The Jamaica Public Service (JPS) said the company has so far seen a 10 per cent drop in overall sales due to the ongoing COVID-19 pandemic which, if persistent, could put the company at risk.

Speaking with the Jamaica Observer last week, Emanuel DaRosa, president and chief executive officer (CEO) of JPS, noted this decline in the company’s revenues as serious and significant.

“For JPS, which runs a modest three per cent profit margin on the total cost of electricity, a reduction of 10 per cent can put the company at risk, a situation which could be compounded if customers stop paying their bills,” he told the Business Observer.

“As with every prudent business, we are planning for the worst but hoping for a better scenario. We have begun negotiating with our fuel suppliers to provide flexibility to JPS in our payments. Without flexibility from suppliers and lenders, JPS will have little ability to provide any flexibility to its own customers,” he continued.

He noted that the company, as a part of its response strategy, has already started to put measures in place to combat possible fallouts from the highly contagious virus.

“We have been forced to look at cutting our own expenses in anticipation of challenging days ahead when the country could begin to see even greater fallout from the COVID-19 crisis,” he said.

OIL HEDGING

With the recent controversy surrounding the price of oil versus the cost of electricity, and the Minister of Finance Dr Nigel Clarke mulling the possibility of hedging the country’s future oil supplies as a possible solution in the long term, the light and power company in commenting on the matter said this is no silver bullet to the situation as this carries both positive and negative outcomes.

DaRosa said while hedging could provide more predictable energy costs — as the price of fuel can be determined in advance — there are also risks that could be disadvantageous.

“With today’s low oil prices anyone hedging oil would be paying well over market value while the hedge provider would be laughing all the way to the bank, which illustrates the downside of hedging,” he commented.