As global oil prices plummeted to negative last week and questions from customers intensified regarding the cost of electricity, the Jamaica Public Service (JPS) has said that their charge to customers is based on levels of usage and not the price of oil — as they do not benefit from direct reductions in prices.

Speaking with the Jamaica Observer late last week, Emanuel DaRosa, chief executive officer (CEO) at JPS, said that the company buys oil from Petrojam for generating electricity of which the cost does not reflect the level of reductions being reported in some markets.

“JPS does not benefit from movements in the price of oil, as this is a straight pass through to customers. Any reduction is a benefit to the customers and not JPS, just as fuel cost increases are felt by the customer without any benefit to the company. JPS is a fully regulated business and our regulator monitors fuel costs on an ongoing basis,” he told Sunday Finance.

In addressing the concerns of customers who have been weary of the new oil prices not being reflected in their light bills, DaRosa said that the fuel charged on customers’ bill is the actual cost of fuel to the company each month.

“Approximately 50 per cent of customers’ bills is attributable to the cost of fuel, which changes from one month to the next. As such half of the customers’ bills is for fuel while the other half is all the other expenses including Independent Power Producers (IPPs), loans, operating expenses, taxes, recovery of asset costs, among others,” he shared.

He said that with the Government’s decision to transition from being mainly dependent on crude oil to add more liquefied natural gas (LNG) and renewables as a part of its fuel diversification strategy, today, heavy fuel oil (HFO) and automotive diesel oil (ADO) account for less than one third of the fuel used to generate electricity, while LNG accounts for about 60 per cent.

“The overall cost of fuel to the customer is determined by the fuel mix, which currently includes oil, LNG and renewables. The price of natural gas is more stable than the price of oil, so we are not seeing any reduction in LNG compared to the reduction being seen in oil,” he said.

In justifying the decision for using natural gas as opposed to regular crude oil, DaRosa pointed to the long term benefits which has implications for the environment as it burns much cleaner, also having a very stable cost forecast with minimal increases over the next twenty years.

He noted that while customers may not see the benefits from the reductions immediately, they should be able to see some difference over the next set of months if the trend persists.

“It generally takes a month or more for customers to see the reduction or increase that is reported in the media based on market or spot prices. At the end of the year, the Office of Utilities Regulation (OUR) will [however] reconcile total fuel costs to ensure that JPS does not benefit from changes in fuel costs from one month to the next,” he further told Sunday Finance.