Robert F. Evans P.E., Contributor
Jamaica's power sector could be further divided into different elements. JPS crew repairing a light-pole in Kingston recently. - RUDOLPH BROWN/CHIEF PHOTOGRAPHER
ONE HAS to turn back but few pages in the book of Jamaica's history to learn how competition in a utility can bring immense benefit to the consumer. I refer, of course, to Cable and Wireless, the one-time monopoly, whose rates dropped so dramatically in the face of competition.
Their primary competitor, Digicel entered into the market five years ago and has made the service of both contenders more affordable to a great many Jamaicans from all walks of life.
The increasing rates and declining service from the incumbent monopoly, Jamaica Public Service (JPS), must encourage Jamaicans to desire to see the 'Digicelisation' of electricity provision in this country. This is no pipe dream. Competition in electricity provision has been in vogue for years in the first world. Let me give you the 'Power Competition for Dummies' version of how it works.
The four elements which make up the process are generation, transmission, distribution and supply.
JPS currently purchases power from other generating entities and sells it to consumers. For example, they buy from the Wigton Wind Farm at less than 6 cents per kilowatt hour and re-sell that power at over 24 cents per kwh. It could be argued that they are charging some 18 cents per kwh to bring that power to your meter.
What is happening now, however, is not competition in generation. How the real contest works in deregulated jurisdictions is that virtually any company can advertise rates and feed that power into the grid. Anyone can subscribe to company X. In reality one does not necessarily get company X's power, but company X's rates. The purchaser, of course, pays additional amounts for transmission, distribution and supply. If company X is oversubscribed, it has to purchase power from its rivals to meet the demand. For generation, all these companies do is produce and sell electricity, nothing else.
DIRECT CONNECTIONS
Now for transmission. This aspect of the supply chain is the business of connecting directly to the power generators and moving the electricity at high voltage on high towers or poles around their designated franchise area. We could, in Jamaica, have three franchises for transmission, one for each county. The counties would be interconnected so as to compensate for shortfalls in any zone.
The disadvantage is that you tend to be stuck with the one franchise holder for your county. This is not true competition of course, but with three entities side by side (barring cartelisation), the regulator could better manage the process. Through interconnection, Cornwall could purchase power from Middlesex or Surrey through the transmission system. These companies operate and maintain their high voltage network and collect a fee for all power passing through their system, nothing else.
The distribution network is the wiring from the transmission line to the pole near your home. For example, one could run a pole line into a large community of say 1,000 houses and connect to the transmission wires on the main road. Again, you do not have classic competition because you tend to be stuck with your single provider. But, as before, because there may be tens of distribution companies islandwide, regulation would be commensurately simplified. These companies operate and maintain the wires that bring the electricity to your gate, nothing else.
Supply is the final link in the chain. The supplier is the entity that provides you with a meter and connects the distribution line to your home or business. Obviously there can be many suppliers within a zone and here true competition is possible because you need not have the same supplier as your neighbour. This company operates and maintains your connection to the distribution system, meters your electricity and collects the money to pay for its services plus the distribution, transmission and generation.
Who is buying and selling to and from whom is not as complex at it may appear. The solution is similar to interconnection in the telecommunications industry.
BIG MONEY
This is a big money business with much room for local entrepreneurs. JPS' gross revenue for 2004 was about $30.4 billion. If competition causes a reduction in costs then perhaps a reasonable estimate of the current electricity market demand could be $24 billion annually. At that scale of revenue earnings, the business of generation is worth $12 billion; transmission $1 billion; distribution $7.2 billion and supply $2.2 billion.
Telecommunications services can be provided through the electricity grid and optimising the use of the wires in this way could further reduce costs to the consumer.
Minister Philip Paulwell has done well for us by smashing the telecommunications monopoly and his 2006 budget presentation indicates awareness that electricity must follow. If Jamaica does not take the path all the way down the road of deregulation of both electricity and water, a well-known road world-wide, and quickly too, then perhaps we are 'Dummies'.
An engineer, Mr. Evans practices in the construction industry.
