Some have always admired the candour of Stephen Worme of Barbados Light and Power (BL&P). He was recently asked by a BU family member what was the average price they (BL&P) had paid per ton for Bunker C in the 2003 compared to 2013. This is a follow up to an earlier blog – http://wp.me/p41kz-74Z
2003 – $435 per ton.
2013 – $1,439 per ton.
Were these prices regulated by Government or have been subsidised in any way at any time? We cannot confirm at this time?
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@Millertheannunnaki
I appreciate your concerns because I too harbored those thoughts also about the FCA but after doing the calculations and reading the Consultation Report I was comforted that BL&P have been above reproach in that regard.
What I am not comforted about is their approach to the Integration of renewables generation into their generation mix and this is where I think they are making a huge mistake. I think they should face the fact that distributed generation is a reality that is occurring with or without their willingness to participate.
Photo Voltaic generation is here to stay and they need embrace it now and change their outdated business model or suffer the consequences later when they end up with stranded assets expecting the remaining rate paying customers to bail them out with further burdensome rates.The sad consequence of this approach is that these remaining grid customers will the ones who either rent homes, or who face restrictive covenants and are either unable or can’t afford to put panels on their roofs. A huge fairness issue looms now over who pays for the cost of renewable expansion in this country and no one seems to be aware of it.
No one relishes the idea of a doomsday scenario played out before our eyes with BL&P facing declining revenues and stranded generation assets. And so as to protect BL& P from its destructive self, policy makers should step in now and deregulate the supply of electricity, separating it from its delivery. BL&P would be still responsible for the transmission and distribution which remain regulated. But generation, open to competition, will produce immediate and substantial benefits to consumers. Any generator of electricity, large or small, could negotiate contracts with BL&P for the supply of electricity. BL&P would still continue to schedule, dispatch and control the supply of electricity to meet the demand for electricity.
The reason I am optimistic such a plan would work is simple. In Barbados 65% of the cost of electricity is in generation versus 25% elsewhere in the developed world. If we could reduce that by even 20%, I think we would be better off. It happen with the Airlines and the Telecommunications Industry. Will it happen here? Probably not. The reason being is that companies like BL&P attract risk-averse investors who put their money in utilities because they want or need dividends to be paid no matter what happens. Directors of these companies will not let a CEO make changes that can bring about uncertainty.
Other challenges confront renewable expansion. These relate to planning, investment, technology, infrastructure and grid management. Taken as a whole, something tells me if we are banking on renewable energy as an economic game changer then it isn’t happening anytime soon.
there is still time rather than wait until they end up with a lot
If they making the profit they are now Bunker is $1439
WHAT hte HELL were they earning in2003 when Bunker was £435??:)
The Boxer,
Thank you.
Miller said:
“Consumers were told that the FCA is strictly a ‘pass-through’ charge based on the cost of fuel imposed by the fuel suppliers whether it is the BNTCL or one of the other players like SOL or EXXON”.
Miller, the charge is still passing through. I don’t know which century they plan to start using the sun, which is still free, for renewable energy purposes, they may wake up one morning and realize that it is no longer there.
Alvin is an optimist, he believes the government did the right thing by selling the investment in light and power and, he hopes, they invested the money wisely………….alas, they never did say what they did with taxpayers money from the sale of the shares, maybe we can ask them.
@ TheBoxer | May 17, 2013 at 2:20 AM |
“Photo Voltaic generation is here to stay and they need embrace it now and change their outdated business model or suffer the consequences later when they end up with stranded assets expecting the remaining rate paying customers to bail them out with further burdensome rates. The sad consequence of this approach is that these remaining grid customers will the ones who either rent homes, or who face restrictive covenants and are either unable or can’t afford to put panels on their roofs. A huge fairness issue looms now over who pays for the cost of renewable expansion in this country and no one seems to be aware of it.”
Thanks Boxer for your analytically objective insight into the local power utility pricing system and its associated pending serious challenges.
You are a real living comfort just like your name sake in that famous book of anthropomorphized animals. We are most impressed with your empathic sensitivities to the profit objectives of the power supplier vis-à-vis those of the defenseless customers faced with growing financial difficulties and unable to meet the unending increases in their power utility bills.
We are also really impressed with your erudite understanding of the economics of monopoly utility pricing and regulation. Your ability to clarify and present the workings of this technical issue in an understandable style to help educate the layman or ordinary person is most remarkable and certainly appreciated. Adrian Loveridge will agree with that commendation.
However, I am still not entirely convinced that the BL&P does not benefit financially from the FCA charged to customers. Only a comprehensive review by a real ‘independent’ audit would allay fears of any price gouging on the part of the BL&P to meet any short falls in the rate of return the fixed energy charge is unable to achieve because of reduction in kilowatt demand arising from a depressed economy. Hence the BL&P’s lack of enthusiasm for greater emphasis on renewables substitution which would affect generation capacity.
That concern about the BL&P’s potential to exploit ‘overlapping ’revenue sources to maintain its cash requirements to meet shareholders’ expectation is indeed reflected by your observations made in your submission and reproduced as a quote above. Similar observations and concerns have been expressed in the past on this blog (David of BU can confirm).
Who is going “guide and regulate” this monopoly in the direction it must take in order to ensure a smooth transition to the future business model required to meet the developmental economic needs of the country while satisfying reasonable expectations of private shareholders and providers of capital?
There has been too much of a cosy relationship between utility entities and other service providers and the official agencies mandated to regulate their behaviour and pricing mechanisms. One only has to look to the financial services industry for abject negligence and made worse by the management of the defrauding companies’ ability to influence and control the level of regulation through political patronage and cronyism with Cabinet ministers. CLICO and the role of the now defunct Office of the Supervisor of Insurance spring readily to mind and unfortunately being carried on by its incompetent successor the FSC or whatever it is so titled.
If the BL&P is not financially benefitting from the FCA (since- according to your analysis-it is paid over to the actual fuel suppliers) who then is taking the profits generated from huge differential between the FCA charged to consumers and the landed cost of the imported fuels? If as at present the BL&P is faced, (according to Stephen Worme’s latest figures) with Bunker C cost of $1,450.00 per ton which is passed on via the FCA then what is the imported landed cost of the same ton?
@TheBoxer et al
Keep it coming, will strip out a separate blog later.
@Millertheanunnaki
I am not sure about the process of getting from where we are now to where we need to go, however, I share your concerns about the cozy nature of local business relationships.
It is my view that this process must not only be fair and transparent, but must appear so to the general public. All investors large and small should be given the opportunity to participate, even though we expect that given the size of the undertaking the usual suspects will come forward and dominate. But we are all Barbadians and this is still Barbados. What we should ensure is that the process be guided by an outside consulting firm, since this is something that while new to Barbados but certainly not new to the rest of the world.
As far as the ‘huge differential between the FCA charged to consumers and the landed cost of imported fuel’ all I can say there is a differential and leave it at that. Additionally, you may or may not know that the FTC is litigating that matter before the courts now and BNOCL are not the Plaintiffs. One way or the other we will know soon if this is a hidden tax or not, but do not look at BL&P because you are not going to find the answer to your question there.
@ Miller
“Can you refer to at least one “strategic asset” that the BLP administration during its previous 14 years in office sold off or had to liquidate for cash flow purposes without giving local investors the chance to buy before selling to foreign interests?”
************
Bushie was taking a well deserved break from BU …..but whenever this argument comes up it rubs the bushman like a plimpler…..
What give what locals what chance to buy what asset what….??
…so who did the assets belong to in the first place…?
You mean the politrickians elected to manage our business gave US a chance to buy OUR assets from OURSELVES… in lieu of which THEY had the rights to sell these assets to OTHERS and not even explain where the Money went?
…such an offer is simply adding insult to injury…
Shiite man!!! It is like removing the Vaseline before making us bend over….
PLEASE stop talking about that….!
St George’s Dragon | May 15, 2013 at 11:52 PM |
@ B. A . Stard on May 15, 2013 at 9:23 PM
Bunker C is still very much available.
A quick Google shows average oil prices per barrel went from $22 to $87 from 2003 to now. That is more than the variance you quote.
…………………………………………………………………..
I refer to it as Bunker C, as i cannot recall its correct designation.
@Miller.
“Can you name at least one strategic asset…..foreigh interests.
Before I attempt to answer that question you will have to define exactly what you mean by “strategic asset”.
@B A Stard
r u telling me that we have been taken for a ride. why did the production of bunker c fuel cease as soon as the engines were ready to be commissioned and who would have advised BL&P to go that way, that was a strategic decision, wont market conditions have predicted whether there was a market for such fuel, or were we and other countries hijacked.
just asking questions as I don’t understand the difference between bunker c, jet fuel or kerosene.
@ Alvin Cummins | May 17, 2013 at 6:13 PM |
“Before I attempt to answer that question you will have to define exactly what you mean by “strategic asset”.”
Dear Alvin,
The term “strategic asset” is used in the same sense and context that you Alvin, yourself, employed in your own submission of [Alvin Cummins | May 16, 2013 at 2:46 PM] and repeated as follows for ease of reference:
“However there are certain strategic assets that are held by government that require judicious decision making. And for your information I have applied “intellectual analysis” to other similar exercises when both DLP and BLP have been in office. I told you already I am not afraid of either party and if an issue requires ventilating and criticizing I will do so without fear or favour.”
But before asking you to elucidate on your meaning of “judicious decision-making” here is what I think is a ‘reasonable’ definition of a ‘Strategic Asset’ in the context we speak.
‘A business entity- whether operating for commercial purposes or as a public good- that is owned and controlled primarily by the State (Government) or by private investors mainly citizens and is deemed politically to be significantly instrumental in achieving the country’s socio-economic developmental goals’.
The asset can be in the area of international transport like air or sea ports, public health care, public utilities, or even in financial services like banking and insurance to provide financing and risk capital where private players appear to be too risk averse too back or support any new areas of economic development e.g. renewable energy or agribusiness.
Now Alvin, please don’t try to look up my definition in any text book or by way of an Internet Googling serendipity excursion. As an author yourself you well know that mishmash creativity can be a wonderful exercise for the mind.
Now let us hear you pontificate on these “strategic assets” that the BLP is accused of selling while Bushie conveniently avoids addressing the question posed in the first place.
Tell us Alvin ,do you think your DLP administration is going to put on the auction block GAIA and the Seaport to satisfy its thirst for foreign exchange and to continue feed the cash addiction of the other politically abused statutory entities like the TB, NHC, BADMC, CBC, BIDC and Invest Barbados?
Who or what is going to meet the unbudgeted expenditure needs of the St. John’s Polyclinic along with the other occupants of the soon-to–be-called “David J H Thompson Memorial Centre”?
Sounds like déjà vu 1992 all over again but this time cement, flour and animal feed are not on the “For Sale” liquidation list.
BNOC and its subsidiaries might just form the right attractive portfolio mix to the Simpson “Christian” Empire along with the TB.
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