NASSAU, BAHAMAS— An efficiency audit of BPL has found that the company’s reliability performance is relatively poor compared to other utilities, has been operating at a loss since 2022, and needs to invest an estimated US$500 million to refurbish and replace its aging generation, transmission, and distribution assets.
The Utilities Regulation and Competition Authority released its statement of results from BPL’s efficiency audit conducted by Castalia Advisors and LCI Inc. The audit aimed to establish baseline performance indicators and create a regulatory roadmap to monitor and improve BPL’s performance.
The audit acknowledged BPL’s poor financial position. “BPL has been operating at a loss since 2022. Its net profit margin was -20 percent and -24 percent in FY2022 and FY2023, respectively. Since FY2017, BPL’s net profit margin has averaged -2 percent. Other financial KPIs also demonstrate BPL’s poor financial standing. For example, in FY2023, BPL’s EBITDA margin was 7 percent, its current ratio was 120 percent, and its return on assets was -12 percent.”
The audit further noted that the company has struggled to meet its debt obligations. The audit highlighted that BPL’s debt service coverage ratio has been negative for the last two years, reaching as low as -8.8 in 2022 and -2.5 in 2023.
Regarding the company’s technical operations, the audit found that BPL does not have a least-cost generation and system plan in place or a set process to develop and maintain system planning, despite opportunities for BPL to reduce its generation costs. Fuel makes up more than half of BPL’s operating expenditure and fuel costs are primarily high due to Shell’s monopoly on fuel provision. Shell, the audit noted has an effective monopoly on fuel supply, maintains a large fuel storage facility in Freeport through its sole licensed distributor (FOCOL), and a Shell licensee is contracted for the onward delivery of ADO to the Family Islands.
The audit further revealed that BPL can improve generation efficiency in the Family Islands where mall, old, and relatively inefficient ADO units generate almost all electricity. The average age of generation units in the Family Islands is 23 years, more than double the average age of units in New Providence (10 years). Ensuring generation units remain operational 24/7 has been challenging in the Family Islands due to a lack of skills and capital, as well as the overload of current staff.
According to the audit, BPL does not have any utility-scale renewable energy. “BPL is not on track to reach its 30 percent renewable energy target by 2030. BPL staff noted that the target had been determined politically and was not based on techno-economic least-cost generation planning, nor had it considered land availability. According to the Electricity Act, BPL must support the Government’s National Energy Policy, including promoting the development and use of renewable generation resources and technologies,” the audit noted.
It added: “BPL would need an estimated 230 MW of solar capacity to meet the renewable energy target. Currently, BPL only has the Ragged Island solar plant (400 kW), which constitutes less than 1 percent of total generation. At the sector level, the uptake of renewables has been mostly driven by distributed solar systems, totaling 6 MW across 300 systems.”
The audit found that BPL needs to invest an estimated US$500 million to refurbish and replace its aging generation, transmission, and distribution assets. “The network needs investment, as it is reaching maximum capacity: there is no N-1 redundancy in the summer peak should one substation or critical network component go down. Around 10 percent of substations need replacing, and another 10 percent need an upgrade or repair. Further, some base designs are over 20 years old. Investment in the grid can also help reduce losses. System losses in New Providence have increased more than 25 percent since 2017, now at 10.2 percent.”
The report also found that BPL’s maintenance is mostly reactive rather than preventative and that although BPL schedules planned maintenance for the winter period to ensure adequate reserve margin for the summer peak, maintenance is mostly reactive rather than preventative. BPL often defers planned maintenance due to limited reserve capacity and inventory challenges.
BPL’s reliability performance is relatively poor compared to other utilities. “Benchmarking reliability indicators show that BPL’s customers experience more frequent interruptions compared to other utilities, but interruptions do not last as long. This indicates that BPL responds to outages relatively well but could improve on preventing outages before they occur. The audit found that since 2021, reliability has improved but remains relatively poor. In 2023, the System Average Interruption Duration Index (SAIDI) was 593 minutes per customer, and the System Average Interruption Frequency Index (SAIFI) was 10.5 interruptions per customer,” the audit found.
Although effective processes are in place, it was noted that BPL can improve in ensuring timely payment from customers. The audit revealed that the collection rate has remained relatively consistent, averaging 93 percent in the past 4 years. Collections dropped to 87 percent in 2020 during COVID. “Collection from Government customers is much lower compared to other customer categories. BPL does not enforce disconnection and arrears control processes on Government customers, which has led to receivables from Government customers of about US$89 million. Compared to benchmarked utilities, BPL’s customers take longer to pay. BPL’s average collection period is 135 days, an increase of 45 percent (from 74 days) since 2017,” the report noted.
The audit found that BPL is good at communicating outages but offers limited ways for customers to communicate issues to BPL. BPL uses various channels (social media, radio, and TV) to announce planned outages 24 hours in advance and unplanned outages as soon as practicable, in compliance with the Consumer Protection Regulations. According to the Consumer Protection Regulations, BPL must offer a way for consumers to report faults and interruptions 24/7 year-round. To improve customer service, BPL is establishing a 24/7 Contact Centre to allow customers to interact with BPL via multiple channels, including messaging and social media. This plan is still pending approval from the Bahamas Electrical Utility Managerial Union. BPL’s customer engagement is also said to lack transparency.
Workforce planning is critical to BPL’s performance, which the company does not do well according to the audit which found that BPL has “no clear strategy to anticipate or plan to replace the loss of skills due to employee attrition in the medium to long term.” According to the audit, BPL conducts mostly reactive and short-term analysis and planning of its workforce needs. The audit also found that BPL risks losing institutional knowledge and technical expertise due to unplanned exits and retirement.
