Rate reduction bond deferred
NASSAU, BAHAMAS — The government has subsidized The Bahamas Power and Light’s (BPL) fuel cost to the tune of “tens of millions of dollars”, it was confirmed yesterday, with the company’s top executives noting that the introduction of incremental increases to its fuel charge will help cover its roughly $300 million annual fuel bill.
BPL officials yesterday announced that electricity bills are set to increase next month. Customers using less than 800kWh will see an increase of two cents p/kWh, and those using more power will see an increase of 4.3 cents p/kWh in six increments that take effect on October 1. Prime Minister Philip Davis said that for low-energy consumers, the increase seen this quarter will amount to less than $20 per month.
In a press release, BPL outlined when the increases will take effect: October 1 to November 30, 2022; December 1, 2022 to February 28, 2023; March 1 to May 31, 2023; June 1 to August 31, 2023; and September 1 to November 30, 2023. During each phase of the implementation, customers can expect an increase of two cents per kWh up to 800 kWh and 4.3 cents for all units over 800 kWh, BPL said.
Shevonn Cambridge, BPL’s chief executive stressed that the increase is not a profit-making exercise for the company but a “pass through” charge to consumers.
“We don’t make anything off the fuel charge but in the scenario where you are not collecting at the rate that you should be, some of our operational cash is diverted to your fuel needs so this will redirect those funds back to the purposes,” he explained.
He noted that BPL spends roughly $300 million a year on fuel.
In February, BPL released, then retracted, a statement announcing that customers’ fuel charges will increase from 10.5 cents per kilowatt-hour (kWh) to 13.7 cents per kWh. The company at the time noted that the fuel charge increase was unavoidable due to a “tremendous rise in global prices”.
Cambridge noted that with the company having deferred the increase at that time, there was an accumulation of arrears which the utility is now seeking to recover.
Opposition leader Michael Pintard last week called on the Davis administration to “come clean” on its handling of Bahamas Power & Light (BPL) and to indicate whether the government has been subsidizing the company’s fuel charge.
Financial Secretary Simon Wilson while not giving an exact figure on how much has been spent on fuel subsidies noted that the sum was “significant.”
“It’s fair to say we spent a significant amount, in the tens of millions of dollars. A lot of that money that was spent will be recovered over a period of time,” said Wilson.
Wilson also addressed the fate of the $535 million Rate Reduction Bond (RRB) which was introduced under the Minnis administration to help pay off more than $300 million in legacy debt, as well as fund future capital projects.
“The rate reduction bond has been deferred by the government,” he said.
“The market conditions don’t allow for that type of solution within a high-interest rate environment. I think BPL along with the Ministry of Works will come up with a new solution which accomplished the same thing which is taking care of the legacy debt which was assumed by the government.”