Chamber warns on energy cost increase for ‘most businesses’


Tribune Business Editor

The Chamber of Commerce yesterday joined those voicing concern that Bahamas Power & Light’s (BPL) new rate structure will fuel more price increases by raising energy costs for “most businesses”.

The business advocacy group, while praising the ambitions and objectives of the Davis administration’s energy reform strategy and the intended long-term impact, said in a statement it is “very concerned with the short-term impact of the policy shift” that will force companies to subsidise low income, vulnerable households.

“The Chamber is concerned... over what appears to be a strategy to increase the cost of energy for certain consumers using in excess of 800 kilowatt hours (kWh) a month as this will impact most businesses in the country, leading to a further increase in the cost of doing business,” the Bahamas Chamber of Commerce and Employers Confederation (BCCEC) said.

“This could lead to increases in prices for goods and services if these increases are significant and businesses have to pass them on, thereby offsetting some of the benefit provided by energy cuts to other consumers.....

“While we applaud the move to secure our energy infrastructure long-term, we are very concerned with the short-term impact of the policy shift and welcome the opportunity to work closely with the Government, BPL and any proposed partners to ensure safe, secure and successful implementation.”

The Chamber’s comments echo concerns reported by Tribune Business over the past two days regarding the so-called Equity Rate Adjustment strategy, which is set to take effect from July 1, but was only unveiled by the Government on Monday.

The changes will give all consumers - both households and businesses - a 2.5 cent per kilowatt hour (kWh) discount on the first 800 kWh that they consume. But, above that threshold, BPL customers will have to pay a extra 1.5 cent charge over and above BPL’s actual cost of fuel for every kWh used.

The Prime Minister’s Office, giving an example of how this would work, said: “If the [actual fuel charge] is 20 cents per unit (kWh), then the customer will be 17.5 cents per kWh for the first 800 units (kWh). The remaining units (kWh) will be billed at 21.5 cents.”

Multiple business community sources, though, pointed out that enterprises of all sizes - right down to ‘Mom and Pop’ restaurants and shops - consume significantly more energy than 800 kWh per month especially during the upcoming summer period. 

With the bulk of their consumption above this 800 kWh threshold, several in the private sector voiced concern that the reduced base rate for small and medium-sized enterprises (SMEs) will be more than offset by greater BPL fuel charges especially if global oil prices increase due to higher summer demand.

Jobeth Coleby-Davis, minister of energy and transport, yesterday challenged fears of increased energy costs for most Bahamian businesses as a result of the revised BPL tariff structure by asserting that “56 percent of regular commercial consumers always consume less than 800 kWh”.

This, she implied, would place most companies - especially SMEs - below this consumption threshold and into a space where they will enjoy discounts on both BPL’s base rate and calculated fuel charge. “It is worth mentioning consumption bands for the different classes of consumers,” Mrs Coleby-Davis said.

“Fifty-eight per cent of residential consumers always consume less than 800 kWh. Fifty-six per cent of regular commercial consumers (not on general service) always consume less than 800 kWh.” She added that 69 percent of energy is consumed by BPL’s residential customers who either use less than 200 kWh per month or between 201-800 kWh.

“This means that, while 42 percent of consumers sometimes consume above 800 units, they seldom go way above,” Mrs Coleby-Davis said, confirming that the Equity Rate Adjustment structure will be in place for three years until BPL’s tariff submission is then reviewed and approved by the Utilities Regulation and Competition Authority (URCA).

Bahamian businesses spoken to by Tribune Business yesterday said they are still trying to understand how the new BPL tariff structure will work and what impact it will have for their particular enterprises. Vasco Bastian, the Bahamas Petroleum Retailers Association’s (BPRA) vice-president, told Tribune Business that while unable to comment on the new rates any relief on electricity costs will be welcome.

“I can tell you one thing,” he said. “Any relief we could somehow get from this new deal with the Government, Shell and Island Grid or whoever the partners are, we’ll be happy. I know, as a businessperson who owns gas stations, operating 24 hours a day seven days per week, if those parties can reduce the cost of electricity from $12,000-$13,000 a month to $3,000-$4000 we’ll welcome it.

“Your coolers are running 24.7, your air conditioning is running 24/7, the ATM relies on electricity. Every piece of equipment in a gas station relies on electricity. Between the hotels, the food stores, the hospitals and the gas stations we’ll be happy people in this country if they can reduce the cost of electricity by 30-40 percent.

“If they reduce the cost of electricity by 30-40 percent, we’ll be happy, but we have to get more details on how this impacts us.... I can say this much: Any type of relief we welcome. We definitely need the help, we definitely need the relief.”

Walter Wells, president and chief executive of Caribbean Bottling Company, the Coca-Cola producer, told Tribune Business that he is also still processing the new rate structure but acknowledged that large corporate energy users such as his business may have to endure short-term pain in their light bills for longer term gain.

The Prime Minister’s Office, in detailing the Equity Rate Adjustment’s impact, asserted that only BPL’s largest consumers - its 300 general service consumers representing around 500 accounts and less than 1 percent of the utility’s customer base - will see their light bills increase after July 1.

While it said energy costs for the likes of hotels, food store chains and manufacturers will be less year-over-year, that will not be difficult given that the same period in 2023 featured a 163 percent hike in BPL’s fuel charge compared to October 2022 in a bid to reclaim under-recovered fuel costs.

Manufacturers such as Caribbean Bottling are likely to feature among BPL’s general service consumers. “To be honest with you, I’ m hoping that is not the way it pans out,” Mr Wells said of the possibility of higher energy costs, “but until I see precisely what they’re proposing I cannot comment with authority on it .

“The reality is that our light bills is very high compared to where it was some years ago and we were hoping they will go down. It sounds like they may not go down that quickly but I’m hoping that some of the things they are proposing will have an impact on the cost of electricity.”

Pointing out that electricity rates are beyond the private sector’s control, Mr Wells added that it was virtually impossible for manufacturers such as Caribbean Bottling to reduce energy consumption because they need to run their production lines for however many hours per day to generate the products that provide their sales income.

“We have to produce product or we don’t,” he said. “I think the same principle applies to any fuel retailer or wholesaler. It’s very difficult to adjust your consumption. I think all of us today are operating with types of equipment that are as efficient as they can be for electricity consumption standards.

“There’s not much we can change. We’re very conscious of electricity costs and are doing everything we can to minimise it.” Asked about switching to renewable energy, Mr Wells replied: “That’s not cheap either. There’s a significant investment, particularly for large operations like we have. Certainly, if we’re going to LNG I’m hoping that, long-term, we should see an impact from the changes that are proposed.”



Porcupine says...

Sorry, but this is about votes, not about the competitiveness of businesses.
What they don't say is that the overall cost will be borne by the entire society, because businesses will have to pass along these costs to consumers. Even though the "marginalized population" as it is referred to will see some relief on their electric bills, the cost of doing business in The Bahamas remains horribly high. All of these factors contribute to the rising inflation which is killing our people and our country. The point the business community is asking is, even though some people's BPL bill will come down, what about most businesses who will necessarily pass this increase along to their customers, even the so-called marginalized population in our country. This same paper already has highlighted how inflation is outpacing wages. BPL is a failure. There is no quick political fix. Not only has BEC / BPL management failed, due to political interference and abject incompetence, but it has also been fleeced by the employees of that corporation. It appears that everyone has had their hand in the cookie jar. Do we forget what Mr. Miller said when he was "in charge" of BEC? How many private businesses did he say were being run out of BEC? Do we forget that in this same paper there were tanker trucks stealing diesel on a daily basis from BEC? How many other people were stripping BEC of its assets on a daily basis that we do not know about? How many politicians were lining their pockets from BEC / BPL coffers? Ignorance is bliss.

Posted 13 June 2024, 12:41 p.m. Suggest removal

TimesUp says...

How do you use 200kwh? 1 lightbulb?

I have all gas appliances, insulated roof and walls, energy efficient fridge, 20 seer ac units set at 80 in the day and 84 at night. I allegedly consume 1800kwh.

Posted 13 June 2024, 1:14 p.m. Suggest removal

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