BPL boss details strategy to drive down consumer bills

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

Bahamas Power & Light’s (BPL) chief executive Pam Hill said yesterday the company is aiming to improve efficiency at its plants and is also pursuing a fuel hedging strategy as a means to provide lower electricity costs to consumers.

Ms Hill, who spoke to reporters after addressing the Rotary Club of East Nassau said: “We are working on two key things. One of them is to improve the efficiency of our plants so they are able to burn less diesel and less heavy fuel oil. You do that by going in early, doing the preventative maintenance, looking at everything associated with the plant and essentially getting more miles per gallon.”

Ms Hill further noted the company was pursuing a fuel hedging strategy as a means to help reduce the company’s exposure to volatile and potentially rising fuel costs.

“Another area we are looking at really revolves around the prices themselves and looking at ways to add more stability to fuel prices,” she added.

“We are looking out for our customers and looking to find a product where we can have less ups and downs so that 10 per cent, maybe 20 per cent or 50 per cent of their fuel price is stable or fixed.”

Ms Hill said BPL had witnessed its ‘highest ever’ peak demand over the past two months adding the company was still utilising the 80 megawatt (MW) rental units as part of its generation fleet through the company Aggreko.

Ms Hill said BPL had hit its highest ever peak demand back in June, only to ‘blow past that,’ in July.

“We hit a new peak, the highest ever in June and blew past that in July. That peak was roughly 245-250 megawatts. You never want to have enough reserve power only for your peak. How we look at it is in the event that two of our largest engines went off line. Our two largest engines are about 30 megawatts or so which takes you to about 310 mega watts that you want to have readily available at all times. Of that, 80 megawatts of is rental generation. The total generation that BPL has in Nassau, including the generation that is really not working very well is as much as 420 mega watts,” said Ms Hill.

“The rental generation is very inefficient and is very strongly priced. It is well priced for our customers. It is both efficient and it is also reliable for our customers. It is on the lower end of the total fuel cost that our customers incur.”

As to how long the company would have to rely on the rentals, Ms Hill said: “The purpose is to have a stand in as we build a new power generation the company. That will probably take 18 months on the low end to two years at the high end to put in place. We are looking at that sort of time frame to have some sort of temporary generation in place.”

Ms Hill estimated BPL’s overall fuel cost was currently in the range of $0.12-$0.13 cents per kilowatt hour.

Last February, PowerSecure signed a five-year management services agreement with the Government to run BPL, the Bahamas Electricity Corporation’s (BEC’s) newly-created operating subsidiary. Then, on February 25, PowerSecure announced the Atlanta-based utility giant, Southern Company, had acquired it it for $431 million making PowerSecure a wholly-owned subsidiary.

Comments

SP says...

**"The rental generation is very inefficient and is very strongly priced.** *It is well priced for our customers. It is both efficient and it is also reliable for our customers. It is on the lower end of the total fuel cost that our customers incur.”*

This is Perry Christie style double talk. Which is it? **The rental generation is very inefficient and is very strongly priced** or *It is well priced for our customers. It is both efficient and it is also reliable for our customers. It is on the lower end of the total fuel cost that our customers incur.”*

As an absolute novice, one would have thought Venezuela or Trinidad would be considered as reasonably inexpensive suppliers of fuel.

http://www.trinidadexpress.com/201610...

http://oilprice.com/Energy/Oil-Prices...

http://www.barrons.com/articles/how-v...

Price stability, however, is yet another unanswerable question.

Posted 10 August 2017, 5:59 p.m. Suggest removal

Reality_Check says...

Thanks to U.S foreign policy aimed at keeping Venezuela destabilized for the purpose of controlling the global supply of oil and keeping the price per barrel in a narrow trading range, Venezuela is now too unstable to be regarded as a reliable supplier. Most people do not know or appreciate that Venezuela has by far the largest proven reserves of oil in the world - more than Saudi Arabia. The U.S. did not like the idea of Venezuela being able to control its own oil resources with significant implications for the price of oil in the global markets. By keeping Venezuela destabilized, the U.S. government has achieved precisely what it set out to do years ago when it began its very hostile attitude towards the previous Chavez government and the Venezuelan people. Truly sad that the U.S. only ever thinks about its own selfish interests (actually the selfish interests of the top 0.1% of Americans that control the U.S. government), and could not care less about the interests of others. As a result young children and the elderly in Venezuela are today without food and essential medical supplies.

Posted 11 August 2017, 11:37 a.m. Suggest removal

watcher says...

From Wikipedia.

"Fuel hedging is a contractual tool some large fuel consuming companies, such as airlines, cruise lines and trucking companies, use to reduce their exposure to volatile and potentially rising fuel costs. A fuel hedge contract is a futures contract that allows a fuel-consuming company to establish a fixed or capped cost, via a commodity swap or option. The companies enter into hedging contracts to mitigate their exposure to future fuel prices that may be higher than current prices and/or to establish a known fuel cost for budgeting purposes. If such a company buys a fuel swap and the price of fuel declines, the company will effectively be forced to pay an above-market rate for fuel. If the company buys a fuel call option and the price of fuel increases, the company will receive a return on the option that offsets their actual cost of fuel. If the company buys a fuel call option, which requires an upfront premium cost, much like insurance, and the price of fuel decreases, the company will not receive a return on the option but they will benefit from buying fuel at the then-lower cost."

**Is Ms Hill saying that** BEC never used hedging in the past? I find this very hard to believe, but not impossible, knowing the PLP. Secondly, does BPL have trained hedge managers / analysts / financial experts on the books already. If so, then hedging must have been done in the past. If not, then these experts won't come cheap. Her statements are confusing and, together with SP's comment above, seem to raise more questions than they answer.

Posted 11 August 2017, 1:16 a.m. Suggest removal

TheQuant_In_Hiding says...

Lol, I am almost positive that no one there even understands the fundamentals of hedging.

This is all fluff.

Posted 11 August 2017, 9:36 a.m. Suggest removal

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