Bahamas Eco-Forum

The State of Solar in the Sunny Bahamas

by Larry Smith

According to the latest report from the International Energy Agency, which tracks these things, renewables and cleaner-burning natural gas are leading in the race to meet energy demand growth.

In other words, a big energy transformation is taking place, spurred by the Paris climate agreement. But whether the Bahamas will benefit from these advances within a reasonable timeframe is questionable.

Government officials often refer to our high vulnerability to climate impacts like rising sea levels and stronger storms. But we see little real leadership in moving towards a clean energy economy.

Environment Minister Ken Dorsett said recently he became involved in politics to facilitate change. “And over the last four-and-a-half years we have seen evidence of the foundational work for that change, (including) energy sector reform.”

In support, he pointed to a national energy policy that was developed over successive administrations. It sets a goal of 30 per cent renewable energy use by 2030.

The policy envisions the Bahamas as a “world leader in sustainable energy”. And to its credit, the government did pass a new Electricity Act, which specifically provides for renewable energy generation and grid inter-connection.
The draft law was left on the table by the previous administration and not enacted by this government until 2015. Provisions in the law for the establishment of Bahamas Power & Light (BPL) are already in effect, but the renewable energy provisions are not.

That’s because everything is on hold until the Utilities Regulation and Competition Authority (URCA) can approve plans and set up a licensing and regulatory system for the electricity sector.

BPL and BEC: Siamese Twins of Electric Power

By Richard Coulson

Hurricane Matthew played no favourites here, and neither has Bahamas Power & Light (BPL).

From the flats of South Beach, yea unto the peak of Mount Fitzwilliam, darkness has reigned; no Almighty said “let there be light.”

On Friday (Oct 21) Government House ballroom was unlit. The handsome invites for the gala Celebrating Women International had to be scrapped, although dispatched by the Governor-General, Dame Marguerite Pindling.

“Cross” might be a polite word for the eminent lady’s reaction. Even Queen Elizabeth II would have hard words for her Prime Minister if Buckingham Palace went dark for two weeks.

Unfortunately, the blame lies directly on Dame Marguerite’s own government, inherited directly from her charismatic late husband Sir Lynden. Since her ministers took office in May 2012, we can easily review their record of abject failure in leading us to cheap, reliable electric power—a principal plank in their Charter for Governance election platform.

In 2013, the Prime Minister delivered a lengthy, grandiose statement of how energy supply would be reformed, as developed by his chosen National Energy Task Force. Amid the flow of eloquent generalities, and the standard platitudes about renewable energy (meeting 30% of our total needs by 2030) several specific points can be found about reorganising the Bahamas Electricity Corporation (BEC).

Recognizing that “fundamental realignment would be required”, BEC would be divided into two companies, one for transmission and distribution and another for generation. Although government would retain a stake, other parties would be promptly invited to bid by sending out RFPs (requests for proposals), and initial public offerings (IPOs) would be launched locally. With KPMG Advisory Service on board as principal consultant, all would be wrapped up by 2013 year-end.

As usual with Mr. Christie’s more ebullient announcements, his promises have proved illusory. There is still no government programme for wide generation by solar, wind or waste resources, and the projected reorganization of BEC has been radically revised and down-sized.

By late 2013, it was obvious that any acceptable RFPs were slow in coming, and questions to Minister of Works Philip Davis were being met with evasive answers that the matter was still “under study”. Finally, in early 2014 Minister Davis acknowledged that “we may fall back on doing it ourselves...BEC may remain unified and not split up”, reversing all the earlier analysis and advice by KPMG and a technical advisory firm.

For the remainder of 2014, there was no further hard news. Then in May 2015, government announced firmly that it would keep 100% ownership of BEC and, for a ”transitional” fee of $900,000, simply grant “management” to Power Secure International (PS), an American company recommended by the US Secretary of Commerce, no less.

That was an unusual choice, since PS, although publicly listed on the New York Stock Exchange, was not itself an electric utility but a provider of specialty services to major utility companies.

Although PS was a successful, entrepreneurial firm founded by its CEO Sidney Hinton, it took until early February 2016 for the company to sign a five-year management service agreement with government, providing that PS could earn as much as $5 million annually for five years.

Then, within three weeks, to Mr. Christie’s evident surprise, PS announced that it had been bought by US utility giant, The Southern Company, (formerly the controlling shareholder of Freeport Power) for some $431 million, giving a nice profit to its shareholders including Mr. Hinton, who clearlyhad been negotiating this major deal during all the months he had been dickering with our government about BEC.

Meanwhile, government had incorporated a new company named Bahamas Power and Light, wholly owned by BEC and created (here I quote) “to allow BEC to split off its generation, transmission and distribution duties and prepare for ring-fencing the utility’s $450 million-plus legacy debt.”

In other words, BPL would become the operator of all aspects of our electric power business leaving BEC as a corporate shell with nothing but debt. PS (now a Southern Co. subsidiary) would actually manage BPL and install its senior executives under a Bahamian board of directors headed by banker Nathaniel Beneby.

The first choice of managing director was a gentleman who resigned “for personal reasons” within three weeks. PS hid their embarrassment by quickly finding a replacement, which they did by going outside their ranks and recruiting Pamela Hill from her senior position with a major US company. She was officially named CEO of BPL effective May 2 this year.

I hope Ms. Hill is a lady of stamina, as she has suffered a rocky road ever since her appointment. Beginning at her Chamber of Commerce breakfast introduction, she has been steadily heckled by the feisty Leslie Miller (a former BEC chairman), and union leaders, among others.

When she made rational proposals to increase rates for electricity consumers, she was immediately shot down by government, which feared political consequences. Then she had to share the bIame for government’s failure to build foundations for the installation of new rental generators. And in June she had to warn of continuing outages during summer months, raising the ire of consumers.

This month’s descent of hurricane Matthew was her personal “perfect storm”, as public wrath rose to new heights about “the worst hurricane response in our history”. In fact, Ms Hill's response seems exemplary. Her contact with Southern Co. enabled the speedy arrival of a flotilla of bucket trucks, with drivers and repair equipment, which would still be tangled in red-tape if handled by Mr. Davis’ Ministry of Public Works.

The catastrophic damage along our south coast resulted from a geographical peculiarity combined with uncontrolled property development, poor drainage systems, and unenforced building codes - issues over which she has no control.

The hurricane should not be used to obscure the fundamental failings of our energy regime, which will continue even in the sunniest weather. The real difficulty lies in financial management. As Ms.Hill herself has stated, BPL is short of current operating funds to improve service and to correct the shoddy maintenance that government, through BEC, has allowed to fester for many years.

These problems are not resolved by simply slotting in the new company. BPL. underneath BEC. It’s hard to understand—I certainly cannot—the incestuous relationship between these two companies.

If BPL is now the operating entity, why do consumers still get their bills headed by the BEC logo and turn to the BEC internet website to get information about billing, plus a lot of out-of date material about a previous board of directors?

Googling BPL, one finds only a facebook page with a bold pink announcement that the company “Supports Breast Cancer” (sic) - nothing else except an address and telephone number. When will BPL be able to produce its own corporate facts and financial statements, the latest one from BEC covering the year 2010?

Any improvement in service is hamstrung by BEC’s legacy debt of at least $450 million, which certainly cannot be funded by BPL from its own operations. Early this year government authorized a BEC $600 million “Rate Reduction Bond”, but current reports show little success to date in placing these securities, and the technical default of an outstanding $100 million BEC bond was recently announced.

Pamela Hill should be given full latitude for squeezing operating efficiencies into profit for BPL and dividends up to BEC, but it’s hard to see her making substantive improvements and reducing rates in the face of that overhanging debt.

Regrettably, both washed-out South Beach residents and the Government House ballroom may have to endure more nights in the dark.

North Carolina Firm Gets Contract to Reorganise Bahamas Utility

by Larry Smith

A five-year management contract, worth at least $10 million, for the Bahamian state-owned electric utility was announced by the government in early February.

The bankrupt Bahamas Electricity Corporation has been stripped of some $100 million in legacy debt and a new company called Bahamas Power & Light has been set up as a wholly owned subsidiary of BEC.

Recently passed energy reform legislation calls for the issuance of a government-backed bond, which will be used to refinance BEC's existing debt, as well as to fund infrastructure and efficiency investments for BPL

The contract was awarded to a North Carolina company called Power Secure, which provides energy technologies and services to utilities in the United States. The company reported revenues of $257 million in 2014, and says it is a pioneer in distributed generation power systems with smart grid capabilities.

The agreement calls for a $2 million per annum management fee, plus the ability to earn a 150 per cent bonus - an additional $3 million per year - should the company meet certain benchmarks.

The benchmarks are presumably contained in a business plan that was presented to the government (at a cost of $9800,000) but which has not been made public. Neither has the management agreement been made public.

BPL is managed by a new public board headed by RBC Bahamas country manager Nat Beneby. The board has replaced longtime BEC general manager Kevin Basden with Jeff Wallace, who has more than 35 years of utility experience in the US.

Most recently he was vice president of fuel procurement for Southern Company, where he managed a $7 billion budget.

At a press conference recently, Power Secure executives said there would be a reorganisation of staff that might include some voluntary reductions.

The Bahamas and the Devil's Excrement

by Larry Smith

Prime Minister Perry Christie says climate change “threatens the existence of the Bahamas as we know it”. So what does the recent Paris agreement to tackle climate issues mean for the Bahamas - and the rest of the world?

In case you didn’t know, almost 200 countries spent two weeks at the end of last year crafting the world’s first universal agreement - one that signals the end of the fossil fuel era.

The goal is to peak greenhouse gas emissions “as soon as possible” in order to keep global temperatures from rising more than 2 degrees celsius above pre-industrial levels.

Christie was among those in Paris pushing for more - arguing that warming should be kept below 1.5 degrees. "The Bahamas and other small developing island states are seeing…life-threatening impacts, and the science tells us we can only expect more over time,” he said.

UNPRECEDENTED RECOGNITION

Politically, the Paris agreement marks an unprecedented global recognition of the risks of climate change. Economically, it will push investment towards adaptation measures and clean energy. Beginning in 2020, industrialised countries will spend at least $100 billion a year to help developing nations fund their transition to green technology.

The good news is that the agreement was unanimous - and the most significant effort to address climate change ever. However, it is also mostly aspirational. As the Economist magazine explained in generally favourable terms: “It requires countries to act on climate change, and to increase their actions over time, but it says nothing concrete about how much anyone has to do."

The editors of the Economist acknowledged that public opinion and international pressure had produced the Paris pledges. "The hope is that similar bottom-up processes, rather than unenforceable UN mandates, will drive up the level of action in decades to come."

As part of the conference process, the Bahamas submitted its plan to address climate issues in November. The plan says we will adapt to climate impacts while pursuing "a low-carbon pathway in conformity to growing international and public pressure for environmentally friendly development.”

Bahamas PM Warns, But Does Nothing to Address Climate Risks

by Larry Smith

Ever since Dr Marcus Bethel was named minister for energy and the environment in 2006, during the first Christie administration, we have been hearing about energy reform.

Spurred by the Inter-American Development Bank, Dr Bethel launched the process to draft a national energy policy. The goal was to co-ordinate traditional and alternative technologies to meet future power demand.

At the time, oil prices were skyrocketing. And countries were seeking to expand the role of renewables to avoid economic disruption in the event of a global energy crisis. Pollution and climate change issues also played a major role.

Our initial draft policy was based on an IDB study of the local energy sector, as well as a review of regional policies. And in 2007 I wrote that "by now we should be well on the way with alternative energy incentives, efficiency measures, and demand planning."

But we weren’t.

Landfill Fires Highlight Government's Failure to Advance Energy Agenda

by Larry Smith

In case you hadn’t noticed, the Harrold Road dump exploded again last week, spewing billowing clouds of toxic fumes and black smoke into the clear skies over New Providence.

The government’s response was to send in the fire trucks and suggest that those affected by the pollution shut their windows and visit a clinic.

His job done, Environment Minister Ken Dorsett then jetted off to a regional conference at a Mexican resort.

Ironically, an official release on this meeting said it gave an opportunity to Ministers of Environment "to articulate to the world the need to embed the environment in all facets of sustainable development.”

Meanwhile, back in Nassau the dump continued to burn - not for the first time, and likely not for the last. In fact, the dump catches fire every other year in the dry season, releasing cancer-causing chemicals and particulate matter into the air. It has been doing this for decades.

Reycling in the Bahamas—More than you Think

by Larry Smith

During an informal discussion at a science conference on Abaco recently, the question of recycling came up, with one participant insisting that even the local breweries’ much-touted bottle re-use programme was not working.

So I decided to take a look at all the recycling efforts in the country today. Surprisingly, there’s a lot more going on than you might imagine.

First, a little context. These days about a third of the 250 million tons of trash Americans create each year is recycled or composted, compared to about 40 per cent of the average waste each European generates.

This puts the US somewhere in the middle of the major countries (United Kingdom, Canada, Germany, France and Japan) in terms of landfill disposal. Only a few countries – Germany, the Netherlands, Sweden, Belgium, Austria and Denmark – have been able to phase out landfilling.

But for small island states like the Bahamas, both land and cover material are at a premium. And landfill management is often inadequate, leading to frequent toxic fires, pollution of the water table, overproduction of greenhouse gases, and the spread of vermin. And illegal dumping creates obvious problems for tourist-oriented countries like ours.

Government Wants to Restructure BEC by Year End

by Larry Smith

The government wants to split the state-owned Bahamas Electricity Corporation into two separate companies by the end of this year, and has invited private sector management bids.

The proposal is similar to the current situation in Trinidad and Tobago, where a state-owned utility retails electricity via a single interconnected grid, while a privatised joint venture company produces the electricity.

Trinidad’s state-owned utility divested its generation assets in 1994 to a public-private partnership called PowerGen. The shareholders of PowerGen include the state utility, Maru Energy of Georgia and Amoco of Texas.

The proposal prompted a response from former BEC chairman Michael Moss, who said unbundling the corporation's assets was not a good idea. "Power plants account for about 80 per cent of BEC's total operating cost," Moss said, "with transmission, distribution and customer service accounting for the remaining 20 per cent.

"Separating generation from transmission, distribution and customer service will likely lead to increased cost to consumers, as there will inevitably be a duplication of administrative and other overhead costs in the two organisations."

Moss also told me that the number of small Family Island plants operated by BEC (some with as little as two or three employees) posed another problem.

"How do you split generation from transmission, distribution and customer service at such locations? Not only will there be an increase in administrative overheads with two separate entities, there will likely have to be an increase in the number of employees."

He said the government should privatise BEC as a a single entity to maintain economies of scale, and noted that the Trinidad model had proven less successful than models which kept the original company intact.

Although the timeframe for such a major restructuring of the Bahamian energy sector is considered extremely short, Prime Minister Perry Christie has denied that the government’s move was influenced by special interests.

Some observers have suggested privately that the proposed arrangements are part of a done deal with generation specialists who have no knowledge of, and want no part of, the headaches of operating a transmission and distribution network and dealing with customer service issues.

Government will therefore be stuck with these less desirable components, as is the case in Trinidad and Tobago. All of the power companies within CARICOM are vertically integrated except for Trinidad and Tobago. The regional electricity market is characterized by a mix of state-owned and private or partially private utilities.

Under this scenario, the most likely player is Genting Group, the Malaysian multinational which has announced several investments in the Bahamas tourism industry since Christie and his Progressive Liberal Party were returned to office in May 2012.

Genting's oil and gas division is both a production and exploration company, and the Bahamas is about to embark on exploratory oil drilling in offshore waters. Genting also generates power in Malaysia, China and India.

Genting provided the government with a report on energy and cost reduction at the end of last year, and this past May Christie was said to be in "high-level talks" with Genting in New York involving energy and resort investments in the Bahamas.

But the prime minister has insisted his administration did not have any specific candidate in mind to take over BEC. He said he was pushing to seal the deal by the end of the year purely in response to complaints about the country's high electricity rates.

There had been no public discussion of restructuring BEC until the prime minister's surprise statement in mid-August. A Request for Proposal was subsequently issued, which outlined “the intent of the government to create two new companies into which relevant assets, liabilities and operations of the Bahamas Electricity Corporation will be transferred...to achieve cost and operational efficiencies.”

An experienced utility management service provider will be recruited to help manage transmission and distribution services. This will include nationwide responsibility for the operation, maintenance, repair, and expansion of electricity transmission and distribution systems, as well as billing, collection, customer services and other relevant services.

A joint venture partner will be recruited to assist with the operation, maintenance, repair, financing, and expansion of BEC’s current electricity generation facilities across The Bahamas. Once established, a portion of the shares of the joint venture company will be offered to the Bahamian public.

All proposals must be submitted by September 13, with payment of a non-refundable fee of $25,000.

“We are inviting (applicants) to bid on the management of BEC, similar to the Nassau Airport Development Company," Christie said. "You simply come in and manage BEC, or a private company becomes responsible for the generation of electricity at BEC and the management and distribution of it.”

Nassau Airport Development Company is owned by the government and currently managed by a Canadian firm called Vantage Airport Group under a 10-year contract. In 2007, NAD signed a 30-year lease with the government to manage and operate Lynden Pindling International Airport.

Christie said the government’s objective is to “create efficiencies which will allow for significant reductions in the cost of energy, increased energy security, environmental responsibility, reliability, and increased competitiveness as a country.”

He said there would be no job losses as a result of this process, adding that any agreement would include significant investments in new technology training for Bahamians. He also said that “liberalisation” of the energy sector could be expected to create new business opportunities for Bahamians.

But union leaders reacted negatively, saying they had not been consulted over the restructuring proposals. Union leader Clinton Minnis said BEC employees were concerned over their jobs and unsure of what the proposals would mean for consumers “as the government is carrying a lot of the electricity costs now.”

Bahamas' Incoherent Energy Policy

by Larry Smith

The budget proposals relating to the state-owned Bahamas Electrcity 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".

Bahamas To Go Ahead With Exploratory Oil Drilling

Environment Minister Ken Dorsett said the government would not require a national referendum - as previously promised - before going ahead with licensed exploratory oil drilling. He added that an updated regulatory framework would be implemented before drilling takes place.

"The new regulations are substantially complete already and will be presented to Cabinet very shortly," Dorsett said. "Exploration drilling is of course the only way the Bahamian people will be able to get a scientific answer to the burning question as to whether petroleum reserves even exist in commercial quantities in our waters. Obviously, we are not going to have a referendum on a hypothetical proposition.

"If during the course of licensed exploration activities, commercial quantities of oil are, in fact, discovered in our waters, we would then engage the Bahamian people in an extensive public information programme to ensure that all important facts are laid before the people for their consideration and discussion, well in advance of a national referendum on the matter."

As part of this public information process, he said, the government would provide a timeline for production and engage in a national dialogue on how oil revenues should be used. Exploration data will not be available until late 2014 or early 2015.