By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A senior Atlantis executive yesterday voiced optimism that Bahamas Power & Light’s (BPL) massive fuel charge hikes will not slowdown the post-COVID tourism rebound “by itself” despite “the risk of eroding profits”.
Vaughn Roberts, senior vice-president of government affairs and special projects, told Tribune Business that in the aftermath of BPL’s announcement the priority must be to diversify away from fossil fuel use with the Paradise Island mega resort typically facing a $30m annual electricity bill.
With Atlantis presently progressing towards pre-COVID profit levels, he added that the rolling series of quarterly fuel charge increases that BPL has unveiled for the next 11 months will not take The Bahamas into uncharted territory as this has been in the 20 cents per kilowatt hour (kWh) range before.
Alfred Sears KC, minister of works and public utilities, sought to highlight that same point yesterday when he told the House of Assembly that the BPL fuel charge’s scheduled peak of 27.6 cents per kWh between May and August 2023 will be just two cents higher than the 25-cent mark recorded when oil prices peaked in 2010.
However, Mr Roberts said electricity costs were just one part of the inputs that impact the tourism industry’s competitiveness against rival Caribbean and other destinations. While the Davis administration has sought to show that BPL’s planned fuel charge hikes are not out of line with regional competitors, he added that the overall cost package - including airlift (airline tickets) - must be assessed in its entirety.
“I don’t think so. I don’t think this is in and of itself going to cause any slowdown in what we’re seeing. The business and volumes that we’re seeing will kind of absorb it,” Mr Roberts told Tribune Business, when asked whether the BPL fuel cost hikes threaten to derail Atlantis’ post-COVID rebound and the wider tourism recovery. “At least now we can plan for it. We know what the next year looks like.
“We’ve seen over the last year the benefits of having room rates increase anywhere from 25 percent to 30 percent. Rates are market driven. They are driven by a variety of factors, and we have a very sophisticated revenue management team. The increasing cost of inputs has some risk of eroding profits, but at the same time our business is rebounding. We’re not at the profits we were pre-COVID, but we’re getting there.”
BPL has segmented the fuel charge increases, which all customers will see for the first time in their November billings, into two categories. Customers that consume less than 800 kilowatt hours (kWh) of electricity per month will see their fuel charge rise via a series of rolling two cent quarterly increases, while for those using more than that threshold it will be a 4.3 cents per kWh quarterly leap.
As for businesses and households that use over 800 kWh, such as Atlantis, fuel charges are set to increase by 138 percent, 163 percent and 138 percent - more than doubling compared to the present 10.5 kWh rate - during the periods of March 1 to May 31, 2023; June 1 to August 31, 2023, and September 1 to November 30, 2023.
Mr Roberts said Atlantis typically spends $30m per year in electricity costs. Given this bill, which averages $2.5m per month, assuming the BPL fuel charge accounts for 50 percent of that figure works out to be $1.25m.
Taking the peak 27.6 cents per kWh charge would send Atlantis’ fuel charge soaring to $3.2875m per month, just over a $2m increase. And, when added to the base tariff cost, Tribune Business calculated that this would take the Paradise Island mega resort’s total monthly light bill to $4.5375m - an 81.5 percent jump.
While only a rough estimate, it gives an indication of the huge surge in energy costs that major users such as hotels, food stores and other businesses must now brace for in 2023 given the extent of the BPL fuel cost increases. “We’ve seen this sort of stuff before,” Mr Roberts added.
“It’s been in the 20 cents before. I think that we are in an inflationary environment, and know we generate electricity with fossil fuels. It’s subject to the volatility of fuel prices. We’ve been very fortunate over the last few years to have a relatively stable level of prices.
“This will have some impact, but really the solution is we need to diversify energy generation, and it needs to be done with some priority. It’s sort of inconsistent for the Prime Minister to be championing around climate change mitigation and not move more aggressively to diversify from legacy fossil generation. It will benefit us all. The sooner we can move in that direction, the better for all of us.”
Noting BPL’s cost comparisons with other Caribbean territories when it came to the fuel charge, Mr Roberts said each nation’s total cost structure was different. “When you look at the total cost of travel to The Bahamas and other destinations, you cannot just think about what the energy rate is,” he added. “The potential comparison with other Caribbean destinations, energy use is but one part of it. You have the cost of the ticket, which is a significant cost, and fees for the airport.”