Obiglio: The JPS has invested $4 billion per year over the past three years. That is three times the amount of money that the JPS made in the past five years and that cannot continue forever.
THE JAMAICA Public Service Company (JPS) is warning that it could shelve plans to spend billions of dollars to upgrade and improve its facilities if the Office of Utilities Regulation (OUR) fails to grant the 23 per cent, on average, tariff increase the light and power company has requested.
The company says if the increase is granted, it will shell out billions on fuel diversification to improve its reliability and service quality as well as to reduce systems losses. The JPS, last Friday, indicated that its major shareholders, Marubeni and TAQA, might not be willing to pump any more money into the light and power company which has failed to meet its profit target over the last five years.
"The JPS has invested $4 billion per year over the past three years. That is three times the amount of money that the JPS made in the past five years and that cannot continue forever," declared Damian Obiglio, president and CEO of JPS, at a media briefing.
"Jamaica will need, in the next five years, US$1 billion of new investment in generation to reduce the cost of power, at least in real terms, by 30-40 per cent. The only way to guarantee that is to have a healthy distribution company because the one who will have to pay for that power is JPS," Obiglio added.
possible reliability issues
He was supported by Tomofumi Fukuda, chairman of JPS and head of Marubeni Caribbean, who warned that any reduction in the company's spending could cause some reliability issues for its customers and delay plans to develop new generating facilities.
"We have already invested a substantial amount of money into the JPS, (but) so far it has not proved that our investment is justifiable because in 2007 and 2008, after Marubeni came (into JPS), our financial performance was terrible," Fukuda argued. "We have to be comfortable to spend money."
According to the JPS officials, without the increase, the company would have to turn to international lenders for the money, but these institutions would be wary of lending to a company in the financial position of JPS.
"It is very crucial that the JPS maintain a certain credit status, otherwise there would be no new project because no bank would lend money with such a weak financial credit structure," Fukuda claimed.
possible increases
The JPS is seeking to convince the OUR to grant it the tariff rate increase it has requested which could see its customers' bills increasing by a low of 4.3 per cent to a high of 26.8 per cent.
The OUR is to stage four public consultations before making a decision, which should be ready in time for any new rate to take effect on July 1.
But JPS is urging its customers to understand that it is not being mercenary and uncaring at a time when the world is facing a global financial crisis.
According to the JPS, if its customers pay more now, it will be in a position to improve its service and diversify the types of fuel used to generate electricity which in the long run would mean lower bills for Jamaican consumers.
"The JPS plans to spend at least $20 billion (if approved) to introduce petcoke to Jamaica and possibly upwards of $50 billion to introduce coal," the company officials claimed.
But with Jamaicans already reeling from increases in the prices of several items and world oil prices leading to periodic jumps in electricity bills, JPS knows it will face an uphill fight to convince the OUR to grant its request for an increase.
arthur.hall@gleanerjm.com
Some JPS investment plans - 2009-2013
US$16.7 million - To replace ageing transmission structures including poles.
US$6.9 million - To upgrade and replace selected substation transformers
US$0.7 million - To prevent all-island system shutdown.
US$7.4 million - To expand transmission network.
US$104 million - To expand and improve network reliability
US$19.9 million - Recurrent maintenance.
US$1 billion - To increase generation.