Friday, December 5, 2014
Friday, December 5, 2014
Deputy Prime Minister and Minister of Works and Urban Development Philip Davis underscored the government’s commitment to bring about reform of the Bahamas Electricity Corp as he addressed the Bahamas Energy Security Forum December 3.
“Bahamas Energy Policy and Behaviour” was the theme for the one-day event sponsored by The Bahamas Chamber of Commerce and Employers’ Confederation at the British Colonial Hilton.
In this regard, Minister Davis said the government is in search of a suitable management company for BEC.
“This management company will have significant autonomy and operate subject to a business plan which addresses the specific objectives of government,” he said.
The Minister said he is looking to create a partnership similar to the one between Nassau Airport Development Company (NAD) and Lynden Pindling International Airport (LPIA).
“Like the airport deal, Government will retain 100% ownership of BEC,” he said.
The government will commit to a management company that can guarantee the reduction of the cost billed to the customer to an average of less than 30 cents per kWh within 24 months from commencement of the contract, said the Minister.
“Given that the current all-in-cost base of BEC per kWh is close to 44 cents, with customers being billed on average 40 cents, this represents more than a 30 per cent reduction. When reflected on to The Bahamas at large, this reduction will save business and residential customers close to $200 million.”
He said the government is also in pursuit of having the added benefit of significant savings in fuel cost in-hand, which will cause a reduction in the “strain” on US dollar reserves.
“The new management must introduce best-in-class operational practices, facilitate best-in-class environmental stewardship, including the remediation of existing liabilities, and offer state-of-the-art training for its employees, thereby attaching a solid credit rating to BEC.”
Minister Davis also announced plans to create a new Electricity Act that provides for the new innovations at BEC, enables the Energy Policy, and empowers the Utilities Regulation and Competition Authority (URCA) as the regulator of the sector. The act will be in conjunction with the Office of the Attorney General and BEC.
Pointing out that fuel is the most “influential factor” in the cost equation, Minister Davis said the government of The Bahamas, in consultation with KPMG, has defined ways in which fuel and other costs will be reduced throughout the supply chain.
In light of this Minister Davis said an incentive regime for the management company would be introduced.
“This regime prescribes a significant portion of the management company’s remuneration based on achieving service level targets related to fuel efficiency, rationalisation of cost, and significant improvements in reliability, that is, fewer and shorter power cuts.”
Effectively, the more efficiently and reliably the new BEC operates, the more the manager will get paid.
“Secondly, BEC’s credit rating for suppliers must be significantly improved. By giving it a fresh start, paying off all existing liabilities, and introducing stronger financial and operational management practices, the new BEC will be able to secure relatively better prices for fuel and other supplies than it can today,” he said.
Recognizing that BEC relies heavily on light fuel oil, which is extremely expensive, Minister Davis noted the short-term plan to dramatically change BEC’s fuel mix.
Additionally, existing diesel generators will be refurbished and improved; and the least efficient engines will be retired. New dual fuel generators will be installed over the first 24 months.
“Within that same 24 months, the management company will introduce a new base load dual fuel generation plant in New Providence, minimising the need to use the combustion turbines. The new equipment will be much more efficient and have much lower heat rates as compared to the existing fleet,” he added.