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Last Updated: Feb 13, 2017 - 1:45:37 AM |
 Nassau, New Providence - Contribution By Hon. Philip E. Davis, Q.C. Member Of Parliament (Cat Island, Rum Cay, And San Salvador) Deputy Prime Minister and Minister Of Works & Urban Development Electricity Bill, 2015 Utilitities Regulation And Competition Authority (Amendment) Bill, 2015 Electricity Rate Reduction Bond Bill, 2015 Wednesday, 11th November 2015 House Of Assembly Commonwealth Of The Bahamas
Mr. Speaker
I begin by acknowledging God as Supreme and I give thanks to Him for sparing life and limb as Hurricane Joaquin devastated our southernmost islands. My belief that God is still in the miracle-working business is cemented when I recall the stories told by residents who held firm despite the winds, the rains, the storm clouds, and the waves. This is a tough time for all of them, but they are assured of this Government’s full support to aid recovery.
I also take this opportunity to thank the management and staff of the Bahamas Electricity Corporation for their efforts in the aftermath of the hurricane.
As I rise on behalf of the residents of Cat Island, San Salvador, and Rum Cay, I again thank them for the opportunity they have afforded me to serve in this place. Within this constituency, San Salvador and Rum Cay were heavily impacted by Joaquin; and, for the love of service, I soldier on to address their needs.
Mr. Speaker
Notwithstanding our trials and challenges as a country, the objective eye can only agree that our country is well on the road to transformation. It is not an accidental transformation, but one foreshadowed in our Charter for Governance. The Charter is our document of commitment – the yardstick for objective measurement.
For many years now, consumers have had to deal with extremely high electrical bills and far from satisfactory services from an inefficient and debt-ridden Bahamas Electricity Corporation (BEC). In February of 2012, more than five thousand (5,000) BEC customers were without electricity, having been disconnected because they were unable to afford an essential item that was fast becoming a luxury.
Mr. Speaker
Before I go any further into this intervention, I will celebrate with the Bahamian people, something that every pocket must now appreciate. When compared to October 2014, the fuel surcharge is dramatically reduced. In fact, the fuel charge is about 60% lower. It was 27.7 cents per kWh in Oct 2014 and 11.4 cents per kWh in Oct 2015. More than half the rate, Mr. Speaker!
Mr. Speaker
Sixty percent (60%) of our electricity bills was due to the cost of fuel. Notwithstanding the relief to our pockets now, if we consider the April 28th 2015 article by the Tribune Business Editor Neil Hartnell, we see the urgent requirement to proceed as we do today.
In that article, Edison Sumner, the Chairman of the Bahamas Chamber of Commerce and Employers Confederation’s (BCCEC), in highlighting barriers to The Bahamas’ escalating energy crisis, indicated that “The main deterrent for [investors…] was the cost and supply of energy.” He said that “Every investor [he] spoke to raised [issue] the cost of energy in The Bahamas, and the security and reliability of energy supply. They felt the cost of coming to The Bahamas was prohibitive.”
Mr. Speaker
Long before Mr. Sumner spoke, we on this side knew that the single most important essential to driving down costs that encourage investment, entrepreneurship and ownership relates to electricity.
The Journey Toward A NewBEC
That is why, on 22nd July this year, I was pleased to witness The Bahamas, through BEC, take an important step forward with the signing of a Transition Services Agreement (TSA) with PowerSecure, Inc., a wholly owned subsidiary of PowerSecure International, Inc.
At that signing, a Transition Committee was also announced to move the process forward. Their task was to ensure that all ‘i’s were dotted and ‘t’s crossed in the work to craft an investment grade business plan and that the legislative framework was in place to facilitate the Corporation’s transition.
PowerSecure’s five-year business plan for management of the Corporation was developed during July to September 2015, through a process that involved extensive interaction with BEC personnel. To assist its crafting, every Family Island BEC facility was visited. The planning process was monitored, facilitated, and reviewed by the Transition Committee, with detailed reviews by advisors KPMG Corporate Finance (on the financial and commercial side) and DNV GL (on the technical side).
The plan will create efficiencies which will further allow for significant and sustainable reductions in the cost of energy, increased energy security and reliability, environmental responsibility and increased competitiveness as a country.
This Government has also had very productive and advanced discussions and received proposals from various blue chip banks regarding the issue of Rate Reduction Bonds (RRB). These bonds are essential to launch the NewBEC on a foundation of financial health.
We expect that PowerSecure will set the NewBEC on course to profitability and we look forward to an improved residential and commercial customer service experience.
Mr. Speaker
From the Request for Proposals (RFP) for the Management of BEC, which was issued in August 2013 to the announcement of the preferred bidder PowerSecure International, Incorporated, to the execution of the Transition Services Agreement in July, this Government has kept foremost in view the need to aggressively embrace a realistic and permanent solution for a viable future.
This solution now allows for significant and sustainable reductions in the cost of energy, a financially healthy electrical utility company, increased energy security, improved reliability of service, more responsible environmental attention, and, ultimately, increase our competitiveness and marketability as a country. It is a process of true reform.
This reform is dependent on the passage of the legislation which is introduced today:
* The Electricity Amendment Bill, 2015;
* The Utilities Regulation and Competition Authority (Amendment) Bill, 2015; and
* The Electricity Rate Reduction Bill, 2015.
The Electricity Bill, 2015
Mr. Speaker
The Electricity Bill 2015, in part, facilitates the reform of the electricity sector. It provides for the separation of regulatory and operations functions by the restructuring of Bahamas Electricity Corporation. It does this by transferring its commercial operating functions and assets to a wholly owned subsidiary company, and establishes URCA as the independent sector regulator.
The passage of the Electricity Bill will cause the repeal of the Electricity Act and Out Islands Electricity Act respectively. It will provide for diversification in the generation, supply, and distribution of electricity in accordance with the National Energy Policy, including through renewable energy sources; and modernise and consolidate the law relating to electrical installations.
The new 100% owned operating subsidiary, which is now called Bahamas Power and Light Company, Limited (BPL), will operate under private sector management by a Service Provider in a manner consistent with this Government’s National Energy Policy.
BPL was incorporated in September of this year and its Board of Directors was appointed in the weeks that followed, with Mr. Nathaniel Beneby as Chairman. The Board’s first task was the consideration of a high quality, all-encompassing investment-grade Business Plan, which was presented to Cabinet last week.
Utilities Regulation and Competition Authority (Amendment) Bill, 2015
Mr. Speaker
The world over, in progressive countries, that is, electricity industry self-regulation has ultimately failed. I surmise that this is attributed to facts involving conflicts of interest, lack of transparency, and narrowed interpretation of rules.
The Utilities Regulation and Competition Authority Act (Amendment) Bill, 2015, proposes changes in anticipation of the legislation that will establish URCA as the independent regulator of the electricity sector. It will also enable and facilitate URCA in discharging such regulatory function in the new electricity supply regime.
URCA’s primary responsibilities under the new Electricity Bill would be to:
* review and approve electricity tariff rates charged to the consumer;
* review of the need for additional electricity generation by independent power producers;
* establish rules and approve competitive processes where applicable for procurement of power generation resources conducted by BPL, or any other public electricity supplier, and ensure such rules are fair, consistent and compatible with the objectives and principles of the electricity sector and national energy policies;
* ensure the efficient operation of the electricity supply system in accordance with applicable regulations;
* review and grant applications for public electricity supplier licences and issue licences and collect fees from all licensees and public electricity suppliers sufficient to cover the cost of the regulation of the sector; promotion and approval of energy efficiency programs;
* to publish for public information, prior to granting approval, the initial and revised renewable electricity plans proposed by BPL and other public electricity suppliers; and
* to protect consumers.
* Public Electricity Supplier Licensees
The Bill further anticipates that BPL and the Grand Bahama Power Company (GBPC) will be the initial licensees, with GBPC serving the Port Area as defined under the Hawksbill Creek Agreement and BPL serving BEC’s current area of supply across The Bahamas. URCA is mandated to issue public electricity supplier licenses to BPL and GBPC within thirty (30) days of the Bill coming into operation.
URCA may also grant public electricity supplier licenses to certain entities in the Family Islands with BPL’s approval, such as those entities that are currently operating under Franchise Agreements with BEC.
* Renewable Energy
Mr. Speaker
In respect of renewable energy, the Bill requires public electricity suppliers to submit renewable electricity plans, facilitate renewable energy self-generation projects, and regular review and approval of the plan by URCA.
With proper justification and where applicable, URCA will be enabled to make a determination as to whether power purchase and grid tie-in agreements may be entered into with independent power producers following a competitive procurement process and licensing by URCA.
The Bill further empowers public electricity suppliers to grant permits to property owners to install facilities for renewable electricity generation sources for residential purposes using renewable energy sources of such size and quality as may be prescribed in regulatory or other measures issued by URCA.
It provides for a public electricity supplier to purchase any excess energy supplied to the electric grid of the value and amount, calculated in accordance with regulatory or other measures issued by URCA, of power that is not required for the property owner’s use.
Electricity Rate Reduction Bond Bill, 2015
Mr. Speaker
I turn now to the Electricity Rate and Reduction Bond Bill, 2015, which will provide the legal framework and infrastructure to enable the issuance of such bonds.
The purpose of the bonds is to generate proceeds to be used for the payment and satisfaction of specified debts of the Corporation and BPL; and to fund the electricity sector reform and restructuring of the Corporation, including the establishment and initial operations of BPL. This reform and restructuring process is intended as part of the overall plan to eventually reduce electricity charges to the consumer.
With the RRB financing, the Corporation will be able to pay toward the elimination of its financial liabilities of the Corporation, including bank debts, bonds and other non-current financial liabilities outstanding on the date the Electricity Act comes into operation.
It will also allow for the payment of pension and other benefits and rights vested in employees or former employees of the Corporation on the date the Electricity Act comes into operation.
Mr. Speaker
You will be pleased to note that the RRBs will also pay initial costs of environmental remediation, not exceeding the sum of twenty million dollars ($20M), inclusive of ancillary and associated costs, as determined by the Government.Also, by virtue of this legislation and the structure of the Rate Reduction Bonds, and on repayment of the existing debt of BEC with the proceeds of the bonds, the current $246 million Government Guarantee will be removed form the Government balance sheet.The structure of the bonds, which is well tested in other markets, is also such that we expect the bonds to attain an excellent credit rating, with a long term repayment profile attractive to institutional investors, allowing for a much lower interest cost than would otherwise be possible. Further, the bonds will be without recourse to the Government, BEC or BPL, being a stand alone instrument secured purely on a portion of the tariff to customers.I take this opportunity to note that this is not new debt.It is primarily a refinancing of existing, highly inefficient debt and liabilities of BEC, which is costing BEC not only high rates of interest today, but is also restricting BEC from undertaking the capital investment it needs to make. It is not a new cost to the customer as today, we already pay for BEC’s highly inefficient debt structure, and inability to invest.
Finally, but not least in importance, the RRBs will provide BPL with funds to repay initial working capital and interim financing also to be provided by the selected bank(s) to facilitate the initial operations of BPL.
Conclusion
Mr. Speaker
This Government has been working hard for the Bahamian people. Yes, it has been a long road, but like the distance runner with the end in sight, these legislative instruments and all that flow from them deliver on a promise made to our constituents. We are very proud of this promise kept.
As the face of Government, many times we neglect to mention those who really do all of the work. Over these many months, a team consisting of members of the Office of the Attorney General, the Government Task Force on Energy Reforms/Transition Committee, URCA, BEC, and our financial and legal advisors have been meeting consistently to draft the legislation that I set to table. To include my Permanent Secretary, I offer them profuse thanks. Each member can be assured that, with the passage of time, their work will be appreciated by every householder and every businessman all the more.
Energy reform and reduction in our electricity bills is vital to our national growth and development. While others talked about reform, we are doing it. While others sit in the critics’ corner and do what they do best, we soldier on resolutely on behalf of those who sent us here. This PLP government is all about building the best Commonwealth of The Bahamas that we can be.
We are on a mission. The watchwords for the mission are reformation and transformation for a better nation. Every step toward today was, where we are now is, every future step will to be taken in primary consideration of the Bahamian people.
On behalf of the beloved people of Cat Island, San Salvador, and Rum Cay, I am very proud to table these Bills with the hopeful expectation of unanimous support.
© Copyright 2015 by thebahamasweekly.com
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