BPL chief: ‘Under recovery’ behind soaring energy bills

By NEIL HARTNELL Tribune Business Editor nhartnell@tribunemedia.net

BAHAMAS Power & Light's (BPL) chief executive yesterday confirmed that soaring energy bills have resulted from previous policy decisions to hold the utility's fuel charge at an artificially-low 10.5 cents per kilowatt hour (KWh).

Shevonn Cambridge, asked to explain why Bahamian households and businesses are enduring skyrocketing electricity costs even though global oil prices have decreased by more than 30 percent year-over-year, said the disconnect was due to BPL's previous "under-recovery" of its fuel costs.

Providence's pre-COVID load shedding require further work before they can run off liquefied natural gas (LNG) fuel.

The 132 Mega Watts (MW) of new generation capacity were promoted as tri-fuel engines, capable of burning heavy fuel oil (HFO) and light fuel oil (LFO or diesel) as well as LNG, with the latter designed to begin the transition to cleaner burning, more environmentally-friendly, fuels at BPL. However, Mr Cambridge said the seven Wartsila engines are presently not capable of using LNG.

To recover those costs, the utility is presently imposing fuel charges on consumers that are higher than global oil market costs. This is because it previously failed to pass on 100 percent of its fuel costs to Bahamian households and businesses - as it is required to do by the regulations accompanying the Electricity Act - in an effort to hold the fuel charge at a belowcost 10.5 cents per KWh.

“Fuel prices are up while oil prices are down because we undertook a strategy a few years ago whereby, through the hedging programme, the decision was made to fix the fuel charge at a certain price, and that price was held throughout COVID, Dorian and all the rest of that relief, which resulted in a bit of a under recovery," Mr Cambridge said.

“When that was initially put in place, I think the policy statement that I saw

He added: “The original proposals we received were that they were to be tri-fuel, and I think some decisions were made based on time constraints and parts and other things. So while they're not tri-fuel ready, they are tri-fuel capable and that means that they will require some work to convert them to being tri-fuel.

“So, as designed, they are dual fuel LFO and HFO engines, and to get them to be tri-fuel will require an additional $500,000 investment. I think we have made some recent inquiries, and that has gone up significantly as a result of all the things that are happening on the market with supply chain issues...... To convert the Wartsila engines to tri-fuel will cost $4m.” Confirming that he has briefed Prime Minister Philip Davis KC on the issue, Mr Cambridge added: "The engines were designed to operate a certain way. But certain amendments and modifications were made during the project execution that has resulted in them not performing as the project was

SEE PAGE A20 kilowatt hour (KWh) in October 2022 to 41 cents per KWh now.

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was that it would have been reviewed within a year. But things change drastically very quickly, and so for economic reasons, the decisions were made to hold the price of 10.5 cents to provide relief to consumers during that period and we're now having to pay for that under recovery.”

The BPL chief's explanation only partially covers what has caused the present sky-high bills, with consumers having seen their all-in electricity rates increase by 71 percent in just nine months - from 24 cents per

The increase can be directly traced to the Government's decision to artificially hold BPL's fuel charge at 10.5 cents per KWh even though the utility was having to pay a much higher price for its fuel. To achieve this, BPL did not in late 2021 and much of 2022 pass on all its fuel costs to consumers, and the utility is now having to reclaim this "under recovery" - estimated to be at least $90m - through the present high fuel charges.

The 10.5 cents had been previously supported by BPL's fuel hedging initiative, but the Davis administration elected not to execute the trades that would have purchased the necessary cut-price oil volumes to continue supporting this price.