The issue of high electricity rates has been a sore point for all JPS customers for sometime now, but the debate has really heated up with the recent spike in electricity rates. The issue has now sparked wide spread debate with one senator labeling the JPS as an extortionist organization.
Others have called JPS, vampires sucking the blood out of its consumers while making billions of dollars in profits for its owners in the process. Many persons have indicated that even when they attempt to conserve energy, their bills keeps rising and that energy conservation does not seem to work.
The politicians have now joined in, with Phillip Paulwell calling for the breakup of JPS which he suggest could cut our electricity bill by 50%. The current minister however does not agree and so will do nothing at this point in that regard.
Recently we see where the Jamaica Productivity Center in conjunction with Mona School of Business have done some research and has suggested that Jamaica could save upwards of J$15B if JPS was able to reduce it technical and non technical losses from 23.9% to 16% and at the same time have a better conversation rate for fuel. They have suggested that if JPS moves it heat to electricity conversation rate from 10,400 to 8,100 KJ/kwh (kilojoules per kilowatt hour) just over $7.8b in savings could be netted.
Another school of thought is, if we moved from crude oil to LNG we could see in the region of US$500m shaved off our oil bill, but how much reduction would be likely see in our electricity rates? At current rates of US$100 per barrel and our imports being around 1.4mb/y (million barrels per year) our bill is in the region of US$1.4B
Given the fact that our oil bill is order of US$1.4B per annum and that 23% of the oil that is imported goes into the generation of electricity, at current conversation rates we could expect to see reduction of around 25- 30% or between $0.08 - $0.12 per kwh, using a base residential rate of US$0.35 per Kwh.
Next we come to energy diversification, where electricity will be generated from a number of different sources i.e. a combination of fossil fuels and renewables. All of this stuff while making a lot of sense cost a lot on money to be implemented.
So what does all of this have to do with why the price of electricity is so high in Jamaica? This is what I will seek to explore further in the rest of the article.
The Jamaican experience
Jamaica stands today as one of the few countries in the world where the electrical demand and productivity shares an inversely proportional relationship. By this I mean in most industrial countries in the world peak demand takes place during the productive hours of the day i.e. between say 6am and 6pm.
Jamaica has defied that logic and its peak period are when persons are the least productive. In Jamaica the peak period is when persons are at home and falls between the hours of 6pm to 10pm.
Partial peak is between 6am and 6pm and off peaks hours are between 10pm and 6am.
Therein lies one of our biggest problem, which will NOT be solved be cheaper sources of fuel or more efficient plants. Our problems lies in our way of life which if not changed will continue to result in high rates. We will get only temporary relief from high prices with lower oil prices or cheaper sources for electrical generation but ultimately it will rise again by virtue of our bad energy profile.
To understand how our electrical bill is arrived at we need to understand what goes into the determination of the bill.
It must also be noted that JPS have varying tariff structures, which depends on your demand /energy consumption at the rates are different under each of these tariffs (See JPS tariff structure on the JPS website).
What makes up the JPS bill?
1. Energy Charge ($ per kwh)
2. KVA/KW demand (mainly for industrial and large commercial customers)
3. Fuel & IPP charges (to compensate for changes in oil prices).
4. Foreign exchange adjustments (to compensate for changes in exchange rates)
5. Customer Charge (Administrative charges, for billing, meter reading etc)
6. Discount if you own and maintain your own distribution transformer
7. Ratchet charge (Industrial customer/large commercial)
8. Power factor charge (Industrial customer/large commercial)
9. Tiered rate structure increasing or decreasing cost per $kwh above say 100Kwh
10. In addition you must know the rate category that you fall in.
The residential customer only gets billed for 1, 3, 4 & 5 above and therein lies a part of our problem. I am not for one minute suggesting that we pay more, but I want to make a point of why it’s the residential customers that are partly to be blamed for our very high energy bill.
Understanding Demand
Demand (noted is KW or sometimes KVA )refers to the need to have this available power supply at the very instant that the customer needs it, i.e. it must be readily available for use. Consider this example: When I turn on the pipe I expect to find water, as I need (demand) water at that point in time. The flow of water over time can is what the residential customer pays for i.e. what they actually use.
Demand Charges
But someone has to pay for the fact that JPS must have that available power on standby so when it’s needed it is fact available, so who pays for this. Since demand is not shown up on the bill of the residential customer as a separate line item, who pays for this charge or where is it hidden.
Now we are getting to the crux of the matter. The little secret is that you are in fact billed for this demand that JPS must have available for that peak between 6pm and 10pm, but you do not see it as a line item.
The demand charge for residential customer is averaged and rolled up into your energy charge, this is part of the reason why the residential customer pay more per kwh that the industrial and large commercial customers.
Sample rates (Refer to JPS tariff structure rates 2010 http://www.myjpsco.com/_pdfs/JPS_TariffSchedule2010.pdf)
Cost /kwh Demand Charges
Residential (Rate 10) $6.41 first 100Kwh, $14.66 /kwh above 100 ($0.00 demand charges)
General (Rate 20) $12.53/kwh
Rate 40 Low Voltage $3.57/kwh $1295.28/kva
Rate 50 Medium Voltage $3.39/kwh $1165.75
The skewed demand for electricity at the lowest voltage possible is partially the reason for our high energy cost since JPS has to run the equipment with the least level of efficiencies to meet this peak load demand and thus charges more for this service.
For the above to change it would require JPS to increase base load using more efficient generators, which comes at a very capital cost. You simply cannot have high cost equipment sitting around waiting to satisfy peak load it has to be paid for and that will fall on the backs of the residential customer.
The best and most cost effective way towards lower bills is therefore energy conservation. If we can move peak demand to the productive hours of the day the more efficient generators can run for longer period and JPS will distribute at higher voltages which means lower system losses and ultimately lower bills.
Our high bills are therefore partly the inefficiencies on the path of JPS but is also as a result of the way we use or should I say misuse energy. If we change we way we operate I believe we can see at least a 10-15% reduction in our energy bills.
Part 2 to follow.
