JIS News

Vice President of Marketing at the Jamaica Public Service Company (JPSCo), Nigel Grant, has said that there is no systematic rigging of the company’s billing system or of the meter-reading system, to overcharge customers.
Mr. Grant sought to make this clarification in light of the perception among customers that the spiralling electricity bills were as a result of JPSCo seeking to overcharge customers.
The Vice President stated that the utility company was working within the stipulations and regulations put in place by the Office of Utilities Regulations (OUR). “We don’t set our own prices. Our prices are regulated so that any number that is presented to you, is one that has been approved by the regulator,” he informed.
Elaborating, he disclosed that the OUR, had put in place a number of economic or price regulations for the company. For example, in June 2004, the OUR approved a five-year price cap tariff for the JPSCo, meaning that there is a maximum to which electricity prices can go in real terms for the period.
“What this means is that we will not be able to go back to the regulator for a change in our rate structure until June 2009,” he explained.
At that time, the OUR also established a projected rate of return for the JPSCo. In order to determine this, the utility was asked to submit its ‘test year cost of operations,’ which is the cost of running the company in a normal, regular year, along with its five-year capital investment plan and trajectory of operating and maintenance costs over that same period.
“That body of data is what the regulator would have used to determine the return we should realise. The return they have allowed us is 14.58 per cent return on our equity, so the cost plus return on equity is the revenue requirements for the utility over the five-year period,” the Marketing Vice President explained.
Despite this however, “the best the JPS has done in the four years [since its establishment], is 8.5 percent return on equity,” he said.
Notwithstanding this, the utility company has been consistently seeking to improve the quality of its service delivery and “be at least 2.7 per cent more efficient every year,” Mr. Grant told JIS News.
The JPSCo Vice President is of the opinion that the public could play its part, by seeking to understand their light bills. Mr. Grant said that some customers did not take the time to understand their bills and this lack of understanding often led to confusion.
Explaining the main elements of the electricity bill for residential customers and small to medium size commercial entities, Mr. Grant pointed out that one element of the monthly bill is the non-fuel base rate, which is the customer charge, and that is a monthly cost independent of the amount of energy used.
“The customer charge is really recovery of the administrative costs for maintaining an account on the system. It is your meter-reading cost, your GIS system operating cost.all the fixed costs you have regardless of whether the customer takes energy or not,” he noted.
The other major component used to determine a customer’s bill, is the energy rate. “That figure is expressed as a dollar per kilowatt-hour, kilowatt-hour being the unit of energy that we measure,” Mr. Grant continued.
These two costs are the only non-fuel costs for small accounts (residential customers and small and medium commercial businesses).
For the larger accounts, or large businesses, there is a third non-fuel base rate, which is applied, called the demand charge.
“That is again a fixed charge, in the sense that it is independent of the amount of energy you take. It is reflective of the maximum capacity that a large customer calls for on the system,” Mr. Grant pointed out.
The difference between kilowatt and kilowatt-hour (s), Mr. Grant informed, was that ‘kilowatt’ referred to the customer’s capacity to take energy, whereas kilowatt-hours referred to kilowatt time or the number of hours energy was taken. According to Mr. Grant, once these non-fuel rates were set, they remained unchanged for at least one year.
“Those rates may be changed once every 12 months depending on .the rate of Jamaica’s inflation, the rate of US inflation and the value of the Jamaican dollar – whether it appreciated or depreciated. Those three ingredients are the basis of the annual adjustment factor,” he explained.
While the three non-fuel rates may remain constant for extended periods, there are some factors that vary from time to time or at any time throughout the year. One such factor is the fuel rate. However, based on the structure of the fuel clause, the JPSCO is not expected to use the fluctuating cost of fuel as a profit-making factor. The company is required to charge the customers exactly what it pays for the commodity. This is subject to two efficiency measures that have been imposed on the JPSCo by the OUR.
“One of these is known as the heat rate, and this is a measure of how many barrels of fuel we take to make one kilowatt-hour of electricity. The other is the system-loss, which is a measure of how much kilowatt-hours of electricity must be generated in order to sell one kilowatt-hour,” Mr. Grant explained. In other words, the system-loss rate is the difference between the total generation and the total kilowatt-hour that is billed, divided by the total generation.
In the current tariff regime, the heat rate target is 11,200 kilojoules per kilowatt-hour, and the system-loss target is 15.8 per cent. This means that if the JPSCo produces electricity at a system-loss rate higher than 15.8 percent, then the utility is not able to recover the cost for that excess. Currently, the company’s system-losses stand at 21.8 per cent.
“For the year, up until August, it has cost us $14 billion worth of fuel to generate electricity. We have only been able to collect $13.1 billion in fuel revenue, so that we have lost $889 million up until then,” Mr. Grant told JIS News.
Further examination of the system-losses indicates that there is a technical loss component, which means that JPSCo is unable to generate, transform and distribute electricity from one transformer or sub-station to another without incurring losses in energy. “That is a permissible loss in any utility company and that’s about 10 per cent of the 15.8 per cent that we are allowed in the tariff,”Mr. Grant told JIS News.

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