SBA boss: electricity rate hike will cause major fallout for businesses, consumers

Consumers and businesses are being warned to brace for a “prices storm” that will come if the Barbados Light & Power Company (BLPC) gets the green light to increase its electricity rates.

Chief Executive Officer of the Small Business Association (SBA) Senator Dr Lynette Holder said if BLPC’s application to the Fair Trading Commission (FTC) is approved, several micro, small and medium-sized enterprises (MSMEs) may become even more uncompetitive while larger businesses may pass on the increased costs to their customers.

The power company this week asked the FTC to approve an 11.9 per cent increase in base rates. If granted, this would have a knock-on effect on businesses especially, with some of them expecting to pay hundreds of dollars more per month for electricity service.

Holder told Barbados TODAY the situation called for urgent national discussion at the level of the Social Partnership about mitigating measures that could be employed to safeguard the most vulnerable individuals and small businesses.

“These are issues that are affecting households and micro and small firms. The solution, to me, has to be recognising that this is the next storm that is coming. We have a prices storm coming,” warned Holder.

“What do you do when a storm is on the horizon? You prepare for it, you try to manage and mitigate against the impact of it. Therefore, that mechanism within the Social Partnership is what I am hoping can be triggered to address this matter urgently.”

The SBA boss indicated that more companies were likely to announce increases as they felt the effects.

“Obviously, if the business is impacted they will try to recover some of that cost where they can. MSMEs have very small margins in the first place so they don’t have the luxury or the flexibility of passing on costs. So it obviously means an increase in the cost of business for them,” said Holder.

“The truth is, I am concerned that if all of these monopolies, oligopolies, companies adopt this approach now, we are going to see prices that will make our MSMEs even further uncompetitive and unable to do business, and we are going to see consumers continuing to find it challenging to make ends meet because of the high cost of living,” she said.

At the same time, the Government Senator said she understood both the argument of businesses that costs will increase because of exogenous shocks and the contention of consumers and small firms that they can no longer cope with increased costs.

“So, it is not a simple issue, in my view, of saying ‘this sector is right or this sector is wrong’ or for the bigger business, ‘you don’t have a conscience’. But the fact is recognising that these existential issues are upon us.

“I believe we need to hasten the work of the Social Partnership to address the prices and incomes [policy] and look at that protocol and do what we have to do to put it in place quickly to address the cost of food, the cost of energy, the cost even of electronic services vis-à-vis the banking services. So, we have a myriad of issues right now that need to be addressed urgently through the Social Partnership.”

Recalling Government’s intervention in August when feed prices went up by some 20 per cent as a result of an increase in the price of grain on the international market, Holder questioned if the Government would again step in if the BLPC is allowed a rate increase.

“We are not naïve. We understand that external factors will impact the cost of doing business; that is a fact,” said Holder, who acknowledged that Barbados did not produce all of its raw materials and therefore had to do business with other countries and individuals internationally.

“If all of these companies decide they have no choice now but to pass on costs, the truth is, it is the consumer that is going to suffer. Here, with the Light & Power, it is the residential consumer and the business consumer.”
marlonmadden@barbadostoday.bb