By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Regulators yesterday sought to reassure Bahamian households and businesses they are “monitoring” Bahamas Power & Light’s (BPL) sky-high bills but made no mention of any immediate relief from “compound billing’s” impact.

The Utilities Regulation and Competition Authority (URCA), in a statement that appeared to have been sparked by the volume of “widespread complaints” submitted to it, sought to soothe customer fury by disclosing BPL’s assertion that its fuel charge has now “peaked” and bills will be lower moving forward.

However, URCA neglected to mention that it determined late last year that BPL had “made an adequate case” for an up to 163 percent increase in its fuel charge, thus approving the strategy behind the soaring summer bills that households and businesses are now complaining about.

“As the regulator for the country’s electricity sector, URCA conducted a comprehensive review of BPL’s fuel charge increase proposal. At the conclusion of that review, URCA determined that it is satisfied that BPL has made an adequate case for the rate increases outlined in its press statement dated October 4, 2022,” URCA said in late 2022.

Seeking to soften the blow from its verdict, URCA promised to undertake ongoing monitoring and reviews of BPL’s fuel charge during 2023 to ensure the utility is operating efficiently and levying the correct charges on customers.

“The regulator notes that BPL’s justification for the changes to the fuel charge is based on conditions that are likely to change,” URCA added. “Therefore, it is URCA’s intent to revisit that matter to ensure that BPL is operating efficiently and charging customers appropriately. URCA has advised its licensee (BPL) of its intent to review its fuel charge again during the projected glide path fuel charge recovery period, and it will make public notice of the same as necessary.”

URCA did not disclose the full analysis, or review, that it conducted to justify its conclusion that BPL fuel charge hikes of up to 163 percent are warranted. And the timing of its review, and news release, was more than one month after BPL had already begun to implement the phased increases.

The regulator’s statement also glossed over the reason why Bahamians are having to pay such high energy bills this summer - the Davis administration’s decision not to execute the trades that would have purchased extra low-cost fuel for BPL to support its existing hedging strategy. This resulted in BPL increasingly having to pay oil market spot prices for its fuel, thereby exposing it to the fall-out from Russia’s invasion of Ukraine when prices spiked to over $130 per barrel.

These impacts were then magnified, or compounded, by the Government’s decision that BPL should hold its fuel charge at 10.5 cents per kilowatt hour (KWh) for an entire year even though this was insufficient to cover the utility’s costs. Recovering these fuel under-payments is what has forced BPL to hike consumer bills to their current level.

However, URCA’s statement yesterday merely said: “In October 2022, BPL announced an initiative to increase its fuel charge to reflect the rising cost of fuel and to clear some of the outstanding debt it owed on prior fuel purchases. It stated this would be done gradually through the use of a glide path strategy.”

URCA has also failed to address questions of whether the Government, and BPL, were in violation of the law - in particular the Bahamas Electricity Corporation (Amendment) Regulations 2020 - which were enacted to facilitate the state-owned energy monopoly’s fuel hedging initiative.

These required BPL to pass 100 percent of its fuel costs on to consumers, but the present bills and prior fuel charge under-recover suggest this did not happen between late 2021 and October. Another issue concerned the “over and under account”, which was designed to keep BPL’s fuel hedge in balance. This account was allowed to fluctuate within a 5 percent margin either side, and the suspicion then was that these limits had been breached .Both issues were subject to URCA’s oversight.

The regulator, in its statement yesterday, conceded: “URCA considers electricity a basic necessity that should be affordable and remains concerned about the impact of high electricity bills on BPL’s customers and the economy. Considering the widespread complaints, and in accordance with its commitment to protect consumers, URCA has been monitoring the situation.

“In recent discussions, BPL confirmed that fuel charges have reached their peak and customers can expect lower rates moving forward. The company has confirmed the fuel charge will decline this month for many consumers and will be reflected in those consumers’ electricity bills next month.”

However, any decline in consumer bills is unlikely to be significant in the near-term. While it is correct that BPL’s fuel charge peaked at 27.6 cents per kilowatt hour (kWh) over the three-months between June 1 and August 31, 2023, it will only fall slightly - to 25 cents - between September and November for consumers using more than 800 kWh, before falling further to 18 cents between December 1, 2023, and February 28, 2024.

“In reviewing consumer complaints, URCA has found that consumers have unfortunately experienced the compound billing effects of increased demand during the summer months and the increase in the fuel charge via the glide path strategy,” URCA added yesterday.

“Typically, some people’s consumption of electricity doubles in the summer months due to air conditioning and children being home from school. The doubling of consumption, multiplied by the fuel charge, which is almost three times what it was last summer, means many consumers’ bills are significantly higher.

“BPL’s glide path strategy was designed to slowly increase the fuel charge to a peak this summer and then decrease the fuel charge continuously through the end of February 2024. By March 2024, BPL is expected to have paid off its outstanding fuel debt. This means that, as of March 2024, bills are expected to only reflect the actual cost of fuel used in supplying consumers,” URCA continued.

“At that point, provided the market price of fuel remains the same, or decreases, the charge for fuel will naturally decrease. Hence, consumers will receive a lower bill for the same amount of consumption.” However, the actual fuel charges incurred between now and March 2024 will also depend on international oil prices, and in the meantime there will be no relief for Bahamian households and businesses.

Several sources have suggested there were good and valid reasons why the September 2021 trades were not executed, namely that the cash-strapped government did not have the necessary $40m funding and cash flow available to finance the deals, especially with a $246m BPL loan coming due for repayment in February 2022 and nothing allocated to cover it.

However, the latest Fiscal Strategy Report revealed the extent of BPL’s financial woes and the need for government support. “The recent disclosure of approximately $150m of payment arrears of Bahamas Power & Light (BPL) represents a significant unbudgeted liability of the Government,” it said. “To ensure continued provision of essential electrical services to the public, the Government has committed to ensuring payment of this liability by the corporation.”