be the best we can be in the Family Islands. Food is so important to people in the Family Islands… The level of service has to be comparable to, if not better than, Nassau or New York or anywhere else in this world if we’re going to be competitive.” Besides the supermarket, Mr Sands said the complex that would benefit from the planned renewable upgrade also includes the Shell-branded gas and fuel distribution business and a Bank of The Bahamas branch.

Yet he warned that changes such as the imposition of VAT ‘exempt’ treatment on uncooked foods, which have increased food store costs despite eliminating the 5 percent levy for consumers, are - in effect - “killing us before we start” on energy-related investments by businesses of all sizes, including medium, small and micro.

Mr Sands said the inability of food stores such as his to recover much of the VAT paid on their inputs now means that the importation of energy efficient and renewable equipment has significantly increased this cost. “We are having it delivered. We have ordered it,” he said of the new refrigeration. “There are the duty rates plus the VAT that I cannot recover because of the change in VAT ‘exempt’ treatment on uncooked food.

“You go from a cost of, say, $300,000 to an additional $100,000 in duty and VAT. For a small business in the Family Islands, that’s just one part of the equipment change you need to do. That’s where there is a big lack of support. They should be encouraging us in energy efficiency.

“The client investing in the Family Islands expects a certain level of service when they walk into your business. It’s so difficult, as the added cost limits our ability to serve the audience investing in the Family Islands and are here for the long run.” Recalling his family’s 50 years in business, he added that while it has been rewarding it has also been “a long slog” - an experience shared by other Family Island entrepreneurs and investors.

Recalling a recent conversation with persons in Long Island, Mr Sands said many had invested because they were “local” and “stuck it out when nothing was there” by finding ways to get it done. “You develop a mindset that you are going to make it happen,” he added. “Without those individuals, you wouldn’t have anything in the Family Islands.

“A lot of people feel burnt up by working through it, increasing regulations and taxation, and so on. You are putting hard working people out of business.” Mr Sands contrasted The Bahamas’ energy reform pace with the likes of the US and Canada, which are much further advanced on allowing businesses and homeowners with renewable energy systems to supply excess power back to the grid.

“There’s no strategic plan and no real support for a strategic alliance with community ownership,” the Eleuthera Chamber president added. “In other locations this is in force - bringing in energy efficient equipment, bringing in other power sources, grid ties to reduce the cost of operations. We need to have systems that are fully integrated. We are already doing part of the work.

“We keep reacting. Reacting to the crisis without strategic ownership and community empowerment with that plan… If you go to Rock Sound [power plant], you will see all the rental generation units. Capital is going outside the country. Does that make any sense? I am thankful for the move made to put in place solutions. But I think we need to think broader.

“At the end of the day, we all pay the price. The money invested in the country is going outside. The money spent on energy is going outside on fuel. There are so many leakages that make this inefficient.”