PLP leader Philip Davis. (File photo)
By RASHAD ROLLE
Tribune Staff Reporter
OPPOSITION Leader Philip Davis said the Progressive Liberal Party’s rate reduction bond plan would not have resulted in increased electricity costs for most customers.
Customers are bracing for an extra charge as Bahamas Power and Light moves to refinance its $650m-plus legacy debt. The Bahamas Rate Reduction Bond Ltd will be established as a special purpose vehicle that will issue the bonds and pay investors due interest. This structure will exchange BPL’s legacy Bahamas Electricity Corporation debt and other liabilities for new debt, which will be kept off BPL’s balance sheet via the SPV’s role as issuing agent, thereby relieving the government of its existing $230m guarantee. The old liabilities include around $321m in bond and bank debt; a $100m employee pension fund deficit; and other assorted liabilities, including the cost of environmental clean-ups at various sites around The Bahamas.
While the Christie administration passed the bill to establish a rate reduction bond, the former administration did not move forward with anything that involved the plans.
Mr Davis said at a press conference yesterday: “There was going to be a base rate increase of the electricity bill. That base rate increase as we had envisioned and agreed would not have cost the Bahamian consumer any more than they were already paying because by the time we were there, the trend of the electricity bill was already going down.
“The rate that was going to be added was only going to be for a period of 18 to 19 months, then it was going to be reversed and it was only going to impact the major users so the rate was tiered. So, for example, almost 60 percent of customers were not going to be impacted by the rate increase and that’s the majority of the Bahamian people. We also had the good fortune to negotiate in this fashion because we took advantage of the oil challenge, the decrease in oil costs, so the savings we enjoyed from the drop in that, we were going to pass a a lot of that savings on to the Bahamian public.”
Mr Davis said under the PLP’s plan, people who consumed less than 250 kWH of electricity would not have had to pay extra costs.
Earlier this month, electricity consumers were told to brace for an “adjustment” to their bills by way of an extra charge as BPL confirmed plans for its mammoth $650m-plus refinancing. At the time, Dr Donovan Moxey, the state-owned utility’s chairman, promised that the proposed rate reduction bond issue will ultimately result in “better outcomes” for all Bahamian households and businesses even though the “structure” of electricity bills will change. Using carefully-worded, guarded language, a BPL statement quoted Dr Moxey as saying the new billing structure would “function as a short-term deposit” that will ultimately enable consumers to enjoy longer term savings from reduced fuel costs and more efficient generation plant.
However, legislation to facilitate the RRB issue, which was tabled in Parliament about two weeks ago, makes clear that BPL’s customer base will be relied upon to service what is essentially a doubling of the debt burden associated with the utility to secure its financial future.
Last week, Minister of Finance Peter Turnquest said if BPL does not raise electricity prices, the government would have to raise taxes to deal with its debt.
“Unfortunately, the cost of that fix is significant and in order to meet that, BPL, as a stand-alone corporation, has to raise the money,” Mr Turnquest told The Nassau Guardian. “Otherwise, the taxpayers, the shareholders of the corporation, will have to inject the capital as equity. If we inject the capital as equity, it means that our tax bill will go up because we have to recoup that money.
“If BPL does it on its own, it then has to cover the cost of operations and the reserves that I mentioned and the cost of maintenance as well as pay back to…the lenders that will lend the corporation the money to do what it needs to do to rectify the problem,” he said.