OUR, JPS seeking to curb US$59m in costly power cuts
Jamaica’s power distributor is planning investments to improve the stability of the grid by 2024 to avoid blackouts that would cost the economy US$59.5 million or $8.9 billion annually in lost productivity.
“The Office of Utilities Regulation analysis has supported this viewpoint. It is estimated that the avoidance of widespread load shedding due to shortage of generating capacity, voltage instability and the consequential economic loss to the society estimated at US$59.5 million annually,” the newly published JPS tariff determination notice from the OUR stated.
Power provider Jamaica Public Service Limited, JPS, initially raised the matter in its tariff application stating that these investments, dubbed “generation life-extension” projects, are necessary to avoid large-scale load shedding and the consequence of the economic costs.
Last week, the OUR granted the JPS a rate increase to somewhat cover inflation but also to finance its extraordinary capital projects to improve grid stability, the regulator stated. JPS had sought a 2.0 per cent hike in electricity bills to average customers but the OUR granted a 0.7 per cent increase.
The major project involves retrofitting of existing power generation at Rockfort and Hunts Bay power plants. It aims to extend the usefulness of the plants until 2026, when 171.5 MW of new generation units come on stream.
“Considering that the 171.5 MW replacement capacity will not be implemented in time to allow for the retirement of this unit and others scheduled for retirement in 2023, this investment will be needed to ensure the capability of the unit to provide power reliably beyond said retirement date in 2023,” stated the OUR document on the investment justification.
TARGET STABILITY
Other projects target stability and reliability on the grid, particularly in the Corporate Area and the north-eastern region of the island. The major and auxiliary projects will cost US$22.5 million and were previously disclosed by the power utility but required certain approvals by the OUR.
This will in effect “improve the stability and reliability of the grid”, according to the OUR document entitled 2022 JPS Annual Tariff and Extraordinary Determination Notice. The Financial Gleaner awaits a response to queries from JPS up to print.
The OUR earlier this month granted the JPS a rate increase to somewhat cover inflation but also to finance its extraordinary capital projects, the regulator states.
JPS has three major rate review applications allowed under its Electricity Licence 2016. The most substantive request covers a five-year period and includes a business and investment plan. The company also applies for an annual review which allows for the “realignment” of the company’s revenue targets each year against inflation and exchange rate movements. The licence also provides for an Extraordinary Rate Review in the event of any exceptional circumstances such as the pandemic, that have a significant impact on the electricity sector, usually factors not considered or known at the time of its substantive five-year tariff review.
GREATER EFFICIENCY
The OUR also adjusted two measures to encourage greater efficiency. The regulator lowered JPS’s revenue target of $48.16 billion for 2022, down from the $51.3 billion proposed by JPS. Additionally, the OUR lowered the heat rate target to 9.495 kilojoules/kilowatt hours from the JPS proposed target of 9,791 kJ/kWh. The heat rate indicates the efficiency of JPS’s generation plants.
The pandemic initially resulted in a reduction in energy consumption which forms a metric for economic activity. For 2022, the OUR forecasts a 2.5 per cent growth in energy consumption or 3.05 gigawatt hours compared to 2.98 GWh in 2021.
That said, the energy consumption for residential customers is expected to decline by 2.6 per cent year on year.
“This can be attributed to the government and most private-sector ending their work-from-home orders for staff,” stated the OUR, which added that rate classes linked to business activity are slated to grow mostly in the high single digit levels.
“These increases are due in part to the removal of curfew hours and the increased economic activity,” added the OUR.