An important pursuit
No modern economy can thrive if individuals and businesses have to pay exorbitant amounts for electricity. Here in The Bahamas we pay around 40 cents per kilowatt-hour. The average price of electricity in the United States is near 13 cents per kilowatt-hour – with that price being in the nine-cent range for some states.
What makes the situation worse here is the poor service from the state provider, Bahamas Power and Light (BPL). Outages are common during the summer months when usage increases. Some businesses have to close. Others, residences too, lose equipment from the fluctuations on and off.
Then, there is the nebulous energy surcharge. The average residential light bill in The Bahamas increased by 45 percent between October 2017 and October 2018, according to data provided by BPL, driven by a surcharge hike.
The company says the surcharge is influenced by the cost of fuel at a given time, and the type of fuel it uses. Sometimes it uses more heavy fuel, which is cheaper; other times it’s diesel, which is more expensive. Many consumers don’t accept BPL’s explanation, however. The charge seems less than rational.
Prime Minister Dr. Hubert Minnis in December last year promised the government would bring energy costs down for all residents and businesses, though he declined to give a specific date. He said an announcement would be made “next year”. Such a change would excite weary Bahamians tired of paying too much to BPL.
The government raised the rate of value-added tax (VAT) from 7.5 percent to 12 percent, including on BPL bills, in July. To offset the impact on BPL customers, it said electricity bills $100 or lower would be exempt from VAT. The ceiling was increased to $200 after public outcry.
The government most recently raised the ceiling to $300. Minister of Public Works Desmond Bannister said the removal of VAT on electricity bills $200 and lower helped 52,364 customers in October 2018. A total of 64,085 BPL customers stand to benefit from the exemption increase to $300, he added.
The government must stay the course on the long-term efforts to fix BPL. It has reduced staff through voluntary separation packages; it is restructuring the state supplier’s debt; it signed a contract with Shell North America for a new 270 MW power plant in New Providence that will in part use natural gas. No one can say how much the rates could fall by, but there is an expectation that they will as a result of these efforts.
Getting the rates down and improving the quality of service would boost the economy. It would put money back into the pockets of residential consumers and the bank accounts of businesses. It would also encourage more investment in The Bahamas – especially if the rates fall noticeably.
No matter who won the last election, whether Free National Movement (FNM) or Progressive Liberal Party (PLP), energy sector reform this term was critical. It is something that must be done if we are to have a period of sustained prosperity.