Prime Minister Perry Christie last night announced that the government will be issuing proposals for a partner or partners to reform the country’s energy sector, which could mean the establishment of two new electricity entities.
In a statement released last night, Mr. Christie said the government’s objective is realign the Bahamas Electricity Corporation (BEC) and “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.”
“It is our intent to create two new BEC entities into which the relevant assets, liabilities and operations of the Bahamas Electricity Corporation will be transferred.
“The first is a new Transmission and Distribution company (“NewCo”) which will be wholly owned by BEC. This company will be responsible for the operation, maintenance, repair, and expansion of NewCo’s electricity transmission and distribution systems and for billing, collection, customer services and other relevant services across The Bahamas. The second company will be a new Generation Services company. This company will be responsible for the operation, maintenance, repair, financing of BEC’s current electricity generation facilities and certain other assets located across The Bahamas, as well the development of new power generation plant. It will enter into a Power Purchase Agreement with NewCo.”
He continued, “Through this RFP process we are seeking to identify financially and operationally credible parties or consortiums and will be publishing a notice in The Bahamas and the world press. It is our intent to enter into management agreements with the successful party, or parties, to operate the two new companies, and in the case of the new generation company, a management agreement and/or a Joint Venture Agreement. Our new partners will be expected to assist the government in transitioning the relevant assets, liabilities, operations and personnel from BEC to the new companies, and to assist the government in driving performance improvement and upgrading the various systems to the highest standards.”
The prime minister said over the next few months the government intends to provide an affordable energy supply to all consumers with the capacity to meet the long-term growth in the demand for energy; an energy sector that contributes to the international competitiveness of the productive sectors of the economy and that fosters economic development and job creation.
In addition, Mr. Christie said the government wants to create an energy sector that is environmentally sustainable with significant increased use of economically viable renewable energy sources among other things.
“Over the last several years, the government has received a very large number of expressions of interest in providing renewable and traditional energy solutions for The Bahamas. The government is thankful to all of the parties that have expressed an interest in participating in the sector and taken the time to submit proposals,” he said.
Mr. Christie said the government is keen to see Bahamian participation as a part of this process either as part of a consortium or ultimately taking part in an IPO of one or both of the companies.
“I want to emphasise that we are not reinventing the wheel. In fact, the proposed new structure for our energy sector has been successfully implemented in many countries across the world, big and small. There is a general consensus that, when properly implemented, electricity market liberalisation has delivered considerable economic benefits,” he said.
“In almost all cases, this liberalisation started with the unbundling of government owned vertically integrated monopoly electricity companies, underpinned by regulatory reforms. The separation or unbundling of power generation from transmission and distribution has allowed for competition over time in power generation, and other areas also. In the US, Canada, the UK, many parts of Europe, Singapore, Australia and elsewhere, creating an environment for Independent Power Producers to sell power into national grids has generally been successful.”
The prime minister said the government is committed to introducing renewable energy for The Bahamas.
He said the realignment of BEC and the establishment of residential energy self generation programme should be implemented by 2014.
In addition, the government is looking for the country to be 30 per cent reliant on renewable energy by the year 2030.
There are also plans for the Family Islands.
“We recognise that the provision of electricity in the Family Islands, due to their geographically diverse nature and relatively small population densities, generally requires subsidisation from electricity operations in New Providence. In addition, we also recognise that the Family Islands are well suited for renewable energy based power generation solutions in conjunction with traditional power generation. For instance, the transport of fuel and supplies to Family Islands is both expensive and inefficient. While traditional fuel generation may continue to be necessary from a base load perspective, renewable solutions such as wind and solar power present an opportunity to reduce fuel costs and supplement power generation, providing some redundancy as well as reducing overall operating cost,” he said.
“We also envision that sustainable arrangements would also be concluded with relevant stakeholders in Grand Bahama to achieve the same efficiencies and cost reductions in electricity are achieved for that Island as might obtain in the rest of The Bahamas. A reform of this nature is absolutely fundamental to the future of The Bahamas. I recognise that with such major change, there is bound to be much uncertainty for many stakeholders. These stakeholders include the thousand or so staff of BEC, residential consumers who just want to see rates come down, large commercial customers who feel likewise, service providers and suppliers to BEC who may be worried about losing BEC’s business, those with concerns for the environment and others. Please be assured that we are working as hard and fast as we can to make this happen, but a process such as this will take time. Our goal is to be negotiating the necessary agreements with a view to signing contracts by the end of this year.”
Mr. Christie said the government has enlisted the assistance of KPMG Advisory Ltd. along with other technical and legal advisors to assist with the reform of the energy sector.
The government also created a National Energy Task Force to advise the government on solutions which could be implemented to reduce the high cost of electricity.
He assured that through the negotiation process there will be fair treatment for all.
“For the staff of BEC, you can be certain that in our negotiations with bidders we will be insisting on fair treatment for all, and fully expect there will be no job losses as a result of this process. We will also be insisting on investment in training and retraining programmes where new technology is being implemented. Liberalisation of the energy sector will also create many new business opportunities. A sector that “works” will result in more inward investment, creating more job opportunities. We will keep you informed of our progress. In the meantime I ask you to bear with us, and to continue to do your jobs with pride,” Prime Minister Christie said.
“For those with environmental concerns, which I suspect is almost all of us, not only will we be asking our new partners to assist with the clean-up of the current damage that has been created over many years, starting with Clifton Pier, we are also looking to bidders to propose the most energy efficient and environmentally responsible solutions they can. We will ensure the highest regard for the environment, as well as the possibility of co-generation of fresh water.”
The prime minister said the goal is to realign the energy sector, which is in “urgent need of an upgrade.”
“We simply cannot continue with the same model we have today. There is far too much at stake. We all want to see lower costs, more consistent electricity supply, environmentally friendly power generation, more energy security and the list goes on. Energy is a basic human need, and the driving force of growing our economy. This RFP is the first step of that journey,” Mr. Christie said.