By YOURI KEMP

Tribune Business Reporter

ykemp@tribunemedia.net

Bahamas Power and Light's (BPL) chairman yesterday revealed that the extra charge consumers must pay come March 2020 will likely be equivalent to 15 percent of their electricity bills.

Dr Donovan Moxey finally clarified that the National Utility Investment Bond fee, which will service BPL's new $650m debt, will be calculated as a percentage of every business and household's energy consumption.

He spoke after Tribune Business sought an explanation as to how much Bahamian companies will have to pay because BPL's statements to-date have only referred to a $27 per month increase for the "average household" once the debt servicing charge is implemented early next year.

"We're still in the midst of the bond, so I can't say much beyond what we posted out there. What we have posted out there was the rate for the average consumer," Dr Moxey said. "That rate itself is based on a calculated, or estimated, price per kilowatt hour (KWh).

"Just look at it this way. If you look at how that is calculated, the average Bahamian pays $180 per month, so that rate is a percentage of that $180 per month. So you can extrapolate that through to see what everybody else may pay given that estimated total."

The $27 figure quoted in BPL's recent advertisement therefore represents 15 percent of the $180 "average bill" referred to by Dr Moxey. "Everybody is going to pay the rate reduction bond rate," the BPL chairman asserted.

"The calculation you saw was a percentage based on the average bill that Bahamian households pay. The average bill is $180 a month. So, just based on what I just told you, you can extrapolate some calculations there.

"Everybody is paying the same percentage on their bill, and that percentage that we gave you is an estimate because I can't come out and tell you what it's going to be because we're still going through the rating agency process. That percentage will apply across the board to everybody's bill."

Many observers are likely to view BPL and the government as having been less than forthcoming on how much extra the private sector, especially, and many residential consumers will now have to pay to bail-out the state-owned utility monopoly from years of mismanagement, waste, inefficiency and corruption that brought it to near-collapse.

BPL's advertisements have focused on the $27 increase that the "average household" will pay, giving some the impression that the debt servicing cost is a flat fee rather than a percentage, while ignoring how much the private sector will have to pay. It is also unclear whether the debt servicing charge will be calculated just on the consumption, or if VAT is included in the base, too.

Those with the largest monthly bills, such as hotels, food stores and companies where electricity has to be on 24/7, could thus find themselves potentially saddled with a significant hike in their electricity bills come early 2020 as the price Bahamians must pay for paying the interest/principal due to foreign and local investors who buy into the $650m bond issue that will refinance BPL.

Desmond Bannister, minister of works, previously said the hike in electricity bills would only last for 10 months. BPL, and the Government, are betting that the new, more efficient Wartsila generation engines will reduce the utility's fuel and other costs enough to offset the bond servicing charge and, ultimately, lower net electricity bills although this remains to be seen.

Dr Moxey yesterday confirmed this was the plan, saying: "What everybody needs to recognise is we will offset that cost based on the fuel savings. That's how that cost will be offset. That savings is based on the average bill that consumers paid over the 2018-2019 year.

"So if you look at the average fuel bill, and this is very important that people understand this, the baseline that we are establishing is the average fuel bill over the last two years, 2018-2019. That's what is going to go down, and that's what the estimates are based on. And again, they are simply estimates because we are still in the middle of negotiating our rate reduction bond and I cant say anything else other than these are just estimates."

This means BPL's "15 percent" estimate is not set in stone, as the bonds have yet to be priced, and the interest rate investors will receive has not been determined. This, in turn, depends upon the strength of the credit rating that the $650m refinancing obtains from the international agencies such as Fitch and Standard & Poor's (S&P).

No rating has yet been assigned, which means the debt servicing charge on customer bills could be below or above the 15 percent given by Dr Moxey.