Govt’s Policy Directions: Possible Sale Of BELCO

[Updated] Speaking in the House of Assembly today [March 22], Minister of Home Affairs Walter Roban provided an overview of the policy directions that he provided to the Regulatory Authority.

This follows after the Ascendant Group — the parent company of BELCO — said they are “evaluating strategic alternatives, including the potential sale of Ascendant Group Limited” on January 28th of this year.

Minister Roban said, “I rise to inform Honourable Members and the general public of the policy directions that I have provided to the Regulatory Authority.

“On January 28th of this year, the Ascendant Group, which is the holding company that owns BELCO, announced that in its examination of strategic alternatives for its future, it was considering the sale of the group.

“Built into Bermuda’s legislation is the requirement that the regulator and the government, which oversee the utilities, only agree to that change in control if that change provides benefits to all stakeholders, not just the shareholders.

“ I will outline the policy directions given to the Regulatory Authority which are imbedded in the purposes of the Act as described in Section 6 namely, to seek—

“[a] to ensure the adequacy, safety, sustainability and reliability of electricity supply in Bermuda so that Bermuda continues to be well positioned to compete in the international business and global tourism markets.

“[b] to encourage electricity conservation and the efficient use of electricity.

“[c] to promote the use of cleaner energy sources and technologies, including alternative energy sources and renewable energy sources.

“[d] to provide sectoral participants and end-users with non-discriminatory interconnection to transmission and distribution systems.

“[e] to protect the interests of end-users with respect to prices and affordability, and the adequacy, reliability and quality of electricity services. This is self-explanatory; and

“[f] to promote economic efficiency and sustainability in the generation, transmission, distribution and sale of electricity. Economic efficiency in these areas translates to lower costs for customers.

“I wish to assure the general public that, as noted in the Energy Act 2016, we will require any prospective new owners- and, indeed the current owners- to adhere to the Integrated Resource Plan [IRP], once complete.

“Any prospective buyer of the Ascendant Group would have done their own due diligence in their investigations of the company. Any prospective buyer would have taken note of the events in October of 2018, where plant workers were poised and ready to put their feet on the street in support of their Bermudian colleagues who were abruptly dismissed,” the Minister said.

“Any prospective buyer would know that Bermudians are no longer willing to watch their qualified, educated, experienced colleagues be overlooked and under-valued. Therefore, Mr. Speaker, we expect any prospective buyer to know that they will have to be transparent, inclusive, and collaborative. Transparent in their planning and decision making, so that matters of national importance once deliberated behind the closed doors on Serpentine Road are decided through open discourse across all the strata of our society.

“Inclusive, in that Bermudians must come first, and those Bermudians who are qualified must be given preference over non-Bermudians. Collaborative, in that the community must be engaged to develop services and solutions that improve the triple bottom line; in other words, solutions that benefit the environment, the economy, and society.”

Update 4.13pm: The Ascendant Board of Directors said, “The Board welcomes the statement made in the House of Assembly this morning by the Hon. Walter Roban, Minister of Home Affairs on the possible sale of the Ascendant Group.

“The Company will continue its evaluation of all strategic alternatives, which may include the sale of Ascendant and, as previously stated, the Board understands that its responsibility is to a broad group of stakeholders, including shareholders, customers, employees, and regulators.

“Each of these stakeholders brings to bear on the Company a wide range of perspectives and expectations. The Board is committed to taking action that is in the best interests of all stakeholders. As this process continues, we look forward to working with the Government and regulator to ensure the continuity of safe, reliable and cost-effective energy for all our customers.”

The Minister’s full statement follows below:

Mr. Speaker, I rise to inform Honourable Members and the general public of the policy directions that I have provided to the Regulatory Authority.

Mr. Speaker, on January 28th of this year, the Ascendant Group, which is the holding company that owns BELCO, announced that in its examination of strategic alternatives for its future, it was considering the sale of the group. This news is a once-in-a-generation moment, where we can either simply witness events unfold, or galvanize our position on what is best for Bermuda and continue to drive positive change in this essential public utility.

Mr. Speaker, built into Bermuda’s legislation is the requirement that the regulator and the government, which oversee the utilities, only agree to that change in control if that change provides benefits to all stakeholders, not just the shareholders. Among those things normally considered regarding changes in control or ownership are the nationality of the prospective buyers, their financial stability, and fitness to engage in the business of providing a national electrical service.

Mr. Speaker, I am permitted under section 8 of the Electricity Act 2016 [the Act] to give directions to the Regulatory Authority “with due regard to the purposes of this Act.” Additionally, section 9 of the Act allows me, in formulating Ministerial Directions, to set priorities in a way that, in my opinion will best serve the public interest, taking into account Government policy, the purposes of the Act, any public comments and any available technical analysis.

Mr. Speaker, For the benefit of Honourable Members and the general public, I will outline the policy directions given to the Regulatory Authority which are imbedded in the purposes of the Act as described in Section 6 namely, to seek—

[a] to ensure the adequacy, safety, sustainability and reliability of electricity supply in Bermuda so that Bermuda continues to be well positioned to compete in the international business and global tourism markets.

We must ensure that a stable energy platform is maintained. Our stable electrical supply and grid have played a part in establishing Bermuda’s ‘elite’ reputation among all other island jurisdictions in the region. Safety is paramount as well, again, setting Bermuda quite apart from others in the region. This piece cannot be under-emphasized in an environment where cost and quality are almost entirely proportional in that where electricity is inexpensive in our region, it is usually also not nearly as reliable and safe as that in Bermuda;

[b] to encourage electricity conservation and the efficient use of electricity.

Energy conservation and efficiency is something that, historically, Bermuda has not done well. Increased efficiency in end-uses would mean that demand could be lower, and if demand is lower, especially at times of peak use, it is likely that fewer new engines need to be brought on line to meet demand. Peaking engines being the most expensive to run- they use costly diesel and they are not as efficient themselves as the slower base load engines- overall energy costs to the customer could also be diminished through using those engines less. Lastly, energy efficiency and conservation is the most effective way to reduce costs. Much of the incentive to embrace energy efficiency is in the hands of the utility- through innovative rate structures and public outreach and education so that the utility remains whole while helping their customers reduce costs;

[c] to promote the use of cleaner energy sources and technologies, including alternative energy sources and renewable energy sources.

The obvious rationale here is to be more environmentally responsible. Increasing the uptake of renewables responds to climate change by increasing Bermuda’s resiliency, through less reliance on imported fuels. Renewable energy reduces the amount of money spent on foreign commodities such as fuel oil, lubricants, replacement parts and the like. That capital would instead be retained on island, and hopefully circulating in the local economy. Energy independence is good for both the economy and the environment;

[d] to provide sectoral participants and end-users with non-discriminatory interconnection to transmission and distribution systems.

This prevents any monopoly on the generating subsector and ensures that other market participants are allowed to interconnect to the grid, and it ensures that end users are not denied service without just cause;

[e] to protect the interests of end-users with respect to prices and affordability, and the adequacy, reliability and quality of electricity services. This is self-explanatory; and

[f] to promote economic efficiency and sustainability in the generation, transmission, distribution and sale of electricity. Economic efficiency in these areas translates to lower costs for customers.

Mr. Speaker, I wish to assure the general public that, as noted in the Energy Act 2016, we will require any prospective new owners- and, indeed the current owners- to adhere to the Integrated Resource Plan [IRP], once complete. While the IRP is being developed by the Regulatory Authority and not this Government, we can state quite emphatically that we look forward to more renewable energy, for example, solar energy which is abundantly available in Bermuda. Power that does not require the importation of fuels, such as fossil fuels, is competitively sourced to be cheaper and cleaner. This type of energy mix that demonstrates that Bermuda is serious about energy independence is our vision for a power sector that benefits all of Bermuda. But, let us not just ‘tick the box’ of the IRP. Mr. Speaker, compliance alone is not enough.

Mr, Speaker, any prospective buyer of the Ascendant Group would have done their own due diligence in their investigations of the company. Any prospective buyer would have taken note of the events in October of 2018, where plant workers were poised and ready to put their feet on the street in support of their Bermudian colleagues who were abruptly dismissed. Any prospective buyer would know that Bermudians are no longer willing to watch their qualified, educated, experienced colleagues be overlooked and under-valued. Therefore, Mr. Speaker, we expect any prospective buyer to know that they will have to be transparent, inclusive, and collaborative. Transparent in their planning and decision making, so that matters of national importance once deliberated behind the closed doors on Serpentine Road are decided through open discourse across all the strata of our society. Inclusive, in that Bermudians must come first, and those Bermudians who are qualified must be given preference over non-Bermudians. Collaborative, in that the community must be engaged to develop services and solutions that improve the triple bottom line; in other words, solutions that benefit the environment, the economy, and society.

Mr. Speaker, It is our mission, together with the Regulatory Authority, to ensure that the result will be a better BELCO for a better Bermuda. Maintaining the status quo or simply a marginal improvement to that status quo will not be acceptable to this Government, nor can it be acceptable to our people. We will look forward to in whatever form, a better electric utility that shares the government’s vision of increased adoption of renewables, a fairer electric utility, all for a better and fairer Bermuda.

In conclusion, Mr. Speaker, I want to assure Honourable Members and the general public that the Government will be actively working with the RA to achieve their expectations to obtain optimum services from the utilities, whether they be electricity or electronic communications. You will soon hear more about developments in the electronic communications area, in particular, the Integrated Communications Licences [ICOLs].

Thank you, Mr. Speaker.

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