ELECTRICITY bills will jump 18 per cent for the average residential customer this month, returning them to their usual levels. After customers benefitted from a one-off, US$3.8-million ($340 million) fuel rebate from Petrojam, a new heat rate target and lower oil prices last month, the fuel rate has returned to levels seen up to July this year.
Customers of the Jamaica Public Service (JPS) are to be repaid for a fuel overcharge by Petrojam this month.
The Office of Utilities Regulation (OUR)
Minister of Science, Technology, Energy and Mining Phillip Paulwell has vowed to abolish the ‘avoided costs’ system used to compute and compensate independent power providers (IPP) supplying electricity to the national grid as an incentive for renewable-energy producers.
The alternative will be a feed-in-tariff mechanism, designed to accelerate investment in renewable-energy technologies and, unlike the avoided costs system, offer cost-based compensation, price certainty and long-term contracts that can help to finance investments.
Paulwell said that for years, when IPPs entered into purchasing agreements with the Jamaica Public Service Company (JPS), they are told that the price JPS will pay them must be related to the avoided costs, “which is a theoretical concept based on what is assumed to be the least cost of an additional unit of electricity to the grid.”
“That to me does not provide the incentive and the framework to encourage people to get into the business,” said Paulwell, at the launch of an energy cost containment initiative rolled out by Jamaica Broilers Group at one of its contractors’ poultry rearing facilities at Atkins Farm, Four Paths, Clarendon, last Wednesday.
To treat with the issue, “we recently conducted a consultancy through the World Bank and we are about to promulgate a feed-in-tariff mechanism that will reward people based on the actual costs of the technology that is being deployed. And we are going to abolish this issue of avoided costs so that we can properly incentivise those of you who wish to get involved,” the minister added.
According to a declaration by the Office of Utilities Regulation (OUR) dated December 2010, “avoided costs for the JPS electric grid can be defined as the costs to the electric utility of energy or capacity or both, but for the purchase from the qualifying facility(s), the utility would generate itself or purchase from other sources.”
Avoided costs in electricity generation and distribution refer to the cost the JPS escapes by purchasing electricity for resale from other parties instead of building a new plant. It consists of generation fixed costs or capacity costs, and generation variable costs or energy costs.
The OUR said the avoided costs considered in making the declaration are generation fixed costs, which include capital costs for new generation capacity to be installed over the planning period, depreciation of the investment and the fixed operation and maintenance costs for those facilities. Variable costs include fuel costs and variable operation and maintenance costs.
Paulwell told poultry farmers and business people that another issue “we are going to insist on for this year is the ability of businesses to establish generation in one location and to be able to wheel that to another location utilising the grid.”
Emphasising the need for Jamaica to diversify its energy sources, the minister said he intends, very shortly, to present to the country a schema in relation to how the Government will get the price of energy significantly reduced, as well as outcomes in relation to the liquefied natural gas project.
Paulwell said he will again be speaking to the use of coal as an alternative source of fuel, but wanted to “ensure and assure our environmentalists that we are not going to do anything that is going to, in any way, be reckless and careless in how we implement that project.”
The minister, who has installed solar panels – obtained from Cuba – at his home in St Andrew, said the Jamaican Government was also trying to secure a technical agreement with Cuba to train Jamaicans into assembling the panels here.
“I don’t believe it has to be a government project. I want to challenge the private sector to step forward and see how we can manufacture panels in Jamaica” with a view to exporting to other areas in the region “if we can manufacture enough,” he said.
mcpherse.thompson@gleanerjm.com
http://jamaica-gleaner.com/gleaner/20120715/business/business8.html
The Office of Utilities Regulation (OUR) wants to audit power providers, including Jamaica Public Service Company (JPS), to ensure that customers are correctly charged for fuel when world oil prices fluctuate.
The audit will result in recommendations made to the OUR to “effectively manage” the fuel accounting systems of JPS and two independent power providers (IPP).
It plans to hire a consultant auditor for this purpose. Bidding for the job closes June 27.
“The OUR intends to engage the services of a qualified, experienced and competent auditor to carry out an audit of Jamaica’s power system fuel management policies and practices in order to facilitate regulatory oversight of the fuel cost component of electricity charges to consumers, and to create a database of fuel usage cost and efficiency in the system,” stated the OUR in its notice published June 10.
Officials at the regulatory agency were said to be travelling and unavailable for comment.
Fuel represents the largest component on bills and also the bulk of JPS’s expenses at US$206.2 million for its March 2012 quarter, up 23 per cent year on year. Even small fluctuations in oil prices will result in large dollar movements on total customer bills.
JPS, the sole power distributor, buys oil at world market prices with some 30 per cent of its power requirements coming from IPPs. It then passes the cost of oil to customers, ostensibly at cost price.
The OUR wants the consultant to determine: whether JPS fuel policies and practices routinely generate accurate fuel charges billed to customers; and if JPS’s fuel management is compliant by analysing historical and current fuel procurement, fuel usage and general fuel accounting.
JPS bill subdivisions
JPS bills contain two main subdivisions: meter usage and fuel & IPP charges. The fuel charge on bills covers the cost of the fuel required to produce and deliver each kilowatt hour of electricity, and “some” of the costs of the power JPS buys from IPPs, said JPS on its homepage.
“This figure may change based on the cost of oil on the world market,” said JPS.
Currently, fuel and IPP charges are near all time highs at J$21.82 per kilowatt-hour in June 2012 compared with J$8.66 in January 2009, according to JPS statistics on its homepage. Last month, the rate stood at J$24.06 per kilowatt-hour.
JPS needs approximately 20,000 barrels of oil each day to meet the daily electricity demands of customers nationwide. “The company must purchase this oil at world market prices which may vary each month,” said JPS on its home page.
business@gleanerjm.com
http://jamaica-gleaner.com/gleaner/20120613/business/business3.html
On April 12 I wrote a column titled, ‘Is JPS likely to give us the full hundred’. In response, JPS head of Corporate Communications Winsome Callum had a piece published as a letter to the editor on April 15 titled, ‘Inaccurate Mr Wignall, here are the facts’.
Space will not allow me to respond to every sentence and paragraph of the JPS letter, but I will deal with the points which appear to be the most important, plus other salient matters that were not fully highlighted in the crosstalk.
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The JPS plant at Old Harbour in St Catherine. |
As a target JPS is easy to beat up on simply because it is a monopoly. Almost every household in Jamaica has no other option but to purchase its expensive power and there doesn’t seem to be any sanctions in place if the company operates inefficiently.
One part of the JPS letter said, “Any balanced analysis of JPS’ operations will need to take into consideration the company’s continued investments in its operations. Each year, JPS spends an average of US$50 million to ensure that our power plants are operating as efficiently as possible, to improve system reliability, and to tackle the monster of electricity theft in order to create a more equitable playing field for our customers”.
It seems to me that outside of an independent audit of JPS, the entity most capable of providing a balanced analysis of JPS is JPS itself, but I would never expect JPS to make such an analysis public. The Corporate Communications arm of a large company like JPS is in the business of churning out treacle for public consumption. It is simply PR on steroids.
The first question is, what exactly has JPS done to increase the efficiency of its units, most of which are 30 years old and have reached their useable limit? Spending money on power plant efficiency and system reliability seems to me to be throwing good money after bad as, short of changing out these units, each spend is patent waste.
The company stated in its letter, “In the last five years, JPS invested US$280 million in operational improvements, while on the other hand recording US$115 million in cumulative profit.”
Great for JPS, the contractors involved and the workers, but where in all of this did the customers, the lifeblood of JPS, get a benefit? Where was the rate reduction?
The letter also said, “Mr Wignall’s article also incorrectly states that JPS does not suffer a penalty for inefficient operations. The fact is that the measures of efficiency, Heat Rate and System Losses, serve as significant sanctions for inefficiency. Heat Rate measures the efficiency with which oil is used in the generation process
