THURSDAY AFTERNOON UPDATE: The Davis administration said it will not allow BPL to impose a late fee on the Bahamian people. It was only one of five considerations in a discussion to lower the company’s outstanding arrears, according to Acting Press Secretary Keishla Adderley at the OPM press briefing this morning.

BPL also released a statement (right) saying it did not have plans to impose a late fee on its customers at this time.

FROM EARLIER:

By Fay Simmons

Tribune Business Reporter

jsimmons@tribunemedia.net

Bahamas Power & Light (BPL) has received approval to impose a $5 monthly fee on the 80 percent of customers who pay their bill late as it bids to slash its $100m accounts receivables.

Shevonn Cambridge, its chief executive, yesterday told the Bahamas Institute of Chartered Accountants (BICA) annual accountants’ weeks seminar that it has received regulatory go-ahead to implement the levy given that more than four out of every five customers pay their monthly bills after the due date.

With the cash-strapped state-owned utility’s accounts receivables, representing monies owed by residential and business customers, standing at $100m at August 2023, he added that BPL depends on timely payments from consumers to manage its cash flow, pay expenses and fund capital projects to improve operational efficiency.

Mr Cambridge said: “BPL’s receivables.. they exceed $100m from residential and commercial customers as of August 2023. And while we understand that this may be cyclical based on the current increase in consumption and the glide path fuel recovery strategy, we must reinforce the importance of timely payments to improve collections.

“While we continue to encourage on time and consistent payments from our customers, we struggle in this area as more than 80 percent of our customers pay their bills late and BPL depends on consistent and timely payments to better manage cash flow and adequately fund projects.”

Mr Cambridge said BPL has already received regulatory approval to charge a late fee on overdue bills as a deterrent, and to offset the penalties imposed on BPL when it pays its creditors late due to cash flow issues.

He added: “You can appreciate that there is a time value of money carrying costs associated with late payments. And if we don’t have the money we, too, are subject to additional fees and penalties from our creditors.

“BPL has considered, and already has regulatory approval to implement, a universally-accepted strategy to implement a nominal late fee. A $5 monthly late fee is already in use by many other utilities in The Bahamas. It can be a deterrent to late payments and, at the same time, based on our numbers, it could generate funds to offset the carrying costs associated with those late payments.”

Mr Cambridge added that BPL loses thousands of dollars monthly through electricity theft. “Collection is just one part of the equation in controlling costs. We are improving the recovery of unbilled units that is through operational losses and what we call loss through theft,” he said.

“While difficult to quantify only until cases are discovered, on average our revenue protection unearths several thousand dollars in cases of electricity theft every month.” Mr Cambridge said BPL has not had an increase to its base tariff since 2010, although it has seen a 100 percent increase in costs and up to 8 percent annual increase in demand over the past 13 years.

He said: “BPL has not had a tariff increase since 2010. In those 13 years, inputs have gone up exponentially. The costs of transformers, engines, wiring etc. All have seen nearly a 100 percent increase in costs. At the same time, output has also grown substantially as I’ve told you. We’ve seen about a 2 percent on average growth over that period, with last year seeing a six to 8 percent growth.

“So we’ve seen an increase in the cost of our inputs and an increase in demand on our output. At some point something has to give. Unfortunately, what tends to give in the absence of proper funding is the quality of service. We’re seeking not to have the quality of our service diminish, so we’re going to have to address that.”

Mr Cambridge explained that BPL’s current base tariff leaves the utility “vastly underfunded”, and confirmed that a study is being conducted to obtain recommendations on how to adjust the levy in a way that is a “win-win” for BPL and its stakeholders.

He said: “BPL’s tariff is the money we collect to fund our operation including capital development, maintenance and salaries. To be clear, the fuel and its associated costs, like transshipment to the Family Islands, is a direct pass through to our suppliers. BPL does not keep any of that money and there’s no profit or anything in it for BPL.

“The reality of it is that BPL’s current tariff leaves BPL vastly underfunded, and we’re looking to address that. Hopefully as the tariff study that’s currently being conducted comes to a completion, we will get some recommendations that we can do that in a way that is a win- win for all.”

Mr Cambridge added that an increase in BPL’s base tariff rate will allow the utility to improve its efficiency and will not increase electricity bills significantly.

He said: “Basically, that type of study is taking a holistic look at BPL’s rates and its impact on all stakeholders, whether that be the Government, as a utility or you as a consumer.

“An increase in rates does not necessarily mean the customer bills would go up significantly. That increase will also allow us to fund many of the efficiency enhancement measures that we wish to undertake. And those efficiency enhancement measures we foresee allowing us to operate more efficiently.”

Mr Cambridge explained that although consumers will see an increase in the base rate, the funds will be used to improve efficiency and eventually lower the fuel costs.

He said: “From our modelling, basically what it’s showing us is that when we do that it will positively impact the fuel charge, which when added together will eventually lead to even a reduction in your overall bill.

“So you may see an increase in the base rate, but that increase in the base rate will fund the efficiency enhancement that will drive down your fuel charge and your overall bills. The potential is there for the overall bills to be lower provided the fuel market behaves itself.”