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Too High, JPS

Spanish ambassador says electricity costs hurting investors

BY COREY ROBINSON Observer staff reporter robinsonc@jamaicaobserver.com

Friday, June 04, 2010    

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SPANISH Ambassador to Jamaica Jesus Silva yesterday bemoaned the high price investors have to pay for electricity in Jamaica, saying that it is hurting the ability of local and foreign investors to stay in business.

“The electricity factor is a very great hurdle to make investment in Jamaica profitable. It is a concern that the foreign investors have, and it is a concern also shared by some companies of the private sector,” Silva told the Observer, after speaking to the issue at the Rotary Club of Kingston’s weekly luncheon at the Jamaica Pegasus Hotel in New Kingston.

Silva raised the concern ahead of an expected energy charge adjustment on Jamaica Public Service (JPS) rates normally made in June each year. The impending increase has started with some entrepreneurs arguing that JPS should forego the adjustment, given the difficulties last week's unrest in Kingston have created for the economy.

Two adjustments last year — the latter in October — pushed up non-fuel energy charges by as much as 49 per cent. The hotel sector was hit particularly hard by those increases with many resort operators seeing their costs go up by as much as 70 per cent, Silva said yesterday.

He said that due to the high cost of electricity, Jamaica has become the second-most expensive country in the Caribbean for Spanish hoteliers, and that the problem is threatening their viability.

"There is only one country which is more expensive — Bahamas, which is only a little bit more expensive," Silva said. "But apart from that, they (investors) are paying something like 50 per cent more than in the Dominican Republic, which is an expensive country, and almost 100 per cent more than in Mexico," he said.

He added that poor quality of service from the JPS is also a cause for concern, citing reports from the Fiesta Hotel Group in Lucea, Hanover, that more than US$500,000 worth of equipment have been destroyed due to power surges and other electrical failures.

"And if they (investors) want to generate their own electricity the regulation does not allow them to import the petrol with the attractive prices to make that solution attractive," he explained, noting that the investors had no choice but to contract the services of the utility company.

Yesterday, Omar Azan, president of the Jamaica Manufacturers' Association, concurred with Silva's statements, and supported the diplomat's call for solutions from the Government.

"When compared to Trinidad, which is our major competitor in the manufacturing sector, our electrical costs are just much more expensive," said Azan.

"The Jamaica Public Service, which basically has a monopoly in Jamaica, needs to find a way to get some investment so they can get new equipment to be more efficient, rather than just increase rates, which are already too high," he said.

Last month, JPS's first-quarter results showed the company earning US$9.4 million (J$841 million) net profit after tax due to a 40 per cent jump in revenues with core expenses remaining flat for the quarter.

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