|Moss: $100M BEC savings not feasible|
Guardian Business Editor
Published: Aug 22, 2012
The former chairman of the Bahamas Electricity Corporation (BEC) says the government's plan to save $100 million annually is simply “not feasible”.
Michael Moss told Guardian Business that the $100 million "headline", whereby the state-run entity proposes to increase base load generation and improve efficiencies, would cost it hundreds of millions in up-front investment that BEC cannot afford.
"No, I don't think it's feasible," he explained. "I have looked at the numbers closely. To achieve $100 million in savings, it would mean doubling the installed capacity at Clifton Pier. BEC's bottom line cannot sustain that."
According to the former chairman, it costs the corporation $2 million per additional mega watt. Seeing as Clifton Pier has approximately 170 mega watts, to double its capacity would cost in the order of $340 million.
"So unless the government is talking about coming to the rescue, I don't see it happening," Moss added.
Leslie Miller, the chairman of BEC, could not be reached for comment before press time.
In a speech to the House of Assembly last week, Kenred Dorsett, the minister of environment, announced that replacement and upgrades, and consideration being given to the introduction of heavy fuel base load generation, "is integral and a priority to BEC". However, the senior official did not provide any specifics on timelines, or how the government would pay for it.
One plan floated by Miller earlier this week, however, is a proposal to purchase oil from Venezuela.
According to the current chairman, talks will begin in short order to enter into a contract to buy fuel at lower costs than market prices.
As a member of the Organization of the Petroleum Exporting Countries, or OPEC, Moss questioned the legitimacy of this plan.
Venezuela’s position in OPEC means it’s bound by international pricing and production quotas. The more likely scenario, the former chairman said, is the country providing oil at market prices but extending long-term credit at low interest rates.
"At some point it must be paid. It's low interest credit. That's like going to the gas station and only buying your fuel with a credit card," Moss told Guardian Business.
Noting there could be "anterior motives" to such a deal, the former chairman said he doesn't see how any deal with Venezuela could make prices cheaper for the long term.
"I don't think The Bahamas wants to increase its debt burden at this point in time. We are at the point where it is best to just pay for the fuel. At some point, the piper will have to be paid," he said.
One point he did agree with in the government's plan, however, is the possible privatization of BEC down the road. The move could "get rid of government interference" and allow the company to function more efficiently. However, he said it is not a solution "in itself'.
He pointed to the privatization of operations in Grand Bahama as not providing any instant solutions for the country's second city.
"I fully support privatization, but in and of itself, it will not reduce rates in New Providence," he said.