Of toothless OUR and hide-and-seek with coal and oil

Dennis Morrison, Contributor

Although I expressed surprise that it took a public outcry to push the Office of Utilities Regulation (OUR) to launch an investigation into the Jamaica Public Service Company's (JPS) billing system [Financial Gleaner, August 26], I could not have imagined the extent to which the Office had fallen down on its watchdog role, as revealed in the findings of the investigation.

For example, we now know that compliance by JPS with the 2007 OUR directive on quality controls at the bill-generation stage is still to take place. Yet in the furore over electricity bills, the OUR apparently did not exert itself, taking months to get to the bottom of the issue.

In its first response to the results of the investigation, the JPS has recognised weakness in its customer-service delivery and has announced that it intends to move immediately to fix the system. It has stated that it will carry out organisational restructuring and will set up a special customer advocacy committee to give oversight to the handling of customer complaints. It should not have been necessary for the company to have had to be pushed to deal with such a basic aspect of its operations.

A big part of the problem in the billing system which drove the recent outcry is related to the company's back-billing policy under which it imposes charges going back years. Customers are intimidated by this practice, which reflects an unbalanced relationship between the company and its customers. It must be a priority of the OUR to require that the JPS revamp its back-billing policy.

a sense of urgency needed

While the company has indicated that it intends to have dialogue with the office with regard to this matter, a sense of urgency is necessary. Consumer and private-sector groups can ensure that this happens if they exert public pressure rather than just grumble. Such pressure should be directed not just at JPS, but also at the Government, because the legislative framework for the electricity sector is way outdated. Although the major legislation, Electric Lighting Act [1890], has been amended over time, it must now be aligned with best practices globally.

Perhaps the most telling weakness in the legislative and regulatory framework is the fact that the OUR has no powers to enforce its directives. In other words, the watchdog agency for the electricity sector is, in fact, a toothless dog. No wonder the report of the investigation reveals directives not backed up by compliance. The updating of the legislative framework would address these problems and resolve issues to do with the JPS's licence.

fuel costs

As I have stated in earlier columns, while rebalancing of the relationship between the JPS and its customers must be dealt with promptly and service delivery modernised, attention should not be diverted from the most critical factor determining light bills - fuel costs.

According to the most recent data that I have seen [August 2011], fuel accounts for 57 per cent of the total tariff. The tariff, at that time, was around US$0.40 per kilowatt-hour. That means that the fuel cost alone was more than US$0.23, which was several times the total cost of electricity in competing countries in Central America and some other countries in our region.

As long as Jamaica persists in using oil, the most expensive and inefficient fuel, to generate electricity, our businesses and households will be overburdened by these high electricity costs. The decision about choice of fuel for new electricity-generating capacity to replace existing outdated plants is, therefore, one of the most far-reaching steps in terms of economic consequences that have to be taken. That decision applies not only to the public electricity system, but also to the bauxite-alumina industry, a leading earner of foreign exchange and source of investment.

Planning for the country's energy-supply system has so far been tied to diversification away from oil to natural gas. In the process, the Government has taken responsibility for the choice of fuel, and both this administration and the previous one have shied away from coal as one of the alternative fuel sources. To shift from total dependence on oil to natural gas as the sole source would put us back in the same vulnerable position.

The strategic move should be to have a mix of fuel sources. As we enter the election season, the electorate should demand of both parties that they present serious policy proposals for addressing the country's energy-supply problems - one of our greatest economic vulnerabilities.

Dennis Morrison is an economist. Email feedback to columns@gleanerjm.com.