COMMUNICATION TO THE HONOURABLE
HOUSE OF ASSESMBLY
BY
HON. BRADLEY B. ROBERTS
MINISTER OF PUBLIC WORKS & UTILITIES
ON REDUCTION OF ELECTRICITY RATES
BY
THE BAHAMAS ELECTRICITY CORPORATION
SEPTEMBER 17, 2003
______________________________
ﾠﾠﾠﾠﾠﾠﾠﾠMr. Speaker:
ﾠﾠﾠﾠﾠﾠﾠﾠYou may recall on June 20, 2003 during the 2003/04 Budget Debate, I provided this House and the Bahamian people with a comprehensive overview of major initiatives which were designed to ensure that the electrical infrastructure in New Providence/Paradise Island, as well as the 28 supply areas throughout the Family Islands would continue to keep pace with the ever increasing demand for electricity.
ﾠﾠﾠﾠﾠﾠﾠﾠThese initiatives were intended to ensure that the quality of supplies and customer service would continue to improve and be maintained at world class standards.
ﾠﾠﾠﾠﾠﾠﾠﾠMr. Speaker, it is worthy of note that BEC’s power generation in New Providence over the past three months has improved tremendously. Load shedding this summer has been at a relative minimum.
ﾠﾠﾠﾠﾠﾠﾠﾠMr. Speaker, there was one significant unfortunate incident in August when an employee of a sub-contractor using a pick axe accidentally struck a high powered underground cable at Clifton Pier Power Station. That incident triggered the shut down of the Clifton Pier and Blue Hills Power stations. Within minutes, however, engineers were able to restart the engines and resumed the provision of electricity throughout the Island. I am pleased to report that the young man responsible for the incident is said to have recovered.
Mr. Speaker, one is obliged to compare a similar but substantially greater incident which occurred in the United States and Canada on Friday, August 15th when a huge power cut left some 50 million people without electricity across the north eastern United States and southern Canada. The headline in the Times of London newspaper read – “America’s return to the dark age”. The sub headline in that same newspaper read “Britain also vulnerable to widespread power cuts that blacked out US cities”.
ﾠﾠﾠﾠﾠﾠﾠﾠ
Mr. Speaker, that prediction almost like clockwork came to fruition on the evening of 28 August, 2003, when the Brits lost power in London that affected at least 500,000 people half of whom were in the London subway.
ﾠﾠﾠﾠﾠﾠﾠﾠMr. Speaker, I wish our friends, the Americans and the English, well in their pursuit to address their electricity problems.
ﾠﾠﾠﾠﾠﾠﾠﾠﾠﾠﾠﾠﾠﾠﾠﾠ
In Grand Bahama, the Freeport Power Company has had its problems in meeting the demand for electricity on Grand Bahama.
ﾠﾠﾠﾠﾠﾠﾠﾠ
Mr. Speaker, the Bahamas Electricity Corporation is one of the public corporations for which I hold ministerial responsibility.
The Progressive Liberal Party “Our Plan” Pledged To “Create Efficient Public Utilities” and in regard to Electricity, it was clearly stated the Progressive Liberal Party Government would:
ﾷ Continue the Upgrading and maintenance of generating plants to reduce load shedding;
ﾷ Reduce the cost of electricity services to remote customers;
ﾷ Respond quickly to complaints and claims of consumers whose services have been interrupted or appliances damaged;
ﾷ Pay interest or give equivalent credit on customer deposits; and
ﾷ Ensure in the event of privatisation, Bahamian control.
BEC’S CORPORATE VISION, MISSION AND CURRENT OBJECTIVES
In this regard, it can be said that Our Plan not only clearly delineates the Government’s and the Bahamian community’s expectation of BEC but also synergises with its Corporate Vision which is:
ﾠ”To remain the number one public corporation in the Bahamas, and to rank among the best utilities of our size and character in the region,”
and with its Corporate Mission which is:
ﾠﾠﾠ”To secure a safe, reliable cost-effective supply of electricity and to obtain an income sufficient to:
(a) Recover all costs, including debt service,
(b) Provide a reserve fund and
(c) Self-finance some of its capital projects.”
In tandem with these goals, the Corporation’s main objectives this year were to change the culture of BEC to be more proactive and productive in order to truly achieve our mission.
Some of these objectives were:
1. To become more cost efficient and effective in managing the cost of doing business, including bank loans, purchasing of goods and services, purchasing of fuel oils, better managing our human resources etc.
2. To establish a more proactive preventative maintenance programme during winter months and timely replacing old plants where feasible to achieve more cost efficiency in oil usage.
3. To improve customer service with the introduction of new initiatives such as:
ﾷ the Interactive Voice Response (IVR) System and
ﾷ the Corporation’s Automatic Meter Reading programme.
4. To implement a High Performance/Performance Management Programme (to be signed off by the Unions) to better manage and measure staff performance, which should result in improved productivity in the Corporation.
5. To make the Corporation more profitable.
6. To place more emphasis on training and development at all levels.
7. To significantly reduce the unacceptably high receivables which stood at $104 million.
The Bahamas Electricity Corporation was admonished and criticized for the quality of service it rendered over the past years, and I am happy to say they have taken up the challenge to provide reliable and cost effective electricity supply.
MAINTENANCE
The new aggressive annual Corporate-wide Planned Preventative Maintenance Programme, which was intensified during the off-peak months between October and June, was completed except for the major overhaul of the Combined Cycle unit at the Blue Hills Power Station. Most of the scheduled power plant, as well as transmission and distribution systems maintenance, have been successfully completed in time to enable BEC to provide reliable power throughout the summer peak period.
ﾠﾠﾠﾠﾠﾠﾠﾠ
SYSTEM PERFORMANCE – SUMMER 2003
Improved maintenance coupled with good management practices and timely decisions to replace old plant, in particular the replacement of GT8 at Blue Hills with a new gas turbine, has resulted in the reduction of outages and an increased availability of plant. Mr. Speaker, as mentioned earlier, we are therefore happy to report that this summer has been one with minimum load shedding. Mr. Speaker, load shedding occurred only one day this summer in New Providence.
TRAINING AND DEVELOPMENT
BEC realizes that training and development is vital if continuous improvement in overall performance is to be realized. In this regard, additional emphasis is being placed on training at all levels. This includes managerial training, development of Engineers and accountants, recruitment and training of apprentices, local training by manufacturers’ representatives, training at manufacturers’ works, and customer service training, etc.
The Corporation has a succession plan in place for Executive Management. A succession plan for Mid Management and Non Management Staff is presently being developed.
INDUSTRIAL AGREEMENT UPDATE
The Corporation is presently negotiating a new industrial agreement with the Bahamas Electrical Workers Union. The negotiations are at an advanced stage and BEC’s emphasis is on the High Performance and Salary Administration System. This is a merit-based system that links pay increases to performance of the individual employee and the performance of the Corporation. It is envisaged that the new industrial agreement would be completed by the end of October 2003.
TOTAL INSTALLED PLANT NEW PROVIDENCE
The installed generation capacity in New Providence is 327 megawatts. The maximum load (peak load) measured to date is 201.5 megawatts. In order to keep up with growth due to ongoing developments, the Corporation carries out both short term and long term load forecasting. In line with planned improvements and upgrades, BEC will have sufficient capacity to supply Kerzner International and other developments.
ﾠﾠﾠﾠﾠﾠﾠﾠ
ﾠﾠﾠﾠﾠﾠﾠﾠ
NEW PROVIDENCE
GENERATION – CLIFTON PIER POWER STATION
Mr. Speaker, in New Providence, a 30-megawatt slow speed diesel engine project, D/A12, at Clifton Pier has been completed. The first reliability run commenced at 3:00 p.m. on Tuesday, June 17, 2003. The reliability run (for 30 days) was not successfully completed. The second reliability run also failed, and hence this plant will not be fully commissioned until a successful reliability run is achieved. Total cost of this unit is some $40 million. Mr. Speaker, may I remind Honourable Members that this diesel engine, D/A12, was originally scheduled for commissioning on August 31st of 2002. This project is therefore over twelve months behind schedule.
GENERATION – BLUE HILLS POWER STATION
Mr. Speaker, in parallel with the new plant installations at Clifton Pier a 23-megawatt ultra modern gas turbine unit (GT4) was commissioned last September at a cost of approximately $11 million. The successful commissioning within budget and on schedule resulted in BEC entering into a contract to purchase another similar unit (GT8R), which was successfully commissioned within budget and ahead of time, on July 5th 2003. Cost for this unit is approximately $11 million. Both units were supplier financed.
The acquisition of these two gas turbines is in keeping with the modernisation programme for Blue Hills Power Station. The programme which is in progress, will culminate in the retirement of old inefficient “fuel guzzler” gas turbine units, most of which were installed between the 1970’s and 1990’s. The instalment of these modern units will increase output and significantly improve fuel efficiency.
Additionally, it is intended to utilize the exhaust gases from these two gas turbine units (GT4 & GT8R) to produce steam in waste heat boilers which will drive a steam turbine to produce an additional 20 megawatts of power without the need to burn additional fuel. (i.e. the combination of the two gas turbines along with the waste heat boilers and steam turbine will comprise a “Combined Cycle” unit).
This Combined Cycle unit, which is scheduled to be in operation in two (2) years will result in significant fuel cost savings to BEC.
TRANSMISSION & DISTRIBUTION
Mr. Speaker, In order to accommodate the increased export of power from new generation plants and to cater for the increased load to the transmission and distribution systems, the following works are in progress:
ﾷ A new 132,000 volt line connecting Clifton Pier and Cable Beach (Leisure Time Sub-Station) is in the final stage of construction and is scheduled to be completed by the end of November 2003.
ﾷ A new substation is being constructed on West Avenue off Collins Avenue – scheduled completion is end of October 2003.
ﾷ A number of upgrades and reinforcements at various substations
Total cost for the transmission and distribution projects is $19 million.
BIG POND REDEVELOPMENT
In New Providence, Phase I of the Big Pond Redevelopment Programme, which entailed the complete refurbishment of the old Big Pond Power Station building, has resulted in the construction of an ultra modern complex to house the Field Operations staff, a new Control Centre, satellite workshops and the Training Department. The Control Centre equipped with a supervisory control and data acquisition system, (SCADA) will soon be operational. This new system will improve the Corporation’s ability to manage electrical power system and response time to disturbances. The transfer of relevant staff to this new building is scheduled to be completed by the end of this month.
FAMILY ISLANDS
Initiatives in the Family Islands to date have been dominated by projects in Exuma, which were mainly to accommodate the new Emerald Bay Four Seasons Resort.
Other significant projects are in progress in the Family Islands that are demanding significant resource scheduling and allocation; (i.e. the Emerald Bay and Crab Cay projects in Exuma and other touristic developments in Abaco, Eleuthera, Rum Cay and other Family Islands.)
EXUMA
In Exuma, a new $8 million 8.8 megawatt power station has been completed and is currently in operation. Additionally, $1.8 million of new transmission/distribution power lines have been constructed to enable reliable supplies to be provided to Emerald Bay and the other various touristic projects. Plans are in progress to install an additional 8.8 megawatts of generation made necessary by additional growth and development on Exuma inclusive of Crab Cay ($4.5 million).
RAGGED ISLAND
Mr. Speaker, the new power station planned for construction in Ragged Island is currently being reviewed.
ABACO
In Abaco, the generation as well as the transmission and distribution infrastructure is being upgraded and reinforced to accommodate the forecasted load developments. (e.g. the recently announced development at Cherokee Sound.)
Also in the Abaco’s, a new programme to replace faulty submarine cables which connect the various Cays and which have deteriorated over the years is in progress with a view to completing the programme within 18 months.
CUSTOMER SERVICE INITIATIVES
AUTOMATIC VOICE RESPONSE
Mr. Speaker, Following a successful pilot project in Eleuthera, the Corporation launched this enhanced service to our New Providence customers. This system allows the customer to have access to their information relevant to their account as well as other corporate services, including damage claims, conservation tips etc. at their convenience 24 hours a day, 7 days a week. The system may be accessed using any touch telephone. On successful implementation in New Providence, the system will be introduced to the various Family Islands.
AUTOMATIC METER READING
The Corporation is in the process of installing new electricity consumption meters, which can be read remotely and automatically thus reducing errors and consequential queries. This should also result in reduced labour cost, a reduction in the need to estimate bills and a reduction in customer service queries as well as an improvement in our revenue collection.
FUEL OIL CONTRACT
ﾠﾠﾠﾠﾠﾠﾠﾠThe Bahamas Electricity Corporation entered into a new Fuel Oil Supply Contract with Shell on August 1st, 2003.. This new supply agreement is projected to save the corporation $4.3 million per annum.
ﾠﾠﾠﾠﾠﾠﾠﾠThe Corporation has also entered into a Fuel Tank lease agreement with Shell on August 1st, 2003. This new lease agreement will increase the corporation’s income by $1.237 million per annum.
REFINANCING OF IDB LOANS – $128 MILLION
Acknowledgement
Over the years the IDB has been very instrumental in the financing of most the Bahamas Electricity Corporation major projects. The IDB can be credited to a large extent for the project management competencies within BEC.
Review of Corporate records indicate that the refinancing of this loan by the consortium banks amortized over 10 years, based on LIBOR (1.125%) plus 1 1/8, will save the Corporation $5 million per annum in interest cost and eliminate the high exposure risk associated with this basket of currencies. During the past year, BEC lost $1.5 million due to the exchange exposure in US Dollars, which declined by 20% against the Euro.
ﾠThe last six (6) months’ interest rate paid to the IDB on Loan No. 560 (approx. $52 million) was 8.4% compared to the Euro dollar rate of $2.25%, a difference of over 6%. In addition to the substantial savings expected from the refinancing of these loans, BEC will benefit from the purchase of an interest rate cap of 4ﾽ% from participating banks during the life of the loan.
ﾠﾠﾠﾠﾠﾠﾠﾠMr. Speaker, the existing loan is guaranteed by the Government of The Bahamas. The refinanced loan will also require a Government guarantee loan. This will provide Members the opportunity to debate BEC when the resolution is tabled.
RESTRUCTURING OF ELECTRICITY TARIFF
Finally, Mr. Speaker, and most importantly, the Bahamas Electricity Corporation has reviewed the Tariff structure taking into account the benefits from the following initiatives:
ﾠﾠﾠﾠﾠﾠﾠﾠ
(1) Refinance of the Inter-American Development Bank financed loans with a projected savings per annum of $5.0 million.
(2) Benefits of new Fuel Oil Supply Contracts with savings per annum of $4.03 million.
(3) Improvements in fuel operating efficiencies with projected net savings of $18 million.
(4) Increased income on Fuel Tank lease of $1.237 million.
ﾠﾠﾠﾠﾠﾠﾠﾠﾠThe projected net increase in savings for the Corporation in these measures is $28.3million.
ﾠﾠﾠﾠﾠﾠﾠﾠMr. Speaker, the Bahamas Electricity Corporation will reduce the tariff on electricity to all customers in New Providence and the Family Islands effective October 1, 2003 (the start of BEC’s financial year). There will be a reduction in the basic rate of 5%. Additionally, further reductions will result from other initiatives related to a change in calculation of the fuel surcharge and the application of the maximum demand charges for customers with maximum demand meters.
ﾠﾠﾠﾠﾠﾠﾠﾠﾠﾠThe maximum demand charge will be based on the adjustment and application of the maximum demand time every six months as opposed to the current practice of once per year.
WHAT ARE THESE BENEFITS?
ﾠThese reductions in the tariff rates, fuel surcharge adjustments and other changes will affect the customers as follows:
RESIDENTIAL
I. A residential customer consuming up to 800kwh per month with the tariff rate change, minimum rate threshold and fuel surcharge adjustment, will realise a 17% reduction in monthly bills.
Mr. Speaker, it is worthy of note that the corporation has taken the decision to affect the largest percentage of reduction in electricity rates for the customer at the lowest end of the income scale. In this category, the reduction will impact positively some 30,000 households throughout the Bahamas from Inagua in the south to Bimini in the north.
II. A residential customer consuming 1,200 kwh per month with the new tariff rate, minimum rate threshold and fuel surcharge adjustment will, realise a 12% reduction in electricity bills.
SMALL COMMERCIAL
ﾠﾠﾠﾠﾠﾠﾠﾠOn average, a small commercial customer consuming 1,200 units per month with the new tariff rate change and fuel surcharge adjustment will realise an 11% reduction in monthly electricity bills.
LARGE COMMERCIAL
ﾠﾠﾠﾠﾠﾠﾠﾠLarge commercial customers will benefit from a 5% reduction in the tariff rate, a 2% reduction in the fuel surcharge adjustments and a 5% reduction in the maximum demand charge.
ﾠﾠﾠﾠﾠﾠﾠﾠFor example, a large commercial customer with an annual maximum demand of 20 kVA and using 10,200 units per month would realise a minimum of 12% reduction in monthly electricity bills.
Mr. Speaker, our hotels have been complaining bitterly over the high cost of electricity and were requesting concessions from the Government. I am confident, Mr. Speaker, that this level of reduction in the cost of electricity to hotels is a significant step in the right direction. Further, Mr. Speaker, it is the expressed hope of the Government that the hotel industry will recognize this action as a demonstration of the seriousness of the Government to meaningfully address this long outstanding concern of hoteliers.
INTEREST ON SECURITY DEPOSIT
Mr. Speaker, successive Governments of the Bahamas promised to pay interest on security deposits in the utility corporations. It is with a great deal of pride and pleasure that I announce on behalf of this PLP Government led by the Honourable Perry G. Christie, that with effect from October 1, 2003 BEC will pay 3% interest on all customer deposits.
This exercise will cost the Corporation approx $700,000.00 based on current deposits held. Mr. Speaker, this is the first of the utilities, the others will follow in due course.
Mr. Speaker, the introduction of the new schedule of electricity rates will position the Bahamas Electricity Corporation as one of the most competitive providers of electricity in the CARILEC group of electrical utility companies. (CARILEC is the association of Caribbean electric utilities with a membership of over 16 utilities.)
At home the BEC rates compare favourably with those of the Freeport Power Company, with the listed differences:
Residential Customers
ﾷ Freeport Power Company has an electricity rate for Residential customers for usage up to 350 units. The Corporation currently does not have a rate for this category of Residential Customers. Freeport Customers pay 2.31 cents less than BEC customers.
ﾷ Freeport Power Company customers pay 0.12cents less than BEC customer for the next 450 units or up to 800 units.
ﾷ BEC customers pay 2.6 cents less than Freeport Power Company customers for 800 units up to 1000 units.
ﾷ BEC customers pay 0.14 cents less than Freeport Power Company customers for 1000 units and above.
Commercial Customers
ﾷ Freeport Power Company commercial customers with usage below 5KVA pay 4.0 cents less than BEC customers.
ﾷ Freeport Power Company Commercial customers all pay a Maximum Demand charge, while BEC commercial customer under 10 KVA do not pay a maximum demand charge.
(GIVE EXAMPLES OF REDUCTION IN ELECTRICITY BILLS)
ENERGY CONSERVATION
ﾠﾠﾠﾠﾠﾠﾠﾠMr. Speaker, I would be remised if I did not say a few words on energy conservation. A number of Bahamians complain about the high cost of electricity. The reality is that we all can do a better job in controlling the level of our electricity bills.
ﾠﾠﾠﾠﾠﾠﾠﾠAs a responsible corporate citizen, BEC recognizes the need to promote the efficient use of energy. I take this opportunity to encourage all consumers to conserve energy, thereby further reducing the cost of their electricity bills. BEC’s major energy conservation tips are as follows:
1) Timer switches should be installed on water heaters.
2) Light switches should be switched off when leaving a room.
3) Air conditioners thermostats should be set at the highest comfortable temperature setting.
4) Energy efficient light bulbs should be used in place of regular incandescent light bulbs.
5) When replacing old appliances, energy efficient replacement units should be utilized.
Mr. Speaker, additional energy conservation tips can be obtained from BEC’s Customer Service Department.
ﾠ
Mr. Speaker, October 1st 2003 will be an historic Red Letter Day for all Bahamians as it will mark the first time in BEC’s history that the cost of electricity will be reduced to all of BEC’s customers in New Providence, Paradise Island and the Family Islands. I wish to salute the new Board of Directors headed by Chairman Alfred Jarrett and the invigorated management team of BEC headed by my name sake, General Manager, Bradley S. Roberts, for their guidance and creative initiative in making the reductions possible.
Mr. Speaker, this is a super classic example of the new Progressive Liberal Party headed by the Honourable Perry G. Christie delivering on its campaign promise and confirms the Government’s ability to deliver hope and help to all the people of the Commonwealth of The Bahamas.
Mr. Speaker, this reduction will bring about much needed relief to the pockets of ordinary Bahamians, business houses and, in particular, hotels who have been crying out for relief. Finally, Mr. Speaker, the question may be asked – what were the ingredients required to bring about this long overdue change in electricity rates? It’s simple, Mr. Speaker, good business application and a good dose of common sense.
