Questions raised over BEC reform approach

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September 05, 2014

Business people yesterday voiced fears that the new proposed way forward for reform of the Bahamas Electricity Corporation (BEC) will continue to allow too much political interference in the running of the country's primary power producer, and called for an explanation of the rationale behind the decision.
Dionisio D'Aguilar, president of Superwash, former president of the Bahamas Chamber of Commerce and a former director of the board for BEC, said the proposal made known in a statement issued Wednesday evening would appear set to allow the "inherent stupidity to persist" at the corporation.
Gowon Bowe, vice chairman of the Bahamas Chamber of Commerce and Employers Confederation (BCCEC), said it is incumbent upon the government to provide "very clear information about the rationale for the decisions made" with respect to BEC.
"This is a very, very, hot topic for a number of people because of the timeline (of the reform process) and the uncertainty and so I think there needs to be very clear rationale as to what the thought process was."
"People are saying their light bills are like their first mortgage, not their second mortgage. People are looking at it from the point of view of needing to get as significant a rate reduction as possible in the shortest amount of time," said Bowe, a partner with PricewaterhouseCoopers.
Their comments came as KPMG (Bahamas), in its most substantial update on the BEC request for proposal process since February of this year, announced on Wednesday evening that it is intended that a new company, wholly owned by BEC with two distinct divisions for transmission & distribution and generation, will be formed to take on BEC's current operations and assets.
"It is envisaged that separation of generation will take place at a later date, as new generation equipment is installed, and new Renewable Energy Independent Power Producers are procured," said the statement, sent by KPMG (Bahamas) on behalf of its Head of Advisory, Simon Townend.
The position differs from that originally announced when the RFP was launched in August 2013. At that time, the government indicated plans to create two distinct companies, one with responsibility for generation and one with responsibility for transmissions and distribution. The transmission and distribution company would be wholly government owned, while it was unclear what stake the government would take in the generation company.
KPMG (Bahamas) said the government would now enter into the "final negotiation phase" with shortlisted bidders over issues such as the scope of the management agreement in relation to the new company in the areas of refurbishment and optimization of existing BEC assets, a strategy for implementing new dual fuel equipment and related fuel receiving facilities, securing fuel supply agreements and finalizing financing for new equipment.
It said that negotiations would also take place over a management fee structure, with incentives relating to cost reduction and efficiencies, reliability and other "key performance indicators".
Asked to comment on the statement, D'Aguilar said: "What is actually changing from the status quo? If it is still owned by BEC and the government all the inherent stupidity will persist.
"There'll still be intervention and politicians and people who have no idea how to run a company meddling in the day to day. The decision the government has to make in my humble opinion is do they want it to be run as a company or as an arm of the social services department" said D'Aguilar.
"I'm not saying they shouldn't assist people, but they should give people vouchers and it should come directly out of the Treasury. They shouldn't be giving people breaks on their BEC bills for years at time."
Another source with knowledge of BEC's operations, who spoke on condition of anonymity, said that the approach would continue to leave the government in a position to meddle in a way that will allow BEC's state to degenerate financially, with implications for energy costs and reliability.
"The government can't run nothing," the source quipped.
The source also queried how the announced direction will impact BEC's ability to meet the short-term electricity needs of Baha Mar in time for its spring launch.
A message sent to Townend yesterday seeking further clarification on the rationale behind the new proposal was not returned yesterday.
KPMG (Bahamas) said it is intended to conclude the BEC RFP process by November 2014.
The statement pointed out that the government also intends to continue advancing a "residential energy self generation program", finalizing the drafting of amended legislation and regulations for the energy sector and proceeding with advancing renewable energy integration in the Family Islands, however it was not clear which of these goals, if any, was also intended to be concluded by November.

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News date : 09/05/2014    Category : Business, Nassau Guardian Stories

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