NWC says energy savings passed on to water customers
The state-owned National Water Commission (NWC), Jamaica's largest consumer of electricity, said that savings from its energy bill are being passed on to consumers.
Lower oil prices has resulted in cheaper electricity bills from Jamaica Public Service Company. NWC's monthly bill has fallen to about $400 million at present.
"Yes, the NWC has been positively impacted by the reduction in oil prices. Our bills from JPS have gone down to just over $400 million per month, whereas before it was hovering above $500 million per month and in some instances it had exceeded $600 million," Charles Buchanan, public relations manager at the NWC told Sunday Business.
Buchanan said that for most of calendar year 2014 the NWC, and by extension its customers, would not have benefited from the reduction in energy prices because for most of that time electricity rates were still very high. However, both the company and consumers started seeing the benefits since November 2014.
Buchanan explained that there is a mechanism built into the NWC's tariff which is adjusted based on changes in the company's three most significant costs: the cost of energy based on the electricity bills, the foreign exchange rate given that about 70 per cent of its operations involves purchases of items such as chlorine, fittings and meters; and the Consumer Price Index, which relates to other inputs.
"Those three things together are considered under the Price Adjustment Mechanism which customers see on their bills as PAM," he said.
"Let's assume that they are all going in the same direction, whenever they change it will cause customers' bills to change in that same direction."
Buchanan said each of the three elements are weighted by the Office of Utilities Regulation and that the size of their adjustments would determine the impact on PAM.
"So let's say the energy price is going down and by itself would result in a reduction in the PAM, but the CPI and the exchange rate are going in the opposite direction, depending on how significant the movements are, whether the exchange rate changes are small or great or whether the energy cost reduction is small or great, as well as the relative weighting of those components it will determine whether PAM comes out on the net as a positive or negative movement," he said.
"But I can tell you that the movement in the energy prices has been significant enough to have overcome any other contrary movement in the CPI and or foreign exchange rate over recent months. As a result, for the last few months the price adjustment mechanism for the customers has been beneficial to the customers in the sense that it is represented on their bills as a deduction from their water charges," he added.
NWC has some 1,000 locations across Jamaica that require electricity.
In 2011, its annual bill to JPS was $5.503 billion; $5.904 billion in 2012; $6.285 billion in 2013, and $6.464 billion in 2014.
"In all instances there was a continuous climb in the dollar value of the energy costs," said Buchanan.
However, the NWC has put in place energy management initiatives which resulted in its kilowatt per hour usage hovering at around the same place or slightly declining.
For example, in 2011 the NWC's kilowatt/hour usage of energy was 197.17 million, but it moved downward to 188 million in 2014. "This is despite the fact that we had put in a number of new water supply and waste water systems," the NWC spokesman said.
Buchanan adds that there was a four per cent decrease in the NWC's energy consumption in 2014 when measured against 2011. Consequently, the commission was expecting a four per cent reduction in its electricity bill, but instead there was a three per cent increase in the energy cost to the NWC over the period.
Asked about the percentage reduction to customers over the past three months, Buchanan said it was difficult to give a figure due to PAM being a combination of three elements.
"It's a little complicated to give an exact figure ... but definitely the bills have shown declines," he said.