KINGSTON, Jamaica – Jamaica Public Service Company
Corporate headquarters of the Jamaica Public Service Company Limited, Knutsford Boulevard, New Kingston.
The Consumer Advisory Committee on Utilities (CACU) has come out in favour of the Jamaica Public Service Company’s (JPS) retention of its monopoly on transmission and distribution of electricity, arguing that liberalisation of the grid will not lead to reduced electricity prices.
“This misplaced focus on electricity market liberalisation carries with it the danger of destabilising and delaying the actions that have real promise of bringing lower electricity prices to Jamaica,” the CACU said in a statement.
According to the group, whose acting chairman is Stephen Wedderburn, the most important issues to be addressed in achieving reduced electricity prices “are the introduction of an alternative fuel to oil and the installation of new, efficient generation plants”.
In addition, CACU said, “at this time, the loss of JPS’s exclusivity would threaten the successful implementation of the long-awaited LNG project and the installation of the new and efficient 360 MW combined-cycle plant.”
JPS is slated to construct the 360mw liquefied petroleum gas plant at Old Harbour, St Catherine, at a cost of US$600 million.
“If these projects are delayed, it means that Jamaica will spend even more years with high electricity prices, as there are no other projects on the horizon that could lead to a significant reduction in electricity rates,” the CACU said.
It added that market liberalisation by itself, would not lead to lower electricity prices, and may in fact lead to increased prices.
The eight-member advisory committee was established by the Office of Utilities Regulation (OUR) in 2000. It comprises an independent group of persons from the public, who provide the OUR with a forum through which its receives consumers’ views on broad regulatory issues as well as perspectives on issues which affect the relationship between utility companies and consumers.
Part of its mandate is to report to the OUR on matters pertaining to the provision of utility services which affect the interests of consumers.
Members of the committee include Yasmin Chong, Erwin Burton, David Barrett, Kadin Birch, Paul Goldson, Adrea Adams and Gary Jackson.
On July 30, 2012, Justice Bryan Sykes issued a landmark ruling that the exclusivity provisions in the all-island electric licence granted to the JPS were invalid, on the basis that the relevant minister does not have the requisite authority to grant a licence on terms that bar the possibility of any other person entering the market for the transmission of electricity.
The ruling has been accepted in some quarters as signalling the end of JPS’ monopoly in the transmission and distribution of electricity.
Major uncertainties
However, the CACU, in analysing the issues, said it “does not share this sense of euphoria at Justice Sykes’ ruling. The committee believes that the ruling has served to introduce major uncertainties in the Jamaican electricity sector at a very critical time and could very well have the effect of significantly delaying the realisation of lower electricity prices in Jamaica.”
It continued: “We believe that the victory claimed by those who brought the case against JPS is likely to be a pyrrhic victory resulting in no real benefit for Jamaican consumers.”
CACU observed that it may seem strange that a consumer advocacy group appeared to be siding with an “unpopular monopoly provider of electricity”, but its view was that Jamaica should now be giving maximum focus to those actions which would lead to lower electricity prices.
“We do not believe that a break-up of JPS’ monopoly status will lead to lower electricity prices – at least not for the majority of electricity consumers in Jamaica – and we believe the focus on trying to liberalise the grid is distracting the society away from those concrete actions that will, in fact, lead to lower electricity prices,” the statement said.
The CACU said that as a consumer advocacy group, “We believe that the path to lower electricity prices must be the main focus, and that regardless of whether the transmission grid is liberalised or not, Jamaica will not get lower prices until we introduce an alternative fuel to oil and install new and more efficient generation plans to replace the near obsolete steam turbine units that form a major part of Jamaica’s baseload electricity generation capacity.”
Great contributor
The group said Jamaica’s continued dependence on oil for electricity generation was a greater contributor to high electricity prices than whether the market was liberalised or not. “Liberalising the transmission grid and having additional players generate electricity with oil is not going to give us lower electricity prices,” the CACU said.
It also observed that electricity costs could not, and would not, be reduced until critical decisions were taken and measures implemented to replace old and inefficient generating plants with more modern and efficient units.
“The Government has taken unto itself responsibility for both sets of measures. Specifically, it is the Government that sets the timetable for new generation capacity and issues the tenders for this capacity, and it is well known that it is the Government which is spearheading the LNG project,” the group said.
Furthermore, it noted that “there seems to be a generally accepted assumption that a liberalised electricity market will automatically lead to lower prices.
“We are concerned that commentators on the matter are not seeking to educate the public that in a liberalised market, there is a risk that prices could very well go up, and not down,” the group said.
“The objective of any investor is to maximise returns, and in a liberalised electricity market, JPS and any other power producer will be seeking to maximise their returns and if they have the opportunity to increase prices, they will not hesitate to do so,” the group said, referencing the liberalisation of the petroleum sector which, it said, has not resulted in a reduction in prices.
The CACU also noted that should a decision be made to liberalise electricity transmission and distribution, “Jamaica would not, in our view, be able to attract enough players to sustain a truly competitive market. Rather, we would likely end up with a handful of electricity generators resulting in an oligopoly structure.”
Moreover, the CACU said, “the Jamaican electricity system, with approximately half a million electricity customers, is quite small. We believe [it is] far too small to sustain a liberalised electricity market.”
business@gleanerjm.com
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Dear Reader,
This column appears on the very day that the landmark case challenging the monopoly licence of the Jamaica Public Service Company (JPS) will be heard in our country’s Supreme Court.
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The JPS headquarters in New Kingston. |
The case is immensely important and has wide implications for Jamaican consumers in general, and the energy sector in particular. It is being described in some quarters as “the most important development since Christopher Columbus landed in Jamaica”.
Last September, three Jamaicans, with the backing of the consumer advocacy group, CURE (Citizens United to Reduce Electricity), filed a suit against the JPS contending that the light and power company has been operating under an illegal monopoly licence for decades in the island. The three are former senator, Dennis Meadows, children’s advocate, Betty Ann Blaine, and businessman, Cyrus Rousseau. The case being argued on behalf of the citizens of Jamaica is being led by Attorney-at-law Hugh Wildman.
The substantive claim being made is that the JPS monopoly licence contravenes Section 3 of the Electric Lighting Act which stipulates that no one entity should be entitled to the generation of electricity in Jamaica. The claim also challenges the legality of the Office of Utility Regulations’ decision under Section 4 of the OUR Act in recommending that a monopoly licence be granted to the JPS. The three defendants in the case are the Government of Jamaica, the OUR and the JPS.
It is CURE’s position that for almost 50 years since the nation gained Independence, the JPS has operated under an illegal monopoly licence arrangement in which the company has been the sole provider of electricity, and a situation CURE argues that has not been in the best interest of Jamaican consumers.
Today, at US 41 cents per kilowatt hour, Jamaica has one of the highest electricity rates in the world, and the oil imported to generate this electricity is the largest single expense on the country’s national budget, representing 41 per cent of the country’s import bill. The expense of imported oil and imported food items together accounts for approximately 54 per cent of the total foreign currency imports into Jamaica.
Then there is the impact of decades of high electricity bills on the social fabric of the country. The stories of woes and hardships have been ceaseless – those coming from the poor and working classes especially have been overwhelming. There have been unending calls to talk shows about high and irreconcilable bills, stories of overbilling and disconnections, and talk of Jamaicans having to choose between buying food and paying light bills. While theft of any kind cannot be morally or legally justified, the high rate of electricity theft has been symptomatic of the exorbitant cost of electricity and its impact on the poor and working classes of this country.
Over the years I have been personally involved in cases where the elderly have been badly affected. I recall an old lady with tears running down her face, begging me to help because her light had been disconnected and she was living in darkness. In one entire community, citizens gathered together showing me their light bills which seemed clearly at odds with their modest one and two-room houses. This happened after the controversial smart meters were installed.
While the poor and working classes have been buckling under the pressure of high electricity bills, the small business sector has been operating on the verge of collapse. Perhaps more than any other group, Jamaica’s small and medium-sized business owners have been severely affected by the high cost of electricity, and even larger entities, such as the bauxite and cement companies have now found themselves in an uncompetitive environment as a result of high energy prices.
Today’s historic court case is unprecedented in Jamaican history. CURE believes that: “This move to have JPS’ illegal monopoly licence renegotiated is the inescapable foundation for building a new, competitive energy industry in Jamaica which will employ thousands, and above all, help to reduce the cost of electricity which everybody concedes is the single, greatest deterrent to economic growth and prosperity.”
Says CURE, “We are indeed thankful for what we have been able to accomplish with the support of citizens. This we feel is the beginning of a new approach to people power. We want to remind the JPS that while they are the “power” company, it is the people of Jamaica who hold the real power. It is now time for us to boldly challenge all the inequities in the society, and this case is a significant step in this regard.
“It is interesting to note that where monopoly licences are challenged and modified, that real competition begins to take place. Take a look at the current telecommunications industry and one sees how beneficial the competition is for consumers. We are calling on the government to take full advantage of this new development as they have done in the telecoms market, guaranteeing that the cost of electricity will go down, and that a fair and competitive system be put in place to benefit Jamaica.
“This case is also welcomed amidst the celebration of Jamaica’s 50th anniversary as an independent nation. We believe that this is a significant milestone in the country’s development and we look forward to a positive judgment,” asserts CURE.
I believe that every Jamaican would say, “Amen.”
bab2609@yahoo.com
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DOZENS of Seaview Gardens residents, fed up with the high light bills they are receiving from the Jamaica Public Service Company (JPS), took to the streets again this morning to vent their frustration.
The protest