Zia Mian | JPS: high electricity losses
“Electricity can transform people’s lives, not just economically, but also socially.” – Piyush Goyal, Minister of Railways and Coal, Government of India
Jamaica does not possess indigenous energy resources, except renewables. The most pressing economic challenge that Jamaica faces is her dependence on imported oil to meet more than 90 per cent of her energy needs. The cost of imported petroleum places a heavy burden on available foreign exchange that is needed to finance the importation of critical economic inputs and raw materials.
In financial year 2017-18, the cost of fuel imports was estimated at US$1.1 billion. Steps have been taken to diversify energy-supply mix by introducing natural gas to generate electricity. However, natural gas will be imported in the form of LNG and will not decrease Jamaica’s dependency on imported fuels.
Jamaica’s long-term energy policy aims at creating a modern, efficient, diversified, and environmentally sustainable energy sector that would provide affordable energy supplies while assuring long-term energy security.
The policy aims to enhance international competitiveness throughout all the productive sectors of the economy. By 2030, the Energy Plan’s objective is to obtain 20 per cent of the energy supplies from domestic renewable sources (wind, solar, biomass, and biofuels).
High electricity prices, therefore, are a major concern in Jamaica. They affect the life of residents as well as the competitiveness of businesses and industries throughout the country. They also hinder the wider development of the information technology (IT) sector. One major factor that leads to the high electricity prices is the high level of system-energy (electricity) losses.
The system-energy loss is a difference between the electricity recorded at the dispatch point (generated and purchased from Independent Power Producers IPPs) and the electricity sold and billed to the end-use customers as recorded by the customers’ meters at their premises. It is expressed as a percentage of the dispatch.
The system-energy losses are of two categories: technical losses (TL) and non-technical losses (NTL).
Energy losses that occur in generation, transmission lines, substations, transformers, and distribution are known as the technical system energy losses. These losses are an inherent part of the electricity business and are, to ‘some extent’, unavoidable. The level of these losses varies from country to country and utility to utility. There are international industry benchmarks and standards for these losses.
The Jamaica Public Service Company (JPS) estimates these losses at about 8.5 per cent of the dispatch.
The primary triggers for non-technical system energy losses are:
- Deficiencies in billing and meter reading;
- Meter by-pass;
- Consumption not captured by meters or illegal connections;
- Meter errors, defective meters, non-billing and under-billing of accounts.
The JPS estimates these losses at 18.1 per cent of the dispatch. Thus, the total system-energy losses in 2017 were estimated at about 26.6 per cent of the dispatch. About 79 per cent of these losses are passed on to the consumers and are reflected in their monthly electricity bills.
ENERGY LOSSES IN JAMAICA
In other words, both technical and non-technical energy losses in Jamaica are persistently high.
For example, in 2017, The JPS dispatched 4,363GWh of electricity. The JPS sourced 58 per cent of this electricity from its own generation plants (2,536GWh) and 42 per cent (1,827GWh) it purchased from IPPs.
Based on electric-meter readings, the billed sales amounted to only 3,211GWh. The rest of the 1,156GWh of electricity was unaccounted for and hence not billed. This electricity was lost between the dispatch and the meters.
In 2017, electricity losses accounted for 26.6 per cent of the total electricity generated. In value terms, these losses approximated to US$301.6 million (assuming an average electricity price of US¢26.1/kWh to all rate categories).
Of the 26.6 per cent total losses, 8.5 per cent is attributed to technical and the other 18.1 per cent to non-technical categories.
According to the JPS, of the reported 18.1 per cent NTL, approximately 9.3 per cent was due to illegal connections or meter by-pass.
Under the rate-making mechanism, the Office of Utilities Regulation the allows the JPS to pass on eight per cent of the TL and 13 per cent of the NTL (total of 21 per cent) to the consumers of electricity. The JPS absorbs 5.6 per cent of the total losses in its operations (about US$62 million). The customers pay about US$239 million extra to the JPS to offset the allowable losses.
EFFICIENT UTILITY COMPANY
It is noteworthy that an efficient utility company should not have total losses exceeding six per cent.
For example, based on the World Bank studies, the world average losses total about eight per cent. East Asia and Pacific countries have an average of five per cent. The Eastern Caribbean small states have an average of nine per cent. The average in medium-income countries is about, six per cent; in Trinidad and Tobago, two per cent; and in Thailand, six per cent.
At the time of privatisation in 2001, the JPS’ total system losses were at 16.6 per cent. Since then, they have been rising steadily, with some insignificant dips here and there.
The JPS continues to work along with a number of critical stakeholders in its many attempts to address the issue of high system-energy losses. Over the years, the JPS has taken a number of initiatives to bring the losses down to an acceptable level.
These measures, among others, included the establishment of the Energy Efficiency Improvement Fund (EEIF) by the OUR, which provided about US$13 million a year to fund the loss-reduction programme. This initiative has now been discontinued.
So far, these efforts have not produced tangible results. Reducing systems losses is an important contributor to lowering electricity price in the medium term.
At present, the tariff structure allows a cross-subsidy to all Rate 10 residential customers for the first 114kWh per month of consumption. This consumption is cross-subsidised by higher rates applicable to consumption above this threshold.
It is estimated that there are about 180,000 illegal electricity connections in the country. Considering that about 20 per cent of the Jamaican population lives below poverty level, it is unlikely that most of these underprivileged residents are in a position to pay for utility services.
To address the socio-economic problems in targeted communities, an innovative approach to a loss-reduction programme is needed.
An out-of-the-box approach and a paradigm shift is necessary to bring electricity losses to an acceptable level.
- Zia Mian, a retired senior World Bank official and former director general of the OUR, is an international consultant on energy and information technology. He writes on issues of national, regional and international interest. Email feedback to firstname.lastname@example.org or email@example.com.