Prime Minister and Minister of Finance Philip Davis has told the House of Assembly that he had no knowledge of any requests that fuel hedge trades be executed for Bahamas Power and Light (BPL) to lock in oil prices last fall.
Minister of Works Alfred Sears has told Parliament that the minister of finance knew and made the decision to reject the requests because it was not deemed to be in the country’s best interest to execute them.
They cannot both be presenting the facts.
This is unacceptable and it is insulting to Bahamians, though many might have missed these developments on this critical BPL matter with all of the craziness swirling relating to FTX and the dramatic collapse of that crypto currency exchange based in our country.
While it might just sound like political sparring as the opposition raises questions on this issue, the failure of the government to approve the execution of those fuel trades matters.
The hedging program, implemented by the Minnis administration in July 2020, provided an arrangement for BPL to purchase oil in the future at a predetermined price to avoid being subjected to the volatility of the market and to stabilize the fuel charge.
Free National Movement (FNM) Leader Michael Pintard has contended that this decision to reject the recommendation to execute the transactions last year after the Progressive Liberal Party came to power meant that BPL missed a golden opportunity to make future oil purchases at lower rates, and customers will thus be subjected to staggering increases in their electricity bills over the next several months.
That Davis and Sears have presented two different sets of facts suggests that the House of Assembly has been misled, an egregious transgression in the Westminster system of governance, on which our parliamentary system is based.
In the House of Assembly, a week ago, Sears said a Cabinet paper on hedging was addressed to the minister of finance, and the minister of finance decided to reject the recommendation after reviewing it.
Sears said, “The draft Cabinet paper is addressed to the minister of finance for the minister of finance’s consideration. The minister of finance communicated that based on what was presented, it was not supported. That determination was communicated in October of 2021 and what is the relevance?”
But when asked on Monday about Sears’ comments in the House last week, the prime minister said, “I saw no documents about that. Only this weekend, I was provided with some information concerning that, which I am now assessing to determine all the misstatements about what actually went on.
“What I do know is that the financial secretary had some views about it proceeding and I think those were the views that were adopted.
“I had no knowledge of it. He (Alfred Sears) said the Ministry of Finance had knowledge of this. That’s a big ministry. It was not me.”
This statement by the prime minister is deeply concerning. Try as he may, it is impossible for him to distance himself from such a major decision, even if it were made by someone else at the Ministry of Finance without his knowledge.
Davis also has not yet addressed how his works minister could tell Parliament that he personally knew about something he claims to have had no knowledge about.
If we accept all that has been told to us by Davis and Sears on this matter, then we must all be fools because the stories do not all lead in the same direction.
In the House last Thursday, Sears said he had recently spoken to the financial secretary, Simon Wilson, for clarification on what transpired relating to the BPL hedge transactions.
“When the honorable member (Pintard) raised this, as if we were in a court of law, responses were given,” he said.
“I have checked with the financial secretary and I have confirmed with the financial secretary that the documents which were provided were also provided to the Ministry of Finance, and I’ll be happy to lay the response of the financial secretary.
“It was considered and communicated that based on what was put to the Ministry of Finance, the proposal (to execute the trades) was not accepted and some questions were asked which were not addressed satisfactorily.
“But what the Ministry of Finance explained to me, Madam Speaker, is that any commitment of a hedge strategy would represent an obligation BPL was not in a fiscal position to assume that itself and, therefore, through the IDB (Inter-American Development Bank) and the Ministry of Finance, both of which have the requisite technical capacity, reviewed what was put forward, and did not accept it.
“That was a determination by the Ministry of Finance. Now, if the honorable member (Pintard) were to put forward a question, the Ministry of Finance will prepare the answer and provide the answer.”
You’d be forgiven if you are finding it difficult to keep up with all the conflicting statements in this sad story.
While Sears told Parliament last week that Wilson advised him recently that the Ministry of Finance had made a decision not to execute the hedge trades because they did not deem that action to be in the country’s best interest, in March, the business section of The Nassau Guardian reported Wilson’s response when asked by this newspaper about the BPL hedge program.
Wilson responded at the time, “We are not involved at the Ministry of Finance, but we support it. We think it’s sound financial management at BPL, but we are not directly involved in the approval process. If done correctly, it is sound financial management.”
There is much to unpack in trying to settle what the facts are in this whole matter of BPL fuel hedging and how we arrived at this point of an increase in the fuel cost per kilowatt hour increasing from 10.5 cents to a projected high of 27.6 cents for a majority of customers by next June.
To start off with, both Davis and Sears vehemently denied in Parliament last month that they knew of any recommendations on the need to execute those trades.
They both denied knowledge of any documents to this effect.
They both denied any briefings to this effect.
Assuming that is all true, that in itself is remarkable.
It is remarkable that after winning power, and with widespread knowledge that BPL had been hedging fuel, the minister for works and the minister of finance (Davis) did not deem it important to be briefed on hedging.
We know from Sears’ own words last November, though, that the hedge program was on his radar, and he said it would be a priority item of the new board of BPL.
“There have been a number of discussions with the outgoing chairman [Dr. Donovan Moxey] and the Ministry of Finance. The hedging strategy is a financial arrangement which helps to stabilize the price of fuel. That facility is backstopped or supported by the government,” he said in November 2021.
“There is a discussion whether that subsidy by the government should be applied to all consumers or only vulnerable consumers, and I know that’s the discussion that is taking place within the Ministry of Finance. The hedge is one of the first issues that the new board will have to address in concert with the Ministry of Finance and, of course, the Ministry of Works.”
It is interesting that as the minister now tells it, those discussions with the outgoing chairman did not involve any discussions about needing to execute additional trades around that same time.
That is incredible, to say the least.
Pintard is making plenty sense in highlighting this critical issue.
On October 26, the FNM leader told the House, “There was ample evidence that we had a plan in place to maintain the price of fuel in the vicinity of 10.5 cents (per kilowatt hour) and even if it increased, certainly not beyond 11.5 cents.
“That information was ignored. It was ignored and we challenge the minister of works, we challenge the prime minister to say in this House that they have seen none of these documents.”
Davis rose on a point or order and said: “I continue to hear this diatribe of what we did not respond to, or what advice we had or we didn’t follow the advice.
“The first thing we have to appreciate about advice when given, first of all, I received no advice or recommendations, saw no papers in that respect. I never saw any. None reached my desk, and as far as I am aware, it did not reach, the minister will speak for himself, that never happened.”
During that October 26 exchange, Sears then stood up and said, “Mr. Deputy Speaker, not only was I not provided, but what this honorable member for Marco City (Pintard) has failed to disclose to this House and to the young parliamentarians (the Youth in Parliament members who were in the gallery) is that what was on the table was a rate reduction bond to borrow $500 million.”
He also said at the time, “I can say for the record that no draft Cabinet paper prepared by the honorable member (Pintard) or any of his colleagues has been presented to me …”
After Pintard presented to Parliament last month an October 18, 2021 letter written to Sears by the then-CEO of Bahamas Power and Light Whitney Heastie providing comprehensive details on the hedge program, Sears said that document, which he did not ever recall receiving, was only a description of the program.
“What the honorable member to my recollection stated is that a hedge strategy, a strategy was presented and we failed to act … a description of what was done is not a strategy,” he insisted.
“If I’m a policy maker, which I am, and something needs to be done, options will be presented. There would be the justification of option one, option two and a recommendation to take a certain course of action.
“I’ve read this document; I’ve reviewed it. It was just put in my hand. It’s a description. It’s giving background information.
“I don’t recall seeing it (prior) but that’s the point I’m making. I’m looking at the document in my hand, right? I’m looking at the document in my hand and what the honorable member said was we failed to execute on the hedge strategy.”
It turns out, as Sears acknowledged in the most recent sitting of the House last week, that the Davis administration did fail to execute on the hedge strategy.
If the prime minister and the works minister wish to argue that executing the trades was determined not to be in the best interest of BPL and the public, that is one thing; they had the authority to make that determination; but to say that they had no knowledge of any recommendation is another thing entirely.
Further, misleading the House of Assembly is a very serious issue. It should not be allowed to slide.
Davis as minister of finance owes the Bahamian people a straight, clear and accurate account on why the hedge trades were not executed, and an acknowledgement that the public and the Parliament have been given conflicting information on an important topic.
Given the way this administration has been behaving of late, we don’t expect anything of the sort to happen, though.
Davis’ new day has the feel of the past when leaders disregarded our intelligence while disrespecting our right to access truth.