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Powerless! - Fuel accounts for 60-70% of electricity bills

Published:Friday | March 25, 2011 | 12:00 AM


Dionne Rose, Business Reporter

Jamaica's exposure to high oil prices is felt directly at the household and firm levels through increasing electricity bills, with no means of fighting back other than cutting consumption.

Jamaica Public Service Company (JPS), the monopoly distributor of power, has warned of a pending 10 per cent increase in March electricity bills, with oil trading above US$100 per barrel on the world market.

The main driver is the fuel and IPP component, which will rise by close to 17 per cent in one month.

"The increase in fuel cost is something everybody is focusing on, but the only thing we can control is conservation and our green globe certified hotels probably know this best," said Wayne Cummings, president of the Jamaica Hotel and Tourist Association (JHTA), whose 200 members operate 140 hotels.

JPS spent about J$49 billion (US$578.4 million) on fuel for its oil-powered generating plants, all of which was recovered from customers, using a pricing formula agreed to by the Office of Utilities Regulation (OUR).

Controlling usage

According to data from JPS, the fuel and IPP charge on bills for March will be calculated at a rate of 20.499 per kilowatt-hour compared to 17.579 per kWh in February.

Winsome Callum, the power company's head of corporate communications, says the fuel charge typically represents 60-70 per cent of a customer's bill.

"Since we cannot control the price of oil, we need to focus on what we can control - our usage," said Callum. "JPS is therefore urging consumers to use energy wisely."

Omar Azan, president of the Jamaica Manufacturers' Association (JMA), has suggested in the past that an increase in electricity bills could trigger increases in the cost of goods and services.

He was not reached for a more current position for this story, but price data indicate that food and non-alcoholic beverages are cheaper, and were big drivers behind the negative inflation of 0.6 per cent for the first two months of 2011.

Gasolene prices, however, are headed north, with regular fuel now selling above J$100 per litre at even the low-price dealerships.

No policy offsets

Karl Samuda, minister of industry, investment and commerce, said the Government was unable to offer any policy offsets against fuel prices or utility charges.

"There is nothing we can do now," he said, making reference to the volatility of oil prices. "We are not in a position to reduce rates. It is not something we can willy-nilly alter because they (JPS) are operating under a contract."

Cummings said his sector could focus on conservation as a cost-saving measure, noting that some JHTA member companies - though in the minority - are green globe certified, including the Sandals Resorts International chain of hotels, where he is the director of business processes and administration.

Sandals, he said, has seen a 22 per cent reduction in average electricity consumption levels since 1998.

Electricity bills are made up of two main components: energy charge, which is set by the OUR at each rate review; and the fuel charge, which is a recovery cost for oil used in electricity generation.

"JPS spends over J$4 billion on average on fuel each month. The fuel charge on bills is adjusted each month to reflect any change in the cost of the fuel used in electricity generation, whether upward or downward," said Callum, via email.

The fuel rate, which is verified by the OUR each month, has been on a steady climb for the past seven months, from 14.961 last September 2010 to 20.499 in March - a 37 per cent increase.

Callum said the long-term solution to the problem was to introduce more renewables to the energy mix.

"Wind and hydro projects are currently being added, resulting in incremental growth in the percentage of renewables used in electricity generation," said Callum, noting that late last year the JPS commissioned its first wind farm to provide 3MW of power.

Earlier this month, Wigton also commissioned the second phase of its wind farm, and JPS is to break ground for a new six megawatt hydro project in Maggotty, St Elizabeth, to add another 6MW to the existing 22MW generated by hydropower.