by Larry Smith
The recent budget proposals relating to the Bahamas Electricity Corporation are clear evidence of the government's failure so far to create a new energy model for the country.
The path to that model has been outlined over the past two administrations. It calls for changes to the Electricity Act (which dates to the 1950s), a modern Renewable Energy Act to provide a framework for alternative energy production, and a new management regime (including a waste-to-energy plant) at the environmental disaster we know as the Harrold Road landfill.
Last summer, Environment Minister Ken Dorsett made a grandiose statement to parliament confirming that the government was "working assiduously" to achieve these goals. But only recently, State Investments Minister Khaalis Rolle admitted the entire situation was "still under review".
Reform of the regulatory framework for energy was a key recommendation made by Fichtner, the German consultants to the previous administration paid by the InterAmerican Development Bank. However, the Christie administration asked for these issues to be re-studied by the Malaysian multinational, Genting Group. They completed their review late last year, arriving at similar conclusions.
Meanwhile, the government is said to be considering scores of local and foreign proposals for the production of energy from solar plants, waste-to-energy plants, ocean thermal conversion facilities and wind farms. However, it is worth noting that such talks have been ongoing for many years across successive administrations with no concrete result so far.
In fact, new government guidelines for alternative energy proposals for the family islands were hurriedly withdrawn recently after being posted online. At the time, Ken Dorsett said cabinet had not approved the guidelines, which only served to increase confusion over the government's energy policy - or lack of it.
Then we must consider the even more confusing serial statements from the chairman of the Bahamas Electricity Corporation. In January Leslie Miller said BEC was enthusiastic about "serious proposals" to build a $200 million-plus regasification terminal at Clifton Pier and convert BEC's generators to run on imported natural gas instead of imported oil.
But last year, Miller was seeking to cut a deal with Venezuela to supply BEC with cheaper oil, and thereby cut Bahamian electricity bills by 10-15 per cent. Cheaper oil is something which critics say does not exist, since oil is a commodity that sells at whatever price global demand sets. In 2012, for example, BEC paid $384 million to import fuel from regional trading intermediaries.
And just a month or so ago - in April - Miller said BEC planned to outfit the Clifton power plant with brand new generators at a cost of some $285 million. He predicted this would produce a 7-10 per cent drop in electricity prices as early as next month (i.e. July).
It is unclear where things stand with this projected investment, but it was only last summer that Minister Dorsett was talking about about reliability upgrades and replacement and rehabilitation of auxiliary equipment at BEC to reduce electricity prices. "Increasing baseload generation could save BEC $100 million annually," he said at the time.
Former BEC Chairman Michael Moss responded that this would involve hundreds of millions in upfront costs that the utility simply could not afford. "To achieve $100 million in savings would mean doubling the installed capacity at Clifton Pier. BEC's bottom line cannot sustain that, so unless the government is coming to the rescue I don't see it happening," he said at the time.
Meanwhile, the government's recently introduced budget exempts BEC from paying a 10 per cent excise tax on fuel imports "as a means of providing relief on electricity costs, which are projected to decline by 6.6 per cent as a result."
In his recent communication, Prime Minister Perry Christie reiterated that the government was "continuing to examine" all the energy proposals it was receiving so that the country could "move forward expeditiously to reduce energy costs."
According to Chairman Miller, BEC's excise tax bill would have amounted to some $35 million. "By eliminating the tariff, that saves the consumer 6.6 per cent and we're going to get some other benefits by cutting back and try and get that up to 10 per cent…You probably won't see it until September," he said.
But the government will now require BEC to pay a business license fee of about $15 million, offsetting the tariff exemption by about half. Also, any tax exemption given to BEC is a net loss to the public treasury so it is really a government subvention. The last time BEC received such an exemption was in 2008 - at the beginning of the global financial crisis - in an effort to stave off electricity rate increases.
To sum all this up - in Minister Dorsett's initial statement on energy policy last summer, the Bahamas was promoted as having the potential to become "a world leader in alternate and renewable energy, creating hundreds of new good paying jobs and new economic opportunities for Bahamians.”
But since then we have heard multiple conflicting statements with no clear articulation of the way forward much less the announcement of any concrete measures. The energy report produced by Genting has neither been published nor discussed, the energy task force has offered no progress report, and no information on the status of the national energy policy has been forthcoming.
It is government in the darkness. Energy is one of the most far-reaching problems we have. It touches on almost every aspect of the economy, and our quality of life and our livelihoods depend on the economy. This matter desperately needs to be addressed, if not immediately resolved.
And, of course, there is an equal lack of information about that other elephant in the room - oil prospecting in Bahamian waters and the promised regulatory framework that will govern it.
In the words of a popular Harry Belafonte song of yore…
It was clear as mud but it covered the ground
And the confusion made the brain go 'round.
I went and ask a good friend of mine,
Known to the world as Albert Einstein.
He said "Son, from the beginning of time and creativity
There existed the force of relativity
Pi r square and a minus ten means a routine only when
The solar system in one light year
Make the Hayden planetarium disappear
So if Mt Everest doesn't move
I am positive that it will prove...
You can finish the line however you want.
In fact, new government guidelines for alternative energy proposals for the family islands were hurriedly withdrawn recently after being posted online. At the time, Ken Dorsett said cabinet had not approved the guidelines, which only served to increase confusion over the government's energy policy - or lack of it.
Then we must consider the even more confusing serial statements from the chairman of the Bahamas Electricity Corporation. In January Leslie Miller said BEC was enthusiastic about "serious proposals" to build a $200 million-plus regasification terminal at Clifton Pier and convert BEC's generators to run on imported natural gas instead of imported oil.
But last year, Miller was seeking to cut a deal with Venezuela to supply BEC with cheaper oil, and thereby cut Bahamian electricity bills by 10-15 per cent. Cheaper oil is something which critics say does not exist, since oil is a commodity that sells at whatever price global demand sets. In 2012, for example, BEC paid $384 million to import fuel from regional trading intermediaries.
And just a month or so ago - in April - Miller said BEC planned to outfit the Clifton power plant with brand new generators at a cost of some $285 million. He predicted this would produce a 7-10 per cent drop in electricity prices as early as next month (i.e. July).
It is unclear where things stand with this projected investment, but it was only last summer that Minister Dorsett was talking about about reliability upgrades and replacement and rehabilitation of auxiliary equipment at BEC to reduce electricity prices. "Increasing baseload generation could save BEC $100 million annually," he said at the time.
Former BEC Chairman Michael Moss responded that this would involve hundreds of millions in upfront costs that the utility simply could not afford. "To achieve $100 million in savings would mean doubling the installed capacity at Clifton Pier. BEC's bottom line cannot sustain that, so unless the government is coming to the rescue I don't see it happening," he said at the time.
Meanwhile, the government's recently introduced budget exempts BEC from paying a 10 per cent excise tax on fuel imports "as a means of providing relief on electricity costs, which are projected to decline by 6.6 per cent as a result."
In his recent communication, Prime Minister Perry Christie reiterated that the government was "continuing to examine" all the energy proposals it was receiving so that the country could "move forward expeditiously to reduce energy costs."
According to Chairman Miller, BEC's excise tax bill would have amounted to some $35 million. "By eliminating the tariff, that saves the consumer 6.6 per cent and we're going to get some other benefits by cutting back and try and get that up to 10 per cent…You probably won't see it until September," he said.
But the government will now require BEC to pay a business license fee of about $15 million, offsetting the tariff exemption by about half. Also, any tax exemption given to BEC is a net loss to the public treasury so it is really a government subvention. The last time BEC received such an exemption was in 2008 - at the beginning of the global financial crisis - in an effort to stave off electricity rate increases.
To sum all this up - in Minister Dorsett's initial statement on energy policy last summer, the Bahamas was promoted as having the potential to become "a world leader in alternate and renewable energy, creating hundreds of new good paying jobs and new economic opportunities for Bahamians.”
But since then we have heard multiple conflicting statements with no clear articulation of the way forward much less the announcement of any concrete measures. The energy report produced by Genting has neither been published nor discussed, the energy task force has offered no progress report, and no information on the status of the national energy policy has been forthcoming.
It is government in the darkness. Energy is one of the most far-reaching problems we have. It touches on almost every aspect of the economy, and our quality of life and our livelihoods depend on the economy. This matter desperately needs to be addressed, if not immediately resolved.
And, of course, there is an equal lack of information about that other elephant in the room - oil prospecting in Bahamian waters and the promised regulatory framework that will govern it.
In the words of a popular Harry Belafonte song of yore…
It was clear as mud but it covered the ground
And the confusion made the brain go 'round.
I went and ask a good friend of mine,
Known to the world as Albert Einstein.
He said "Son, from the beginning of time and creativity
There existed the force of relativity
Pi r square and a minus ten means a routine only when
The solar system in one light year
Make the Hayden planetarium disappear
So if Mt Everest doesn't move
I am positive that it will prove...
You can finish the line however you want.
Carib Energy is willing and able to have discussions to speak on LNG for the Bahamas. Carib was recently acquired by Crowley Marine and part of their Petroleum group. We are speaking to companies on bulk LNG for markets such as the Bahamas to supply qtys of LNG with purpose built small LNG ships that can transit from Florida to the Bahamas.
Greg Buffington
Vice President Carib Energy
Crowley Petroleum Services
Posted by: Greg Buffington | June 05, 2013 at 06:15 AM