MONTEGO BAY — The Jamaica Public Service Company (JPSCo) yesterday announced that there will be a 1.8 per cent increase in electricity bills starting April as the built-in annual adjustment rate, which compensates the utility company for inflation, kicks in.

The increase is tied to the present tariff structure that came into effect last February, one month before the US-based Mirant Corporation became the majority stakeholder in the power company. The tariff will be in place until 2004.

It was approved by the Office of Utilities Regulation, which is expected to give JPSCo the green light for this year’s increase by March.

Some have described this annual price increase as tantamount to providing the utility company with a guaranteed rate of return, but yesterday, JPSCo CEO, Charles Matthews, dismissed the claims as “ridiculous”.

He was speaking with the Observer after a groundbreaking ceremony for a US$126-million plant at Bogue in Montego Bay, which will provide 120 megawatts of power once it is fully completed.

Matthews said that the impending rate increase would not even cover this latest leg of the company’s expansion work, which is part of a larger US$385-million, 10-year capacity-boosting programme.

“The important point is that we’re talking about in excess of $100 million that will be invested, and we don’t start recovering anything until 2004 (when the new tariff regime begins),” he told the Observer. “So it’s an interest-free loan to the people of Jamaica. A less than two per cent increase doesn’t get you back that (amount of investment). We’re in this thing for the long haul.”

Under the existing tariff structure, JPSCo asks the OUR for an increase every February, based on both local and US price movements. Seventy-five per cent of the adjustment is based on US inflation rates (now at 2.1 per cent) and the other 25 per cent is linked to local price movements (7.7 per cent). Foreign exchange fluctuations, which are factored into the bills on a monthly basis, have no impact on these yearly rate hikes.

Last week, members of the public expressed surprise and concern when OUR deputy director general, Paul Morgan, spoke of the impending increase, and the fact that it would be done annually.

Yesterday, Matthews conceded that public education on the existing fee structure might be helpful.

“This was in the tariff last year. I’m surprised that everybody else is surprised,” he said.

Since Mirant took control, they have embarked on a campaign to boost generating capacity. Twenty-five megawatts of emergency power were installed at the Bogue plant last August, but failed to put a complete stop to interruptions in the electricity supply as the company conducted load-shedding exercises.

Yesterday, Matthews warned that there would be more interruptions as the company carries out maintenance work.

“Over the next six months we will perform much-needed maintenance on our larger generating units that are in desperate need of extensive servicing,” he said. “This maintenance is critical to ensure that the units perform at their best over the long-term. In the short-term, however, we will probably have some load shedding while we carry out the maintenance work. In fact, we expect that there will be some periods of limited load shedding during this period. But I assure you that we will do everything possible to minimise disruptions in service to customers during this period of maintenance.”

Under the expansion work being done at the Bogue plant, 40 megawatts each will be on-stream in July and August this year, and another 40 megawatts is slated to be in place by next June.

The added capacity will make the plant, which is sited on what used to be a 15-acre cane field, the largest in the island. The facility, which provided about 20 megawatts of power 11 years ago, will now become the island’s second largest generator.

It will also be the first plant in the island that will use a combination of gas and steam energy. The steam generation will be facilitated by water harnessed from the nearby sewage pond.

“We’re going to tap the outflow that now goes into the Montego River, process it and use it for cooling,” explained the company’s COO, Robert Patrick. “And we’re also going to process it for other water applications on the power plant. Feeding water to the boiler, washing the boiler, and all other non-potable water uses will be handled from water we get from the outflow of the sewage treatment plant.”