TOPIC: BAHAMAS ELECTRICITY CORPORATION
MAY 14, 2003

Mr. Speaker, you will recall that on the weekend of May 3rd, The Bahamas Electricity Corporation was obliged to load shed as a result of generation problems at Clifton Pier and Blue Hills Power Stations.

Mr. Speaker, during the last six months, BEC has been engaged in planned maintenance of generation plant at both power stations in preparation for the summer peak demand period. Two major factors have adversely affected BEC’s ability to carry out the necessary maintenance, and also meet the required demand.

Mr. Speaker, firstly, the 30 Megawatts No.11 Slow Speed Diesel Generator at Clifton Pier continues to be unreliable. In keeping with BEC’s maintenance program, this unit was overhauled at a cost of $250,000 by the manufacturer, Izar Maneses, from March 3rd to March 17, 2003, some 6 1/2 weeks ago; yet the unit failed. As a result of this failure, major components had to be changed to get the unit operational. I shall return to the subject of the No. 11 Generator in greater detail momentarily.

Secondly, Mr. Speaker, the 30 Megawatts No. 12 Slow Speed Diesel Generator at Clifton Pier, now under construction, which contractually should have been in operation since the 30th of August 2002, is now rescheduled for the third time to be commissioned next month. Again, I shall return to the subject on the history of this unit momentarily.

Mr. Speaker, following the maintenance of No.11 Generator; the No.9 26.5 Megawatts Generator was taken off line for its annual overhaul, by the engine manufacturer. At the same time, GT No.10 22 Megawatts unit was also undergoing a planned maintenance by an independent USA contractor.

Mr. Speaker, whilst all of this was happening, one week ago from last Saturday night, May 3rd, a fire ignited on GT 7 Gas Turbine, which was caused by a broken fuel line, that resulted in the 30 Megawatts Combine Cycle Unit going out of service. Likewise, GT No.1, 18 Megawatts, also went out of service as a result of a faulty control valve. Hence, the reason for the extended problem during the now infamous weekend.

Mr. Speaker, I wish to publicly thank the hard working staff of BEC and the contractors at Clifton and Blue Hills for their tireless effort in the restoration of the generators. Mr. Speaker, BEC workmen assisted by contractors at Blue Hill and Clifton Power Stations worked around the clock until conditions returned to normal, two and half days ahead of projection. The Corporation is committed to completing its planned maintenance program by the end of June.
 

Mr. Speaker, BEC is also scheduled to have its two new generators in operation by the end of next month, namely the 30 Megawatt Slow Speed Diesel (D/A 12) at Clifton Pier and a 23 Megawatt Gas Turbine at Blue Hills (GT8R). The completion of the maintenance program and the commissioning of these two units should ensure that adequate generation will be available throughout the summer.
 

BEC PRE-MAY 2, 2002
Mr. Speaker, at my Party’s Convention in November of 2002 I disclosed that a recent review of the power generation needs of BEC had revealed that BEC’s management needed to be more forceful in addressing shortcomings with employees, equipment, processors and vendors. It stated that generating unit availability is much lower than it should be. Average system availability had fallen from a round 83% in 1997 to only 73% in 2001. Many major overhauls and periodic inspection had not been performed.

Further Mr. Speaker, the report disclosed that as a result of management’s negligence, chronic defects were often accepted instead of solved and repaired as long as the unit can still be operated. To put it in plain language, they let the engines run until they break down. Historical insurance audits indicated that maintenance has been lacking and the report called for additional technical talent needing at both Clifton Pier and Blue Hills.

Mr. Speaker, the study further revealed that the pattern of not diagnosing and not addressing problems at the corporation had led to malaise and the growing acceptance of mediocre performance. ‘The will to manage the corporation is weak.’ The end result was that those employees who would wish to make a difference at the Corporation were normally discouraged.

Mr. Speaker, that was the sad conditions that my government met when we came to power. We have moved quickly to begin the process of implementing the recommendations contained in that report. We have a vibrant, energetic and committed Board of Directors, headed by Mr. Alfred Jarrett. I applaud their success to date. As indicated earlier Mr. Speaker, there is a new spirit in BEC as was demonstrated by the staff who worked around the clock to restore power recently.

BEC GENERATING CAPACITY AS OF JUNE 30, 2003
Mr. Speaker, the peak demand for the summer 2002 was 198 Megawatts. The projected peak demand for 2003 is 217 Megawatts. BEC’s total generating capacity for New Providence as of June 30, 2003 will be 327 Megawatts, assuming the successful commissioning of D/A12 30 Megawatts and GT8 23 Megawatts before the end of June 2003. DA 5 & 7 both 10 MW each are currently off line for repairs. (REFER TO NEW PROVIDENCE STATUS REPORT)

Mr. Speaker, much of the plant at Blue Hills is aged and has for the most part has exhausted its usefulness. It is far from being fuel efficient in the 21st century. The Corporation must retire these units at the earliest possible time.
 
 

BEC RECENT HISTORY OF GENERATIONATION TRANSMISSION AND
DISTRIBUTION SYSTEMS

Mr. Speaker, I am advised that in early 2001 the BEC management submitted a proposal for the purchase of a 25-Megawatt Gas Turbine as a replacement for the Number 4 Gas Turbine unit at the Blue Hills Power Station to prepare for the summer peak demand period of 2002.  Later in the year of 2001, management requested approval to award a contract by the end of November 2001 to allow the unit to be into operation by June 2002.  However approval from the previous Administration was not obtained until February 2002.  This resulted in the unit not being commissioned until September 2002.  The unavailability of this Gas Turbine (GT 4R) and the unreliability of the 30-Megawatt Slow Speed Diesel (D/A 11) contributed significantly to the load shedding last summer.

I am also advised that the reliability of D/A 11 has been a problem for the Corporation since it’s commissioning in late 1999.  The Corporation in consultation with the contractor, ABB/Alstom and various experts in the field have carried out investigations and effected a measure of improvement; however, a problem (scuffing) which is related to unusual and unpredictable cylinder liner wear has been somewhat improved, but not totally eliminated.  This means that the problem still occurs from time to time resulting in unscheduled outages.  To date more than $4 million has been spent on maintenance of D/A 11 since it’s commissioning in 1999 (approximately three and a half years) which is approximately $1.5 million more than the normally expected maintenance cost.

Further, another 30 Megawatt Slow Speed Diesel Generator (D/A 12) which was scheduled to be commissioned on the 30th August 2002, is now rescheduled for the third time to be commissioned around the end of June 2003. Both generators in question (D/A11 and D/A12) were supplied by the same company; a matter I will address in a moment

The extended delay of the D/A 12 commissioning has adversely affected BEC’s ability to effectively carry out planned preventative maintenance at the Clifton Pier and Blue Hills Power Stations while at the same time meeting the required demand because of the limited spare plant over the past seven months.  Notwithstanding the limited spare plant situation, BEC has completed planned major maintenance on seven generators at the Blue Hills and Clifton Pier Power Stations. It should also be noted that, if D/A 12 was available as originally scheduled the power outages, which occurred a week ago, would have been avoided.

Mr. Speaker, it should be further noted that in October last year the Corporation obtained approval to implement a contingency plan which entailed bringing forward of the second phase of the modernization program at the Blue Hills Power Station; that is the replacement of the 14 Megawatt Gas Turbine (GT 8) with the ultra-modern GT 8R which is similar to the gas turbine (GT 4R) commissioned last September.  This initiative along with the re-scheduled commissioning of D/A 12 is intended to insure adequate generating capacity throughout this summer.

BEC is in the final phase of its planned preventative maintenance program with the 26.5 Megawatt Slow Speed Diesel (D/A 10) Generator, currently being overhauled, scheduled to be commissioned by Monday, May 19th, and the Combined Cycle Unit at Blue Hills will be overhauled next month.

Mr. Speaker, in parallel with the generation new plant installations and planned maintenance program the Transmission and Distribution System are also being maintained and upgraded in readiness for the summer to ensure improved system reliability.

In an effort to meet the growing demand the installation of a combine cycle unit incorporating the addition of a waste heat boiler and steam turbine, which will utilize the exhaust gases from the Number 4R Gas Turbine, and the Number 8R Gas Turbine is at an advance stage of planning with a view to being operation in approximately two years.  This project will result in an additional 23 Megawatts of power without additional fuel cost.  Consideration is also being given to the addition of an 18-Megawatt Slow Speed Diesel Generator for installation at the Clifton Pier Power Station, also to be commissioned in approximately two years.
 

HISTORY ON PURCHASE OF DA 12 SLOW SPEED DIESEL GENERATOR
NEW PROVIDENCE POWER EXPANSION PROGRAMME PHRASE THREE
 
Mr. Speaker, in October 2000, the Board of Directors of BEC concluded that based upon the evaluation of its consultants, there was little to separate the two contractors that were selected from the list of bidders, namely, ABB, now known as Alstom of Europe; and Hanjung of Korea. Following the request of Board Members as to the performance of the two contractors in other jurisdictions, the consultants advised as follows:

Hanjung—four utilities were consulted; there were no liquidated damages and the company has a record of good performance with no delays.

ABB (Alstom)—company has record of satisfactory performance; there were liquidated damages and contract delays in Mauritius, Honduras, Peru, Freeport and Nassau.

Mr. Speaker, in the area of contractors experience, Directors were advised that while Alstom had participated in a considerable number of diesel projects as a supplier of the alternator, the number of projects where they have acted as main contractors is relatively few. In the case of the project at Rockford in Jamaica—which is well known to us—Alstom provided the generator, but took little part in the overall project management. Furthermore, this project experienced many difficulties and delays and in particular a sever problem with scuffing of the engine cylinder liners took place there.

Mr. Speaker, the Board of Directors at its meeting held on the 13th of November 2000, gave its approval for the contract to be awarded to Hanjung. Subsequently, at a meeting of the Board held on the 29th of November 2000, the Board unanimously reconfirmed its original decision to award the contract for DA 12 Generator to Hanjung. At an extraordinary meeting of BEC’s Board on the 28th of February 2001, it was noted that subsequent to the meeting, Directors and management were summoned to Cabinet at which meeting the selection of Hanjung was discussed. As a result of the discussions, and for reasons that were deemed to be in the best interest of the country, it was decided to award the contract to ABB/Alstom.

Mr. Speaker, I am advised that two senior Members of the Board resigned as a result of the then Administration’s refusal to accept the recommendation of the Board, which was unanimous that the contract be awarded to Hanjung. One of the Board Members, I’m advised, later reversed his position; the other did not.

Mr. Speaker, this is the factual position from the records of BEC. These facts clearly do not support the front page story carried in the Nassau Guardian of May 12, 2003. The Bahamian people need to ascertain by some legal mechanism of inquiry as to the bona-fide reason why a decision was taken to purchase D/A12 Generator from the same supplier, after the turbulent, expensive and poor performance of D/A11 Generator, which caused much suffering for the people of New Providence and Paradise Island.

Likewise Mr. Speaker, the delay in the commissioning of D/A12 has significantly impacted the cost of fuel for BEC. The coming on stream of D/A12 would have replaced the use of several Gas Turbines in the merit order of operations. Gas Turbines burn Ado (diesel fuel) and the D/A12 Generator burns Bunker C Fuel. The cost of Bunker C is significantly lower than that of Ado.

Mr. Speaker, the cost savings to BEC in utilizing Bunker C Fuel versus Ado Fuel as it relates to D/A12 is $46,600 per day or $17,000,000 per annum. Mr. Speaker, D/A12 Generator is ten months behind its commissioning date, resulting in additional fuel costs to the Bahamian taxpayers of $14,000,000.

Mr. Speaker, much is said time and time again as to who and what is at fault every time BEC suffers power outages. Much is also said about excuses being made as to what are the causes of such outages. I have attempted today and hope in fact that I did so, to finally put to rest the cause and effect of the power outages to date. The plan that I have outlined today may be considered the most definitive one made to-date in this House of Assembly on BEC’s power generation capability for New Providence and Paradise Island.