New management company for BEC within two weeks

Thu, Dec 4th 2014, 01:01 PM

The restructuring of the Bahamas Electricity Corporation (BEC) will be a mirror of what was done at the Lynden Pindling International Airport. A private management company will be selected to manage BEC, according to a predesigned business plan, with the government maintaining 100 percent ownership of the utility.
Deputy Prime Minister and Minister of Works Philip Brave Davis told Guardian Business on Wednesday that within two weeks the government will commit to a management company, and this company will have certain demands with which it must comply.

New management structure
Guardian Business understands that in the matter of a management company for what Davis called "a new BEC", three entities remain at the table. At one point, InterEnergy, China State Construction Engineering Corporation (CSCEC), PowerSecure, Caribbean Power Partners and Genting were all bidding, but it appears that only China State Construction Engineering Company, Cayman Islands-based InterEnergy and PowerSecure remain.
The move confirms earlier indications that the government had changed its intentions for restructuring BEC. Initially, the request for proposals (RFP) associated with revamping BEC was to involve breaking the corporation into separate power generation and distribution entities. Subsequent communications from the government seemed to suggest that this path was no longer the favored one, and with the discussion of a new company to manage BEC, Davis has confirmed the direction in which the government intends to go. Davis said the government has sought to identify a strong, technically capable and experienced company to manage BEC.
"This management company will have significant autonomy and operate subject to a business plan which addresses the specific objectives of government," Davis said. "We will seek to cause that business model to basically mirror that which the Nassau Airport Development Company (NAD) has for the management of the Lynden Pindling International Airport (LPIA). Like the airport deal, the government will retain 100 percent ownership of BEC."
Davis said the government would commit to a management company that can guarantee the reduction of the cost billed to the customer to an average of less than 30 cents per kilowatt hour (KwH) within 24 months from commencement of the contract.
"Given that the current all-in-cost base of BEC per KwH is close to 44 cents, with customers being billed on average 40 cents, this represents more than a 30 percent reduction. When reflected onto The Bahamas at large, this reduction will save business and residential consumers close to $200 million," he said, adding that the significant savings in fuel will reduce the strain on U.S. dollar reserves.

New Electricity Act
The management company will work to meet the government's objectives, Davis said, and must introduce best-in-class operational practices; environmental stewardship including the remediation of existing liabilities, and state-of-the-art training for its employees. All of this must be developed within a progressive legislative framework.
"My ministry is collaborating with the attorney general's office and BEC to create a new Electricity Act, which provides for new innovations at BEC, enables the energy policy and empowers the Utilities Regulation and Competition Authority (URCA) as the regulator of the sector," Davis said.

The next two years
Davis said the government, in consultation with KPMG, has defined the ways in which fuel and other costs will be reduced throughout the supply chain.
"The first path to cost reduction is through the implementation of an incentive regime for the management company. This regime prescribes a significant portion of the management company's remuneration based on achieving service level targets related to fuel efficiency, rationalization of cost and significant improvements in reliability, that is, fewer and shorter power cuts," he said.
"Effectively, the more efficiently and reliably the new BEC operates, the more the manager will get paid."
Davis said the government intends to "dramatically" change BEC's fuel mix, currently heavily weighted - too heavily, many say - towards light fuel oil.
"Existing diesel generators will be refurbished and improved, and the least efficient engines will be retired. New dual fuel generators will be installed over the first 24 months," he said. "Within that same 24 months, the management company will introduce a new base load dual fuel generation plant in New Providence, minimizing the need to use the combustion turbines."

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