The impact of the novel coronavirus pandemic on poverty and electricity theftThursday, April 29, 2021
The Jamaica Public Service Company Limited (JPS) has a problem — a long-standing one that is a common denominator to power supply companies, especially in middle-income countries like Jamaica. The problem that JPS speaks publicly about does not relate to an aging infrastructure or a limited budget for capital expenditure to cover crucial projects or the integration of renewables. It relates to electricity theft.
The lead story in The Gleaner on February 22, 2021 boomed 'Electricity thieves in Corporate Area siphon US$61m from JPS'. Winsome Callum, director of corporate communications and customer experience at the JPS, said that the company was particularly concerned about the upward trend in losses following the outbreak of the novel coronavirus pandemic last year. They were concerned as emergency work-from-home (WFH) policies and the mass migration from traditional in-class, face-to-face education to online education — a consequence of social distancing protocols — seemed to have indeed increased electricity theft.
More importantly, as we become more digitised, the need for inexpensive, clean electricity will become more crucial. But JPS's problem can be placed in an international context. Smart Energy International, energy consultants, estimates theft and fraud of electricity cost the industry as much as US$96 billion every year globally, with as much as US$6 billion every year in the United States alone. No utility company is immune to theft, but the problem is particularly prevalent in India, South America, and Latin America. The problem has socio-economic, political, environmental, and technical roots, but the solution is generally sought solely through technical measures.
To JPS's credit, its approach to the problem includes socio-economic interventions; however, more emphasis is placed on technical solutions.
The public also has a problem with JPS which is not unique to power supply companies. In 2020, according to the local Office of Utilities Regulation (OUR), the public logged 303 complaints against JPS in the January to March quarter. However, that number skyrocketed to 898 in the April to June quarter.
The main complaint by the public was the high consumption bill. Of the three utilities — electricity, water and telephone — JPS receives the most complaints and billing-related matters constitute the highest cause for complaints. The OUR did find that JPS billing was correct; however, this does not increase the public's trust.
The JPS uses the euphemism “non-revenue customers” to describe household, and to a lesser extent companies, on the electricity grid who do not or cannot afford to pay for electricity. Its submission, 2019-2024 Rate Review, to the OUR highlights that it has 180,000 illegal customers, or 22 per cent of its customer base, and has a monthly energy loss of 407,722MWh or 52 per cent of its total loss associated with these customers. Most of these losses occur in areas that the JPS designate as red zones: “...Settlements where a large percentage of the population cannot afford electricity and primarily includes inner-city and squatter settlements. These communities exhibit energy loss in excess of 70 per cent, have a high propensity for 'throw-ups', and are uninviting of formal commercial operations.”
To understand the socio-economic situation of non-revenue customers, the University of Technology, Jamaica, College of Business and Management conducted a national survey of 435 households in red zones, which formed part of the Community Renewal Programme (CRP) and the Citizen Security and Justice Programme (CSJP). The purpose of the study was to gain additional insights into electricity poverty in urban Jamaica.
Poverty is an issue of serious social concern and additional accurate information about the problem is always essential in crafting public policy. Data were collected in Kingston and St Andrew, St James, Clarendon, and St Catherine. The focus was on the 20th percentile of households which align with mainstream assessment of welfare economics. At this level, 'working poor' households have very limited financial resources but may not qualify for income assistance like the Programme of Advancement Through Health and Education (PATH), which is a targeted social protection programme which provides cash transfers to eligible people in families with the goal of breaking the intergenerational transmission of poverty.
In peering into these households, we first examined the ownership of appliances to better understand the consumption of electricity. The survey asked respondents to state the types of electrical appliances, the quantity of each appliance, and the approximate age of the appliances existing in the household. Electric fans were the most common electrical appliance, with 94 per cent; followed by television (90.8 per cent); and refrigerators (89.2 per cent). Electrical appliances that consume a large amount of electricity such as air conditioners and electric stoves were used in only 7.8 per cent and 2.5 per cent of the households, respectively. See Table 1.
The list of appliances indicates that consumer items that were considered luxuries or significant purchases for the middle class a few decades ago — such as television, refrigerator, even washing machines — have become commonplace in poor households. The presence of these mostly basic appliances should be considered necessary for modern urban living. An electric fan, for instance, is a necessity to keep cool in the hot months, to stay inside during curfew, and also for the practical purpose of keeping mosquitoes away. With WFH policies and distance learning in effect we expect the presence and use of computers/laptops/tablets in households to increase and, consequently, increased electricity usage. The presence of these appliances in households should not obscure the nature of real deprivation that exists in poor households. What this means is that the operational definition of poverty has changed.
Respondents were also asked to indicate household take-home pay. This provides a basis to determine the extent of electricity burden on each household. See Table 2. Electricity burden is defined as households with electricity bills that are five per cent or more of their take-home pay. This concept will be examined further in a subsequent article.
Asking individuals to self-report on their earnings is a sensitive topic. So we grouped household take-home pay into three groups — low, middle, and high. Data showed that the highest percentage was low income, 37.4 per cent; followed by no income (people who reported not earning any income from working), 27 per cent. See Table 3.
To get a better understanding of the socio-economic status of the household, respondents were asked if their households were dependent on PATH. The survey data revealed that 16.8 per cent of the households benefited from PATH, with 74 per cent of this group being female and 26 per cent male.
A far greater number of households — 41.4 per cent of the respondents — reported that they received remittances with varying periods of consistency when compared to assistance from PATH. The median remittance received was US$100.
With remittances representing approximately 16 per cent of gross domestic product (GDP) in 2019 (the most recent data), it is arguable that PATH is not the main social protection programme — remittances are.
We examined the age dependency ratio (ADR) to determine the financial stress of the working members of these households. The ADR gives an indication of the potential dependency burden on people who work in the household in relation to the extent of the support and services required for those who are dependent. The survey found that 19 per cent of the households were children (0 – 15 years old) and 19.3 per cent were 65 years and over, which gives the ADR of 45 per cent. This can be interpreted as, for every 100 individuals of working age found in the sample, 45 are dependent on them. The ADR for the lowest 20th percentile of the population was just below Jamaica's average of 48 per cent. The presence of disabled individuals in the household increases the household financial burden. The survey found that only 8.9 per cent of the people in the household were living with disabilities, with 56.4 per cent of these being female and 43.6 per cent male.
We also asked households to identify the highest component of their households' expenses. Food was reported as the highest household expense (42 per cent), followed by electricity (38 per cent). For electricity expenses, over 43 per cent of the respondents reported spending under $4,000 on average per month on electricity, while 25 per cent spent over $8,000. When asked if there were any months in which they were unable to pay their electricity bill, 52 per cent reported that they had no problem and paid the bill in full. However, 16 per cent were unable to pay their bills between one to two months, and 14 per cent could not pay their bills for over three months. For households that could not pay their electricity bills on time, the vast majority (92 per cent) gave lack of funds as the main reason.
The preceding paints an incomplete but sufficient socio-economic picture of the average household in the bottom 20th percentile of the urban poor. The purpose of this article is to gain additional insights into the nexus between electricity theft and poverty in Jamaica. This point was made before, but is worth repeating for emphasis.
The impact of the novel coronavirus pandemic on poverty and electricity theft is a double negative. Social distancing has moved both work and school from their traditional locations to the home. This increases domestic electricity demand, which will lead to more non-revenue customers in both urban and and rural areas. I will attempt to examine some additional issues and to make policy recommendations in a subsequent article.
Professor Paul Golding is former dean of the College of Business and Management at the University of Technology, Jamaica. Send comments to the Jamaica Observer or firstname.lastname@example.org.
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