Prior to the House of Assembly breaking for the summer on Tuesday, August 13, Prime Minister Perry Christie spoke to the matter of reforming the country’s energy sector.
Following is Christie’s statement in its entirety.
” Today my Government will be issuing a Request for Proposals to seek a partner or partners to assist us in turning around our energy sector. Our objective is to realign 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.
In our Charter for Governance issued at the time of the last elections, we clearly stated that one of our critical initiatives to change the economic course of the country would be to find ways to reduce the cost of electricity.
We stated that the cost of electricity throughout The Bahamas is simply too high, causing untold hardship to families, making the country un-competitive in many business areas, and stunting economic development. The cost of importing fuels is also a massive drain on our country’s resources. This remains the case.
We also talked to finding ways to move away from the highly inefficient and environmentally unfriendly fuels that our current generators are using, towards cleaner burning and more efficient fuels supplemented by renewable energy.
Indeed, for more than a decade, investors have sought approval to operate one or more liquefied natural gas plants. With appropriate regulations and environmental safeguards in place, we will consider the operation of liquefied natural gas and compressed natural gas plants, if they provide the best solution to our current problems. The overall vision for The Bahamas energy sector is to achieve” a modern, diversified and efficient energy sector, providing Bahamians with affordable energy supplies and long-term energy security towards enhancing international competitiveness and sustainable prosperity.
“Whilst we recognize that various improvements have been made at BEC over the last 12 months, we believe that a fundamental realignment is required to secure a sustainable energy future.
A number of our key objectives in commencing this energy sector reform are to create:
• an energy sector that provides affordable energy supplies 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 thereby, job creation;
• an energy sector that is environmentally sustainable with significantly increased use of economically viable renewable energy sources;
• an energy sector that is supported by greater levels of awareness of Bahamians of the importance of energy and its use in their daily lives and the contribution that each person can make to conservation efforts thereby supporting the move to greater levels of energy security;
• an energy sector that reflects sustained improvement in the ways in which energy is used, through greater energy efficiency, reduced energy intensity and better energy conservation and management;
• an energy sector that is focused on the modernization and expansion of the energy infrastructure (e.g. generation, transmission and distribution systems) to ensure safety, affordability, reliability and competitive advantage;
• an energy sector that is supported by a modern and dynamic regulatory framework that fosters investment, competition, efficiency, public-private partnerships, a level playing field and transparency;
• an energy sector that provides long-term energy security to producers and consumers, including security of supply;
• an energy sector that possesses the flexibility and creativity to adopt and adapt to new and appropriate energy technologies that may emerge over the long-term;
• an energy sector that is 30 percent powered by renewable energy by 2030, including 10 percent of the sectorâ s power to come from Residential Energy Self Generation in the short term;
• an energy sector with an appropriate institutional framework and high levels of technical capacity to support and facilitate the effective implementation of the policy with support from all relevant stakeholders, including the public and private sectors, educational institutions and non-governmental and community based organizations; and
• an energy sector that provides investment opportunities for Bahamians, new business opportunities and spin-off benefits to other sectors of the Bahamian economy.
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.
In response to the current energy sector challenges and the significant amount of proposals received, the Government created and mandated a National Energy Task Force (‘ NETF’ ) to advise the Government on solutions which could be implemented to reduce the high cost of electricity while lessening the country’ s carbon footprint.
It is with the aforesaid objectives in mind that we are embarking on a realignment of the energy sector and launching this RFP process. We are firmly of the view that such far reaching reforms require the financial support, operational experience and innovation of the private sector.
Given the scale and far reaching nature of the much needed reorganization, regulatory and other reforms needed at this stage, we are focusing on BECâ s Transmission and Distribution system and Generation system in this Request for Proposal (‘ RFP’ ). I will talk to Renewable Energy later in this communication.
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 BECâ 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.
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.
We are also keen to see Bahamian participation in the process, be it as part of a consortium or ultimately taking part in an IPO of one or both of the companies.
I want to emphasize 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 liberalization has delivered considerable economic benefits. In almost all cases, this liberalization 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.
Moving to the topic of Renewable Energy, we remain absolutely committed to introducing renewable energy into the generation mix for The Bahamas.
Whilst we are on track to achieve our goal of 30 percent renewable energy by 2030, we need to get our core energy infrastructure in order before we can embark on any new significant renewable energy based opportunities. This means realigning BEC and introducing the appropriate regulatory reforms, and ensuring that we are technically ready to receive renewable energy without destabilizing our electric grids. A key mandate for bidders, and reason for separating transmission and distribution from generation, is to help us get the operations reorganized quickly, and to drive improvements in the electric grids.
In the meantime:
• we intend to work on regulatory reform with a view to completing this by early 2014;
• we are committed to advancing a Residential Energy Self Generation programme to be implemented by mid 2014, with a goal of meeting up to 10% of the countryâ s power needs over time; and
• we would like to see 30% of the sectorâ s power generation come from renewable energy sources by 2030.
For those in the Family Islands, we are making it a requirement of the successful partners to specifically address how they will make Family Island power generation more efficient. We recognize that the provision of electricity in the Family Islands, due to their geographically diverse nature and relatively small population densities, generally requires subsidization from electricity operations in New Providence. In addition, we also recognize 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.
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 recognize 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 BECâ 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.
To help us achieve the foregoing, my Government has recently retained KPMG Advisory Services Ltd. along with other technical and legal advisors to assist with the reform of The Bahamas energy sector. We are working to bring about the changes needed for the country as quickly as possible without jeopardizing the quality of the outcome and best interests for The Bahamas.
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. Liberalization of the energy sector will also create many new business opportunities. A sector that â worksâ 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.
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.
In conclusion, today we are embarking on a journey to completely realign our energy sector, which is in urgent need of 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.