Peter Espeut | Sweetheart deals and bastard capitalism

I read with great interest the article in The Gleaner of Monday, December 22, by Winsome Callum, director of corporate communications at the Jamaica Public Service Company Ltd (JPS) as she tried to explain why electricity bills for those of us not affected by the passage of Hurricane Melissa will increase or have already increased.

I thought she was quite clear, and she must get full credit for that! She could have obfuscated, and beat around the bush, but she came right out and said it: No blame must go to the JPS for the rate increase. Gll the blame goes to the government through its regulator.

“Every single dollar passed through to customers, and the way these charges are determined, are reviewed and approved by the Office of Utilities Regulation (OUR). JPS cannot add to or alter these charges on its own”.

Put another way: the JPS is only doing what its licence – which it negotiated and signed with the Jamaican Government – allows it to.

We like to pretend that Jamaica operates under a neo-liberal capitalist system, but nothing could be further from the truth.

In capitalism, the persons with the capital invest it – risk it – in the hope of making a profit – the larger the profit the better. The greater the risk, the greater the profit, we are told. And “risk” means that profit is not guaranteed, and there is always a chance that you will lose it all!

The owners of the JPS – the Marubeni Corporation of Japan (40 per cent) and Korea East-West Power (40 per cent) – and the Government of Jamaica (19 per cent) – have invested their capital, and I am trying to identify the direction from which their “risk” comes.

If the price of fuel goes up, the JPS passes the increase on to consumers through the “fuel charge” on their bills so that their profit margin is secure.

PROFIT MARGIN

As more people switch to powering their homes and businesses with solar panels and, therefore, consume less JPS energy, the power company still has to generate the electricity, and, therefore, everyone else has to pay for the energy that the solar-panel people did not use - but which the JPS still generated = and this is reflected in the “Independent Power Producer (IPP)” charge on our bills so that their profit margin is secure.

If people steal electricity from the JPS (like in the political garrison communities or anywhere), the company simply increases the charges to those who pay. It is faithful and legal JPS customers who pay the price of political patronage and theft not the JPS. Their profit margin is secure.

There is always the risk of storm damage to generators and to transmission and distribution lines. Good business practice requires that firms insure their assets that are at risk from storm damage. Householders are encouraged to do no less. But insurance costs money, which is only to be expected, but the element of risk defines the cost of insurance as a legitimate and essential cost of doing business.

Does the JPS insure its assets to reduce its exposure in the event of a hurricane? Not at all! All JPS customers pay a premium into the Electricity Disaster Fund (EDF) every month to cover the cost of JPS insurance so that their profit margin is secure. In addition to paying the full cost of the generation of the electricity they use, every month JPS customers invest hard cash paying the insurance premium for the company, with no dividend or rebate.

It seems to me that it is the persons who purchase electricity from the JPS who are the ones who take the risk associated with electricity generation in Jamaica. The shareholders in JPS take absolutely no risk whatever! They just rake in their guaranteed profits each year (or each quarter, as the case may be).

SWEETHEART DEAL

What kind of bastard capitalism is this? This is what a sweetheart deal looks like! Guaranteed profit ith no risk of losses.

Do you really want to know why our energy bills have to go up at this time? Ms. Callum explained it well on Monday: In the aftermath of Hurricane Melissa

“thousands of customers were without supply. This meant that fixed generation costs – costs that do not go away when fewer people are using electricity – had to be spread across fewer units (kWh) of power. The result was higher per-unit charges”.

So those of us who were fortunate not to lose service after the storm have to pay for the electricity people in Westmoreland and St Elizabeth did not use! The JPS itself must suffer no loss from the storm damage. Their profits must be secure.

Some previous Jamaican Government – possibly a People’s National Party one but more likely both over time – was suckered into signing onto this arrangement and then renewing it! I am sure the JPS has been making political contributions over many years. But the politicians have made sure that this is top secret!

Now the Government is caught in a bind. Never mind that the JPS licence is about to expire: the shareholders have raked in billions over the last decades, but JPS is not going to – at this stage – bear any of the risk realised by Hurricane Melissa. They didn’t pay for the Beryl reconstruction. We did through the EDF and in our much larger energy bills. Who expected them to start paying at this late stage? Maybe that person resides on Paradise Street.

It is we taxpayers who will have to pay for post-Melissa reconstruction by lending JPS the money (US$150 million so far) and then by paying huge increases in our energy bills. The worst is yet to come!

But don’t worry. Up to the last day the current JPS licence is valid, the JPS will continue to rake in the profits, courtesy of the sweetheart deal our politicians have led us into.

Are we going to have a happy and prosperous New Year like the JPS will? Maybe - if we have gone solar. Or wind.

Peter Espeut is a sociologist and development scientist. Send feedback to columns@gleanerjm.com.