Escalating electricity bills together with erroneous billing has incurred the wrath of many Jamaican residents who cite energy costs in many instances accounting for at least a third of their salaries. The impact on the productive sector is equally foreboding and is attributed as a reason why Jamaica lags behind many of its Caribbean neighbours as far as competitiveness is concerned.

Last month Prime Minister Bruce Golding directed the country's leading utilities regulator, the Office of Utilities Regulation (OUR), to carry out a detailed analysis of the costs and charges being imposed for electricity supplied by the Jamaica Public Service Company (JPS). The prime minister's decision follows growing complaints and protests by electricity consumers against reports of skyrocketing electricity bills. He has made it clear that consumers should not be overcharged and having to foot the bill for JPS' inefficiencies.

The OUR has already described as 'unreasonable and unfair' the JPS' use of a 41-day cycle to bill its customers for the months of July and August, deeming it a violation of the electricity company's service terms and conditions. The report is due any day soon.

Jamaica's inefficient use of energy

A recent study by the Inter-American Development Bank (IDB) on energy efficiency and usage in Latin America and the Caribbean entitled "How to save US$36 billion worth of electricity" concluded that Jamaica, with a population of 2.7 million people, has a total energy consumption of 3,9997 kilotons of oil equivalent (ktoe). That is, the tonne of oil equivalent (toe) is a unit of energy equivalent to the amount of energy released by burning one tonne of crude oil.
Turning its attention on Jamaica, the report read: "Jamaica's energy intensity index of 3.55 ranks higher than the average in the region, meaning that the country makes relatively inefficient use of its energy. Jamaica is also heavily dependent on fossil fuels: nearly 90 per cent of its total energy consumption is generated from this source. Prices for diesel, gasoline and electricity are among the highest in the region."
The report went on to point out that if Jamaica were to improve its energy efficiency by 10 per cent over the next ten years, it would save the equivalent of 1,000 GWh (gigawatt hours) of electricity per year by 2018.
The cost of achieving that level of efficiency (based on investments in efficient light bulbs, electric motors, and other measures) would amount to around US$116 million over this period (in 2008 dollars).
This grim prognostication came from the IDB report: "If Jamaica's energy demand continues to grow at the anticipated rate of 3.5 per cent per year and the country does not become more energy- efficient, it will need to build the equivalent of two gas-powered open cycle generation plants to produce the same 1,000 GWh of electricity per year.
"At today's prices, it would cost approximately US$373 million just to build these plants, not counting operational and fuel costs. Put another way, Jamaica has two alternatives for producing 1,000 GWh of electricity in 2018: one costs US$116 million, and the other US$373 million."
Adding to the problem of better efficiency is the precarious financial position JPS finds itself in. For the greater part of this year oil prices have been on an upward trajectory. JPS therefore says it has had to pass on these fuel costs to consumers. Energy Minister, Clive Mullings speaking in Parliament last month revealed that JPS owes the state-owned oil refinery, J$5.7 billion J$2.9 billion of which is now due, thus calling into question the solvency of the Marubeni-owned JPS. Mullings contends that if Marubeni is not suffering cash flow problems then is Petrojam being used as a credit facility?
JPS counters that Mullings is wrong and that it owes Petrojam about J$3.5 billion for invoices it has received. It points out that the high cost of oil means that it has fallen behind on its payments to Petrojam. All in all, the entire country is expressing disgruntlement with both the price and the level of service provided by JPS.
A major problem facing Jamaica is that the government is under a tacit obligation to guarantee the profitability of JPS, and so energy alternatives are not enthusiastically explored or adapted.
This creates tremendous challenges for businesses that face exorbitant input costs, chief of which is energy. Large companies that provide jobs for and generate economic activity in local communities do not enjoy meaningful incentives.
Jamaica's leading hoteliers have long bemoaned that JPS' monopoly pricing strategy is injurious to their operations and that the electricity company cuts them little slack.
Although supplications have been made to the Jamaica Hotel and Tourist Association (JHTA) to lobby on their behalf, hoteliers to date have received no succour. One hotelier speaking with Caribbean Business Report said: "High electricity cost at a time when many of us are experiencing low occupancy exacerbated by the financial crisis gripping both Europe and the United States, means that we are fighting for our very survival. You would have thought that as one of the chief earners of foreign exchange the government would provide some energy incentives and that we would be able to make our own energy arrangements but that is not the case.
"In the US hoteliers pay around 10 cents per kilowatt-hour while we in Jamaica have to fork out something like 28 cents per kilowatt-hour. Right there you can see what we are up against. Our operational costs keep going up when the sector is experiencing a downturn and there is no one paying us any attention."

Manufacturing
The manufacturing sector has long cited electricity costs as one of the main factors behind its demise. Input costs no longer make Jamaica viable. Back in 2005, the then Minister of Commerce, Science and Technology, Phillip Paulwell, declared that manufacturers who wish to produce their own electricity to operate their businesses could do so without being in violation of the JPS licence.
"Furthermore, we are developing a Policy of co-generation. If you are able to produce more than you need, currently you will have to go to JPSCo and negotiate and we encourage that, and we try to insist that you do the negotiation, but we want it to go beyond a negotiated settlement between the producer and JPSCo." He referred to Jamaica Broilers and the bauxite industry as two major entities that have entered agreements for co-generation.
The impact of high energy costs did not escape Paulwell's attention. "If you can reduce energy cost you can enhance productivity, competitiveness and profitability throughout the business. I don't believe that a business can be too small to invest in an energy audit," he said addressing an executive committee meeting of the Jamaica Manufacturers Association (JMA) in 2005.

Net Metering
Business operators including construction specialist Chris Nakesh have for some time now called for the implementation of net metering. Three years ago the government was all set to give it the green light but nothing came of it.
Net metering is an electricity policy for consumers who own, generally small, renewable energy facilities, such as wind or solar power. "Net", in this context, is used in the sense of meaning "what remains after deductions" - in this case, the deduction of any energy outflows from metered energy inflows.
Under net metering, a system owner receives retail credit for at least a portion of the electricity they generate. The ideal has the existing electricity meter spinning backwards, effectively banking excess electricity production for future credit.
While it is important to have net metering available for any consumer that interconnects their renewable generator to the grid, this form of renewable incentive places the burden of generating renewable energy primarily upon fragmented consumers. In many cases overburdened energy companies that more often than not enjoy a monopoly like JPS does in Jamaica, do not provide incentives on a consistent basis and it is difficult for companies to negotiate with large institutions to recover their net metering rebates for using renewable energy.
JPS continues to object to net metering, claiming that it will mean that both the company and its customers will be subsidising people who sell to the national grid by in effect getting them to absorb associated costs. The OUR shares this sentiment but feels that electricity costs may become so high that the JPS will have to concede to public pressure.
President of the Jamaica Solar Energy Association (JSEA) Damian Lyn, an advocate of net metering said: "Just imagine the affect of taking all that A/C load off the grid during the day and the impact could be far-reaching in terms of the electricity being supplied to the national grid."

Businesses have their say
Some of Jamaica's manufacturing executives had this to say about current electricity prices:

General manager of EdgeChem Paints, Melissa McHargh
"It has affected us. We have had to adjust prices. Normally we would absorb slight increases. Our electricity bill has increased 60 per cent increase over last year. But other costs have also increased such as most of our raw material costs. Plus there is a downturn in the global economy. Our bottom line has been reduced. A lot of the plans we had for the new year, we've had to scale back."

Managing director of Geddes Grant, Michael Subratie
"Compared with our electricity bill for August 2007, our bill for August this year has gone up by 50 per cent. Our transportation and delivery operating costs have increased dramatically from last year. We have not factored that in yet to our prices to our customers but it has been putting a considerable strain on us.

"If we increase prices, then the units sold would decrease. But our margins are getting smaller and one of the biggest contributing factors is electricity. Although the price of oil has gone down to US$90 a barrel, we are not seeing it reflected in reductions in light bills, even though JPS may say it is reflected."

An executive with Mapco Printers
"It has affected us very negatively, particularly our bottom line. Our electricity costs increased from J$400,000 to J$600,000 a month and I am unable to pass it on. Many of our contracts are locked in from advance so we cannot increase prices mid-way. Going forward I don't know what we are going to do."

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