In recent weeks many callers to the Down To Brass Tacks radio programme have complained and raised issues relating to the cost of electricity in Barbados. However, no one (including the moderators) seems to have realized that the rates charged for electricity, which the Fair Trading Commission (FTC) has determined, results in a few large electricity consumers subsidizing the majority of other consumers.
Not only is the domestic rate lower but the Barbados Light & Power Co. Ltd’s (BL&P’s) cost of supplying a small consumer is far greater per unit of electricity than its cost per unit to a large consumer. Distribution costs relating to poles, transmission lines, transformers, switch gears, meters, meter readers, billing, collections, administration and so on involve economies of scale that can range from ten to 50 cents per unit of electricity distributed. The Barbados Water Authority (BWA), Grantley Adams International Airport, hotels, industrial complexes and other Government departments are made to pay millions more than it costs BL&P to supply them in order to subsidize the small domestic consumers.
This situation is popular because it reduces the electricity costs of all small consumers but it could create serious problems for BL&P if large consumers realize that they can save the high distribution costs by producing their own electricity.
The BL&P’s great concern that this could happen is manifested by its policies that discourage such action.
It will not be long before some enterprising individual offers large consumers efficient mobile generators with guaranteed operations, maintenance and back-up that will eliminate the distribution costs and reduce their cost of electricity.
When (not if) that happens, the proverbial you-know-what will hit the fan. BL&P will either get further increases or be destroyed financially. Please note that the law which creates a BL&P monopoly prohibits the distribution and sale of electricity but any entity can consume their own production.
Shortly after the last election, Senator Maxine McClean made a public statement to the effect that the BWA should be generating its own electricity to save money.
However, once she had learnt the implications of such action (BL&P would immediately be forced to apply to the FTC for an increase in rates), she never raised the matter again and the Press has never questioned why.
BWA’s electricity costs currently amount to over $15 million annually with as much as $7 million of that going to BL&P for its distribution of electricity. A major portion of this $7 million serves as subsidy for small electricity consumers.
The BWA’s own rate to water consumers is also graduated so that “commercial” water consumers are forced to pay twice the lower rate in order to subsidise small water and electricity consumers.
BWA is an even greater monopoly than BL&P because it essentially controls all the potable water resources in the island and prohibits anyone else producing their own potable water. It is worth noting that given modern technology and filters, rain water catchment and recycling of waste water can safely produce potable water at significantly lower costs than currently accrued by commercial consumers and that desalination of brackish water or even sea water is not far behind in cost. Alternate potable water sourcing is prohibited, however, by BWA’s tangle of regulations which insulates this inefficient public service monopoly.
It is currently costing hotels in Barbados on average between $25 and $30 per occupied room-day in electricity and a further $8 in water – a whopping 15 per cent of their operating costs for just two utilities.
No wonder hotel operations in Barbados are unprofitable and there is so much unemployment. Are we not killing the goose that lays our golden eggs – again? The sugar industry was taxed to bankruptcy (Barrow’s legacy) and some still wonder why people with capital to invest will not risk it in agriculture.
The FTC’s electricity rates are biased and not “fair” and I know several people who would willingly pay more for their electricity if they only had a job! This situation is made even more ludicrous by the average domestic utility consumer in Barbados being blithely unaware and/or unconcerned that they are paying for being subsidized in other ways, such as taxes.
The Government has partly assisted BL&P by discounting its fuel tax but this is not enough. At the same time this fuel tax discount to BL&P serves to disadvantage alternate energy sources such as solar and wind. Furthermore, it is also a disincentive for conservation which all consumers should be actively pursuing.
FTC and others involved need to put their heads together, sooner rather than later, to devise a more equitable (fair) way of reducing costs to all consumers of electricity and water rather than skewing it onto the larger consumers.
In the process, FTC should focus more on the “fair” aspect of their mandate and leave the social and political agenda to the Government. Discrimination by definition is intrinsically unjust. Round and round we go . . . .
The message is more important than the messenger.
• Peter Webster is a retired portfolio manager of the Caribbean Development Bank and a former senior agricultural officer in the Ministry of Agriculture.
