Wednesday, Sep 26, 2018
HomeOpinionOp-EdFocus | BPL needs a long game, pt. 1

Focus | BPL needs a long game, pt. 1

Bahamas Power and Light headquarters.

The Bahamas Power & Light Company is a critical entity in the life of this nation. It is the principal supplier of the energy needed to fuel the social and economic activities of this nation. Both its cost and reliability impact our quality of life. It has monopoly status in the country, so no other entity, save and except for Grand Bahama Power and Light, which has that monopoly on Grand Bahama, can supply energy to the people and organizations here. For the foreseeable future, it will continue to be the major source of power.

The Bahamian people have invested billions of dollars in BPL, the former Bahamas Electricity Corporation (BEC), since 1956. Up to 2012, the company was profitable, but since then, it has deteriorated financially. The company is heavily indebted, in desperate need of infrastructural upgrades, and its human resources seem strained to the max. Reliability is tentative at best, and the cost to consumers is bludgeoning. We can debate who or what caused this state of affairs in perpetuity, but that will not correct BPL or the impact it is having, or not having, on the country’s fortunes. Recent upheavals with its board of directors did not help the situation. BPL is a company in somewhat of a crisis.

No one can take comfort in the challenges of BPL, for its challenges are, in fact, our challenges. Our well-being as a nation and people is inextricably tied to the well-being of that company. We need BPL to find its way and to do so in a significant way. If it is to do so, it needs a long game. All this talk about spending millions on repairs, erecting an LNG plant, executing separation packages, etc. amounts to tactical maneuvers when strategic focus is required. BPL, as a matter of strategy, needs a long game.

Strategy is about winning; that is, making the most of the opportunities presented and achieving the purpose for which one exists. BPL seems like a company in an identity, or rather policy, crisis. It seems confused about the purpose for which it exists. Yes, we, and they, know that the company was created to supply The Bahamas with electricity, but that is only a part of the story. The rest of the story has to do with how it was to do so. Was it created to supply the country with electricity guided by a principle of shareholder wealth maximization, or was it created to supply electricity under the principle of social welfare? Or, was there some combination or hybrid of these two principles that it was to follow? There is a substantial difference in the behavior expected of the company depending on which principle it adopts.

If shareholder wealth maximization is the aim, then the company’s singular focus would be to keep expenses low and revenue high, so as to give shareholders maximum profits. This is especially easy for a monopoly that does not have to compete on price with anyone and charges prices no one can refuse. Even if its reliability is suspect, it would not matter. The only things in this scenario that affect profitability would be the competence of the company’s team and the economic well-being of its consumers. With a strict focus on maximizing wealth for its shareholders, the government of The Bahamas, and by extension the people of The Bahamas, the only thing that one would look for at the end of the fiscal year for BPL would be its net income or profits.

If, however, social welfare is the primary focus of BPL, then rather than focus on profits, the company would focus on people, that is, getting electricity reliability to the population of The Bahamas. In this instance, some costs that the company might not otherwise bear would be borne, because its mandate would be a social one. In this instance, it would not matter if there was economic viability in supplying electricity to small populations, as the welfare mandate would override. Additionally, the cost of electricity might be subsidized in sparse populations and under certain circumstances to achieve a quality of life end for citizens. To do this, the price charged to those in the larger population, like those on New Providence, would be high enough to subsidize the lower price to those in the smaller populations, like in those on Acklins and Crooked Island. In this situation, at the end of the year, it would not be so much the profitability of the bottom line that is inspected, but rather the population penetration and satisfaction of the people.

In a hybrid situation, there would be an attempt to balance both the profitability and the social welfare aims. There would be an attempt to get as much profit as possible while ensuring as much supply of electricity reliability to the population as possible. This might seem like the best of both worlds, but it is the most difficult to achieve. It is especially difficult to achieve in a world where politics is so sharp, unions are so strong, islands are so scattered, people are so demanding, costs are so high, the economy is so lackluster and the government’s coffers are so challenged. In the best of times, this balance is difficult to achieve; in worse times, it’s near impossible.

There is a way forward for BPL, however, but it must clear its mind. BPL has too many minds. It has a mind to make profits. It has a mind to reduce cost to consumers. It has a mind to supply every consumer with electricity, no matter the cost. It has a mind to Bahamianize. It has a mind to get foreign expertise but without having foreigners. It has a mind to hire everyone while it also has a mind to fire everyone.

In one scene of the movie “The Last Samurai”, Algren (played by Tom Cruise) is in a mock fight with one of the samurai and is being terribly defeated. After watching Algren continuously face defeat match after match, a young samurai named Nobutada (played by Shin Koyumada), rushes up to him and says, “Please forgive… too many mind.” Algren replies, “Too many mind?” Nobutada answers, “Hai (yes). Mind the sword, mind the people, mind the enemy, too many mind. No mind.”

What was true of Algren in that movie seems true of BPL today, it has too many minds. This company needs a single focus, and it needs that focus for the long game. Next week we will talk about that single focus and the long game for which it is needed.

• Zhivargo Laing is a Bahamian economic consultant and former Cabinet minister who represented the Marco City constituency in the House of Assembly.

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