Government’s planned break-up of the near 120-year-old electricity supply monopoly by the Barbados Light & Power company and opening up the market to new players may not lead to cheaper electricity, respected economist Jeremy Stephen has warned.
He told Barbados TODAY that the notion of new power companies driving prices down was likely wishful thinking.
He contended that it is more likely that another player would rent the infrastructure owned by Light & Power parent Emera rather than setting up their own.
But he suggested that while electricity bills may not be lowered, a second player in the market would likely lead to price stability.
Stephen said: “In the short term there may be a price reduction because the new entities would be just introducing themselves to the market but over a year or two those prices would creep back up.
“So I do not see any big reduction in prices, especially if the infrastructure has to be shared.
“It is going to be like the same thing that happened between Digicel and Cable and Wireless, where Digicel entered the market and from an investment point of view, made the decision to rent.
“It’s the same with Emera, given the capacity that they have, no one can enter the market and outprice them.”
Stephen further argued that a new company may have to compete on reliability of service or may even appeal to customers by their “marketing and relatability”.
He added: “If a company comes in and chooses to go the same route of oil-based electricity, they will have to share because it makes no sense putting up their own infrastructure or they would have to spend a lot of money on underground powerlines, which in the medium term would be too much of an expense for such a small country.
“It would still therefore come at a cost to the customer.”
The economist noted that even if a new entity goes the route of investing in renewable energy infrastructure, in pursuant of Government’s 2030 goal for 100 per cent green energy, there would be challenges in the maintenance of prices.
He told Barbados TODAY: “If the new players deal with solar, there is a lot of outlay that they would need to first put down and you still have to remember that solar is still a little unreliable at commercial levels, so you will have to price in that inefficiency.
“No company is ever going to fix the cost for an inefficiency, the cost for this is always going to be passed on to the customer, especially when it comes to utilities.
“The point is that it is not going to be as simple as increased competition translating to lower prices.”
Two months ago, Opposition Leader Joseph Atherley, warned Government of serious challenges to the break-up of the electricity monopoly. He told lawmakers that there were lessons to be learned from the on-going process of breaking up the telecommunications monopoly.
Atherley said: “There will inevitably be tensions arising from those considerations which relate to the conventional energy supply structures and the renewable energy platforms that will have to be called into being.
“We saw this with reference to the dismantling of the telecommunications monopoly in fact we saw it and we are still seeing it.
“That there are some tensions around those considerations which relate to the existing infrastructural architecture of the now existing creature and those structures and platforms which will be called into being to facilitate the new creature we are trying to call into existence.” [email protected]
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