#BTColumn – The BL&P model is outdated

“The real issue is not about increased rates. Even more insidious is the attempt to quietly grab new licenses which are designed to disenfranchise Barbadians of their last chance of economic empowerment. Urgent but intelligent transformation of the local energy sector is vital.”

After receiving permission from the Government of Barbados to supply electricity to persons residing within a five (5) mile radius of Bridgetown, the Barbados Electric Supply Corporation erected a power station at the Garrison in 1911, thus launching the now 110 year monopoly that this company has held on the supply and distribution of electricity in this Island.

Of special note is the fact that this arrangement was conceived, and existed for its first fifty years or so, in an environment where Barbados was just emerging from a 400-year-long period of slavery of the most brutal kind imaginable; and from a plantation type structure that essentially defined over 90 per cent of the island’s population as chattel, suitable only for hard labour and as a consumption market for services.

After political changes that came in the mid 20th Century were able to enfranchise masses of citizens (via a national program of mass education and government led policies of inclusion), some reform was also evident in the structure, management and operations of the then Barbados Light & Power Company Ltd.

Between 1980 and 2000, quite significant progress was seen in such areas as;

1. Local share ownership of the company by government, employees and the public

2. Local management and control of most operations of the Company

3. A major company focus on reliability, quality of service and customer satisfaction

4. The systematic training of local professional, technical and administrative resources

Unfortunately, when the company celebrated 100 years of monopoly service to Barbados in 2011, this appears to have fueled a nostalgic appetite for the old days of colonial style

top-down management (as can be seen from the commemorative book produced to mark the occasion).

We then witnessed a deliberate and systematic de-localisation of the company which culminated in the now 100 per cent ownership of the institution by Emera Inc of Canada – a strategic investment company that was created in the 1990s, (when BL&P itself was almost 100 years old), and specifically to target vulnerable and gullible cash-rich utilities for

purely financial gain.

So when the Barbados Government – through the National Insurance Scheme – agreed to sell its block of BL&P shares, this forced all small local shareholders to give up their investment for a price of about BDS $25 per share. These same shares are currently valued at US$47, some 400 per cent increase in value.

This phenomenal rise in share value has been largely facilitated by strategic Emera-driven management decisions that have inter alia:-

• Placed the quarterly return-on-investment above all other considerations in the company’s strategic considerations;

• Converted staff resources which previously guaranteed high reliability and customer satisfaction, into enhanced returns on investment for Canadian shareholders;

• Failed to invest in research and development needed to guide Barbados into the new sustainable energy future outlined by government;

• Failed to fund urgently needed investments in capital equipment – particularly in renewable technologies

• Disbanded local technical and professional resources in deference to Canadian-led thinking which often conflicts with local priorities

• Disbanded and liquidated BL&P’s Innovative Catastrophe Insurance scheme which had been established to manage annual hurricane risks.

When therefore this Company now seeks to make a case for increases in electricity rates, this request must be examined against a number of critical factors.

1. Should Canadian shareholders continue to enjoy premium returns on capital when their customers are faced with unprecedented financial hardships and reduced quality

of service?

2. In light of the clear lack of investment in capital equipment which had been used to justify the last rate increase, how is a further increase now being justified?

3. In the absence of full transparency on this company’s operations, how, without full market competition, are we able to ensure that customers are getting a fair deal.

4. Given the imminent plan to transform the Barbados electricity system to 100 per cent sustainability, why should customers pay more for fossil-based electricity now? Rather than focus on moving to R.E.?

After the first oil crisis struck in the 1970s, the price of fossil fuels began to fluctuate wildly. To offset this constant need to review electricity prices, a decision was taken to separate the variable fuel cost from the much more stable electricity charges. This allowed for far more stable basic electricity rates, while the changing fuel charges were separately managed and billed to customers.

Initially, fuel charges were relatively insignificant in comparison to the substantive electricity bill. In 2020 however, the fuel charge now represents approximately 60 per cent of a customer’s bill for service.

Essentially then, the Islands ‘electricity system’ consists of two key functions.

1. The purchase, importation and storage of the fossil fuels needed for production of the island’s electricity needs. This is a function that is owned and managed by the Barbados National Oil Company Limited (BNOCL) and,

2. The conversion of this imported fossil fuel into electric power, and the transmission, distribution and sale of the electricity to customers on demand. A series of processes for which BL&P has held licence now for decades.

When this current framework is converted to 100 per cent sustainability as outlined in government policy, the net result will be significantly different from the current arrangement.

1. There will be no need for the importation of fossil fuels.

2. There will be no need for BL&P’s generating equipment which is currently required to convert fossil fuels into electric power

3. Arrangements needed for the transmission, distribution and sale of electric power will be significantly more complex, needing new “smart” technology for example.

4. A completely new local ‘source-energy’ market must be created to replace the previously imported fossil fuels. This is potentially a BDS$1 billion dollar a year opportunity.

5. To an increasingly significant extent, individuals will be positioned to procure and use their own electric power without reference to any central authority

6. The question must be addressed of how adequate storage of this new “raw energy” will be achieved, in order to replace the role played by the fossil fuel storage tanks previously used by BNOCL.

7. Government stands to lose significant tax revenues that are currently collected on fossil fuel imports.

Consideration must be given to the replacement of such lost income.

From items 1 – 3, it will therefore have been clear to BL&P for some time now, that the current ‘licence’ which they hold until 2028 is of little value, given the reality of the proposed new energy framework.

Those with eyes to see would therefore not have been surprised that there was such a mad scramble by BL&P for ‘new licenses’ to be issued to them as soon as possible – and certainly BEFORE Barbadians got to recognise the “queen’s gambit” that was being played.

Item 4 presents an even more complex scenario. Given that BL&P currently owns 40 per cent of the electric energy business, and that BNOCL owns 60 per cent, it would seem that a fair and reasonable target arrangement for the new sustainable system would be to maintain that balance.

Furthermore, since BL&P’s licence is currently strictly confined to receiving raw energy from BNOCL for generation, transmission and distribution, any thought of that company storing, or sourcing raw energy must be outside of the scope of their current licence. One wonders therefore about the legality of their solar farm and Battery plant currently installed, and at the thinking of regulators at FTC and the Ministry of Energy who would have approved these projects.

When our government therefore speaks of “carving out” 30 per cent of the new electricity system for local participation, what they are actually doing is GIVING AWAY 30 per cent to foreign interests. Since BNOCL (Barbadians) currently own and control 60 per cent of the business.

The other important factor in this already complex equation is that because of current and imminent technology advances, as well as market forces spurred on by climate change fears, individual home and business owners will increasingly be able to implement their own sustainable energy systems. Such distributed systems will place significant strain on attempts to compete with old-style municipal networks that served us for the last century.

The matter of loss of tax revenue by government can be more than adequately covered once the new arrangement is in place. Indeed, since the base cost of wind, sunshine and bio-fuel energy will be minimal, it means that meaningful tax revenues will be possible – while still keeping costs below current imported rates. Government tax revenues are therefore best served by allowing independent professional experts to manage the business while the country benefits from the taxes produced.

For some time now it has been clear, even within BL&P, that fundamental change would be required in the concept being utilised to supply electric power to Barbados. Many different schemes have been contemplated over the years. From innovative low speed generators using bunker C fuels; to Total Quality management and other schemes to boost efficiency and customer satisfaction; and even finally, by turning to new foreign owners in the hope that they would turn out to be good “fairy godparents”.

Nothing has worked so far – except to now bring us to a critical place where continued failure to urgently implement meaningful changes will be devastatingly catastrophic for this country.

Successive governments of Barbados have endorsed an ambitious policy to transform the energy framework of the country to a sustainable format.

This plan is innovative, ambitious and well intentioned. The benefits that would be derived if successful, are impressive and convincing. However, it is equally clear, as detailed here, that no proper assessment of the weaknesses, threats and perils that are associated with the proposed transformation has been studied. Still, the BNEP presents the best option available to provide a successful energy future for Barbados.

If the BNEP is to be successful, the following steps will need to be taken urgently and decisively by government:

Step 1: Define the intended outcome for everyone concerned. This must be done quickly, clearly and unambiguously.

For example, we should decide as follows:

There will be a single licence issued to a single entity to be called The Barbados Sustainable Energy Corporation Inc. (BSECI) to source, transmit, supply and trade electric energy

in Barbados with effect from February 1 2022.

BSECI will be wholly owned by the following

existing entities:

1. The Barbados Light & Power Co Ltd – 40 per cent

2. The Barbados National Oil Co Ltd – 20 per cent

3. The Public of Barbados through the Barbados Sustainable Energy Co-op Society – 30 per cent

4. The Barbados Water Authority – 5 per cent

5. Independent Public shares – 5 per cent

Step 2: The various shareholders named above will establish an 11 member Board of Directors (4,2,3,1,1 respectively) by

15 January 2022. The new Board is to be chaired initially by the nominee of the BL&P.

Step 3: By 16 March 2022, the Board of Directors will be required to produce a working conceptual plan for the execution of the BNEP. This must include at least one workable architectural and engineering design that allows for the conversion of the Island’s energy fuel to sustainable status by 2030 or the closest date.

Step 4: By June 30, 2022 an engineered plan with implementation schedules is to be presented to the country for finalisation by July 31.

Step 5: The joint resources of BSECI will then be expected to drive the execution of the final implementation plan towards realisation of the BNEP.

The only possible route to a successful implementation of the ambitious BNEP is one where all of the key players, and particularly the BL&P and the public of Barbados, are working together with common goals to achieve this.

The approach outlined here provides such a path to success. It is based on a transparent and realistic assessment of the current status quo, brings together all of the key stakeholders of the energy sector, and presents a rational proposal for a collective way forward for all concerned.

Ambitious 21st century technology challenges such as our BNEP 2019-2030 cannot be overcome by using old plantation-era organisational relics which are driven by financial motives. A new national cooperative model with all hands on deck is urgently required.