JPS a tax-collecting agent for Gov’t, says CEO
... calls for suspension of some tariffs to bring relief to customers
Published:Friday | April 8, 2022 | 12:09 AMAinsworth Morris/Staff Reporter
Although the Government recently announced a 20 per cent relief on electricity bills for almost half a million households for the months of April, May, June, and July, Jamaica Public Service Company (JPS) President and CEO Michel Gantois is calling for the suspension of the tariffs on fuel costs.
Taxes currently make up 16 per cent of an average Jamaican household’s electricity bill.
“There is a special consumption tax (SCT) charged on fuel that we and others use to produce electricity. Customers pay GCT at the standard rate of 15 per cent on the value of electricity consumed. JPS and the independent power producers are taxed at the highest corporate income tax rate in Jamaica of 33.3 per cent. All these taxes are passed through or affect the electricity tariff. To a large degree, JPS is a tax-collecting agent for the Government. Suspending or reducing taxes during the current crisis or even longer would help customers, especially the most vulnerable ones,” Gantois said.
The JPS president and CEO was giving an address at the Jamaica Chamber of Commerce’s Breakfast Conversation at The Jamaica Pegasus hotel in New Kingston on Thursday.
He explained that three-quarters of electricity bills are made up of factors over which JPS has no control.
“Fuel prices alone make up more than 50 per cent of the bill. Then you pay for the electricity and fixed charges to independent power producers and you pay taxes to the Government,” Gantois said.
He continued: “We have some degree of control on our operating costs and the investments we make to bring the power to your homes and businesses – the transmission and distribution lines, the transformers, the poles. And even these are heavily regulated. The regulator must approve these expenses in advance.”
He also explained that governments across the world, even with the Russia-Ukraine conflict, have been responding to the rise in fuel costs in different ways.
Gantois said some are reviving coal and nuclear plants. Others have capped fuel or electricity prices while compensating producers, reduced taxes on fuel, or directly subsidise petrol purchases and electricity bills.
He illustrated the impact of the fuel increase on the electricity bill on the average residential customer.
“In January 2021, their average bill was around $6,700. In December 2021, this had climbed to $8,800 – a 30 per cent increase. In March 2022, their bill was $9,600 – a further 10 per cent increase. For a small commercial customer, their electricity bill went from half a million Jamaican dollars in January 2021 to $700,000 in December and $770,000 in March 2022 – a staggering 40 per cent increase,” Gantois said.
He noted that the same increase affected larger commercial customers.
“Why are the electricity tariffs so dependent on fuel prices? Jamaica’s electricity generation mix today is 62 per cent natural gas (from LNG), 25 per cent oil (HFO/ADO) and 13 per cent renewables,” he explained.
“Only seven years ago, that mix was worse – 95 per cent oil (HFO/ADO) and five per cent renewables. Jamaica will remain a net importer of fuel like most countries around the world and therefore also a price taker.”