The Grand Bahama Power Company (GBPC) has been working hard to deliver reliable electricity service to our customers at the lowest possible cost. In 2011, we implemented a three step turnaround plan to improve reliability, stabilize costs and explore alternative energy options. We’ve been working diligently on that plan and we’re seeing results.
Reliability has improved significantly. The new West Sunrise Plant allowed us to replace aging generation with more efficient and cost effective generation. We’ve also upgraded much of the transmission and distribution system and implemented a preventative maintenance program in order to better serve our customers. Because of these upgrades we’ve been able to improve customer reliability by over 55%, when compared to the past 5 year average, resulting in fewer outages that are of much shorter duration.
We recognize and believe that renewable energy sources need to become a component of GBPC’s fuel mix. As part of this we are evaluating specific renewable and alternative sources of energy which will reduce our dependence on oil and result in the best mix of energy sources for the customers of Grand Bahama. Specifically, the following items are being evaluated:
- Utility scale 5-6 MW Solar farm (10% of our current maximum load) for 2016
- Implementing bio-fuel as a source of energy for our vehicles initially as a project in 2015
- Introduction of Compressed Natural Gas (CNG) in 2017-2018 with conversion of certain engines to operate on both oil and gas
All of these options allow us to diversify our energy mix for the benefit of Grand Bahama’s energy future.
However, we must recognize that the improvements that our customers see take time to be realized. It takes deliberate planning to determine the best outcome and it takes time to execute the plans which benefit our customers. GBPC employees are very proud of their accomplishments to date. The work which has occurred on our generation supply and its stability, the reliability improvement of the entire power supply to customers and the continued reduction of the fuel charge (year over year) has taken time to implement, but it is clearly taking place. Oil is currently our only fuel source and we remain subject to the world market price fluctuation. As GBPC must buy fuel in bulk to ensure we have adequate supply on island to meet our generation demand, there is a 3-4 month lag between when we purchase the oil and when it is burned in our engines.
To minimize the risk associated with the volatile fuel market (the highs and lows over the course of various months and years), GBPC uses a “tool” called hedging. Few customers would forget the record oil prices in July 2011, which saw the fuel charge exceed 24 cents. From August 2010 – July 2011, the fuel charge swung as much as 13 cents. In the last year, as a result of improved plant efficiency and our hedging program, the fuel charge swing has only been 3 cents.
Hedging helps to smooth out the volatile fluctuations in the fuel charge, which improves energy cost predictability for our customers. It is a long term, multi-year strategy designed to secure small amounts of our future oil requirements, at various known pricing contracts. Because we negotiate a fixed price to minimize the risks, the fuel charge will not precisely track the price of fuel on the world market. This could mean customers might not always see the benefit of a falling market, however, hedging does offer protection from rising costs by securing a fixed price.
GBPC began hedging in 2014 with a policy that allows it to buy fuel which will be burned in the future (out to 2019). GBPC believes there is long term opportunity based on the current market prices of ~$65/Bbl to provide a new baseline for the fuel charge to GBPC customers. Knowing this, GBPC has hedged a portion of their future expected fuel price exposure by securing a percentage of the future year purchases (2016-2019) of oil, based on the lower market prices which we have been seeing.