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JPS goes after $10-b annual return

April 17, 2014 Webmaster

Electricity distributor seeks up to 93% rate hike

JPS goes after $10-b annual return

JAMAICA Public Service Company (JPS) is hoping to clear US$94-million ($10.3 billion) profit a year should its proposed rate hike be approved.

The light and power company applied to the Office of Utilities Regulations (OUR) for a raft of changes to its non-fuel tariff (the rate that recovers cost associated with transmitting and distributing electricity rather than generating it).

Residential customers will see the monthly charge for network access (which up to now has been called the customer charge) increase by a range of 70 per cent to 420 per cent, depending on usage, if JPS gets its way.

What’s more, the monopoly electricity distributor hopes to raise the non-fuel, or energy charge to households by a range of 48 per cent to 93 per cent, moving from the lower end of the range to the higher end, the more electricity is used.

For commercial customers, the rates for which JPS has applied, decreases with higher usage, supposedly to promote greater use of electricity for business purposes.

On the other hand, the utility proposes a 65 per cent increase for the smallest commercial users, while enterprises can’t realise a decrease in the overall rate until they have consumed some 140,000 kilowatt-hours (kWh).

Indeed, the utility devised creative ways of encouraging more efficient consumption, such as recommending to the regulator that it altogether remove the non-fuel rate charged to large industrial customers.

That would see JPS give up just under $5 billion in revenue, which it would earn back from proposed increases to the demand charge that are applied to bills of consumers with heavy-duty electric machinery.

When factoring in the fuel charge, the rate hikes might not seem so daunting.

JPS figures that using a fuel rate of 23 US cents per kWh, the residential tariff increases, on average, by 22 per cent. Most commerical customers, or 98 per cent of them would see an average increase of 16 per cent, using the same math.

Of course, the proposed non-fuel tariff rates coupled with the fuel rates would put the cost of electricity at 45 US cents per kWh for the average household and 43 US cents per kWh for the overwhelming majority of commercial customers.

In its latest five-year tariff review application, JPS rationalised that it accumulated net profit of US$96 million, or an average of US$24 milion a year, from 2010 to 2013.

“The target profit for JPS, allowed (not guaranteed) through the revenue requirement, has never been achieved, representing an allowed return on equity (ROE) of 16 per cent that was approved in 2009, which should have resulted in a net profit of approximately US$43 million per annum”, said JPS of its profit performance over the tariff period that recently ended.

High system losses over the period factored heavily in its shortfall.

The utility company estimated that it was not allowed to recover US$111 million in fuel costs due to penalties from 2009 to 2013.

“The magnitude of the penalty varies with the price of oil and the risk exposure was amplified with the spike in the price of oil over the past two years,” said the light and distribution company. “At the end of 2013 losses, technical (8.6 per cent) and non-technical (largely theft –18.04 per cent), stood at a total of 26.64 per cent.”

Jamaica Observer;

Electricity Government JPS News Oil

Cost of electricity rises to record high

October 20, 2013 Webmaster

The cost of electricity has risen to a new record this month on continued slide in the value of the dollar and higher cost of fuel.

Higher fuel and IPP charges have pushed the cost of electricity up by 3.5 per cent this month after a four per cent increase in September. Together both increases mean the cost per kilowatt hour of electricity is at its highest level ever for households.

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OUR Names Preferred Bidders For 115MW Electricity-Generation Project

October 2, 2013 Webmaster

The Office of Utilities Regulation (OUR) has selected three preferred bidders for the supply of up to 115 megawatts of electricity-generation capacity from renewable energy-based power-generation facilities on a build, own, and operate basis.

In a release yesterday, the OUR said from the proposals for energy-only, the evaluation panel recommended three entities as preferred bidders with capacity amounting to 78 megawatts. These comprise two projects offering energy from wind, amounting to 58 megawatts; and one offering solar, amounting to 20 megawatts.

The preferred bidders are Blue Mountain Renewables LLC, to supply 34 megawatts of capacity from wind power at Munro in St Elizabeth; Wigton Windfarm Limited, to supply 24 megawatts of capacity from wind power at Rose Hill, Manchester; and WRB Enterprises Inc, to supply 20 megawatts of capacity from solar PV from facilities in Content Village, Clarendon.

The proposed delivery price to the national grid for these projects ranged from US$0.1290 to US$0.1880.

The preferred bidders have been directed to provide the OUR with the applicable proposal security by October 15.

The OUR said on June 3 that it had received 28 bids from 20 interested entities, which submitted proposals to supply renewable energy electricity generation of greater than 100 kilowatts and up to 115 megawatts to the national grid.

The bids were tendered by both local and international entities, with eight proposals received from local companies. Two proposals were received for wind, one for biomass, and 25 for solar energy.

Jamaica Gleaner;

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The Future Of Power In Jamaica

September 25, 2013 Webmaster

Is there an energy problem in Jamaica? The growing energy crisis in Jamaica has been a cause for concern ever since the Government divested the Jamaica Public Service Company (JPS).

Consumers and producers complain about the high cost of energy. Firms often blame their low productivity, low output, high price for final goods and services, as well as low profitability, on the high cost of energy in Jamaica.

The lowest consumers pay in Jamaica is $40, or US39 cents per kilo watt hour, compared to the United States where energy cost is as low as 12 cents per kilo watt hour in some places.

Jamaica consumes approximately 605 mega watts of energy per day. The country has the capacity to produce in excess of 700 mega watts per day from the old, inefficient power plants across the island. However, plans are being put in place to replace 475 mega watts of our daily usage with cleaner, more efficient sources; a 360-mega watt plant and 155 mega watts from renewable sources including, but not limited to, solar, wind mill and hydro. These two projects combined, are expected to reduce the cost of energy to the consumer by 25 to 30 per cent by 2016.

What is being done about the issue?

The winner of the bid to establish the renewable-energy sources has not yet been announced, but Azurest Cambridge Consortium has won the bid to possibly build this new energy plant that will supply 360 mega watts of Jamaica’s daily usage.

The estimated cost, including buildings, barges, the plant and other infrastructure is US$690 million. Total cost, minus labour, is estimated to be US$580 million. In total, the plant will use three barges, the first barge will be delivered 17 months after Azurest and JPS sign off on a power-purchase agreement. Negotiation are expected to start within the next three weeks, and should take about three to four months.

Azurest plans to sell the energy to JPS, at a price between 13 and 22 cents US per kilo watt hour, earning no more than 20 per cent return on its investment.

The US$100 million core equity committed to project, with hopes of raising US$50 million locally, and the rest overseas, in a 78 per cent to 22 per cent debt-equity ratio.

How will they finance the rest?

The International Finance Corporation plans to raise funds to possibly support the establishment of the 360 mega watt-power plant project in Jamaica, by issuing bonds on the domestic market.

IFC plans to raise US$500 million, or J$51 billion, from the issue. The bonds will have a triple-A rating and will be targeted at pension funds, banks and other investors. The bonds will also carry lower interest rates than the Bank of Jamaica Treasury Bill Rates.

This strategy to raise funds is not new as it was employed in the Dominican Republic to raise approximately US $10 million to fuel two micro-finance operations in the country. The IFC is unsure as to the exact date these bonds will reach the market, but know it will occur during the course of Jamaica’s four-year agreement with the IMF.

Upon establishment of the plant, Azurest will sell all the energy it produces to the JPS, who operate both a monopoly and a monopsony market.

What is a monopoly market?

This is a situation where there is only one seller of goods and/or services in the market. There is no competition as other firms cannot enter the market freely due to barriers to entry.

In this case, based on JPS’s contract with the Government, no other firm can supply electricity in Jamaica.

Given that JPS is the only supplier in the market, if unregulated; it can charge any price it desires. The company usually charges a price higher and supply less than what is efficient.

What is a monopsony market?

A monopsony market is the other way around, instead of one sell such as the case with the monopoly, in this case there is only one buyer of goods and/or services.

JPS is the only company that buys energy in Jamaica. Any company can produce energy, but given that JPS is the only distributor of electricity, it is the only company that buys energy.

In this case, if unregulated once more, the JPS can push the cost price down because there are no other firms in this purchasers market.

Who regulates?

In Jamaica, The Office of Utilities Regulation monitors JPS’s activities.

It regulates and prevents any abuse of monopoly and/or monopsony power that the JPS might be tempted to exercise.

The Jamaica Gleaner;

Electricity Government JPS News

JPS surprised at controversial street light resolution passed by KSAC

September 13, 2013 jrobinson

‘Strange’

THE Jamaica Public Service (JPS) has expressed ‘surprise’ at Tuesday’s passing of a resolution by the Kingston and St Andrew Corporation that seeks to have Corporate Area residents pay for the repair and replacement of street lights.

According to the light and power company, a resolution of that nature warrants consultations with the company, as a number of issues would have to be resolved before any such change could be made.

“I find it strange that they would move a resolution without us doing the research and getting back to them. We don’t have an adversarial relationship, we are accessible to all the councillors, they have our cell numbers and we respond to all their complaints, including street lights,” Jennifer McKurdy, JPS parish manager for Kingston and St Andrew North, told the Jamaica Observer on Wednesday.

McKurdy said that both he and the manager for JPS Kingston and St Andrew South attended last week’s KSAC Roads and Works Committee meeting, and were asked if it would be possible for private citizens to fix their own street lights. She said that they had promised to research the issue and respond but, before they were able to do so, the resolution was passed.

Meanwhile, JPS communications boss Winsome Callum told the Observer Monday night that, currently, there is no restriction on people who live some distance away from the main, or where electricity is unavailable, to go into the JPS office and work out an arrangement.

The process is usually for a certified contractor to install a street light at their home or in their community, and have it passed by the JPS. The owner of the property then becomes responsible for the bills and the maintenance of that light. However, she said that private citizens being responsible for the service or repair of streets lights in areas for which the KSAC is responsible is a totally different matter, requiring intense discussions on how it can be approached.

The resolution is one of the most controversial to be passed by the current KSAC administration, led by Mayor Angela Brown Burke. It was opposed by minority Jamaica Labour Party (JLP) members of the council, as well as three People’s National Party (PNP) councillors who abstained from voting. The resolution was eventually passed by a 16-10 majority.

The Observer reported Tuesday that PNP councillor Ian Telfer (Hughenden) had tabled a motion in the Council, seeking to have the public contribute more to maintaining street lights by paying for the repairs.

This would be in addition to some $3.4 billion from recently increased property tax, which generates revenue the Government and the councils use to pay for the street lights and garbage collection. However, despite the heavy increase in property taxes in April, both services continue to suffer from underfunding.

In his motion, Telfer said that the KSAC has been having “major challenges” in keeping the street lights in the Corporate Area operational. He noted that some private citizens, on occasions, have paid for repairs and replaced defective lights with “lights of their own”, but that these were eventually removed by the JPS.

He admitted that neither the KSAC nor the JPS can allow private citizens to add street lights to the grid as this would create “greater problems of maintenance and accountability, in addition to increasing operational costs”, but insisted in his motion that the KSAC should “mandate” the JPS to accept payments from private citizens.

Telfer said that there were instances where citizens have paid to repair or replace street lights, but the JPS said that the practice is illegal.

JLP councillor Vernon McLeod (Havendale) said that the JPS should find cash flow “to fund its business if it wants to stay in business”.

“The KSAC should penalise the JPS, and don’t pay them if they don’t provide the service,” McLeod said.

Another JLP councillor, Duane Smith (Chancery Hall), said that the resolution would set a dangerous precedent, and could open the floodgates for citizens to be asked to pay for other public services for which they are already taxed.

“It is quite obvious that the councillor is trying to remove the burden and responsibility of maintaining the street lights from the KSAC, and placing them squarely on the shoulders of the public. And what is most unfortunate about it is that it seems to have the backing of members who should know better,” Smith said.

Councillor Delroy Williams (JLP, Seivright Gardens) said that support of the resolution would be a reward for negligence on the part of the JPS. He said the KSAC should move aggressively to get the JPS to carry out its responsibilities.

His PNP colleague, Councillor Karl Blake (Greenwich Town), who seconded the motion, said that it could not be illegal for citizens to help to secure their communities. But, PNP Councillor Eugene Kelly (Whitfield Town), who abstained, said that while the motion had a good intention, citizens were already paying property tax, out of which the JPS was paid by the KSAC for the street lights.

“The JPS is paid hundreds of millions of dollars for the street lights, and if they don’t meet their obligation they should be sued,” Kelly said.

Another PNP councillor, Kevin Taylor (Duhaney Park), who also abstained, said that if citizens were to pay for the repair of street lights, they should be able to have the payment deducted from their property tax.

Jamaica Observer;

Electricity Government JPS News

JPS surprised at controversial street light resolution passed by KSAC

September 13, 2013 Webmaster

‘Strange’

According to the light and power company, a resolution of that nature warrants consultations with the company, as a number of issues would have to be resolved before any such change could be made.

Telfer said that there were instances where citizens have paid to repair or replace street lights, but the JPS said that the practice is illegal.

JLP councillor Vernon McLeod (Havendale) said that the JPS should find cash flow “to fund its business if it wants to stay in business”.

“The KSAC should penalise the JPS, and don’t pay them if they don’t provide the service,” McLeod said.

“The JPS is paid hundreds of millions of dollars for the street lights, and if they don’t meet their obligation they should be sued,” Kelly said.

Jamaica Observer;

Alternative Energy Electricity Government JPS News

OUR Puts Brakes On Power Wheeling

August 23, 2013 jrobinson

The Office of Utilities Regulation (OUR) has halted the scheduled implementation of electricity wheeling to allow the Jamaica Public Service Company Limited (JPS) to make an application to the Electricity Appeal Tribunal.

This means that the OUR will not begin to process applications for wheeling this month, as was scheduled.

A statement from the OUR today said the JPS requested that the regulator put a stop the process, pending the hearing of its appeal.

The grounds of appeal have not been revealed.

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