Dismantling JPS's monopoly

James McNish, Contributor

I have found the statement about the Jamaica Public Service Company (JPS) monopoly made by Dr Carlton Davis, the prime minister's adviser, at a Gleaner Editors' Forum disturbing and confusing. I am unable to fathom the logic of such statement within the context of the pre-election campaign promise to reduce the high energy cost.

Dr Davis has posited that it is better to have a properly regulated monopoly to distribute electricity to the Jamaican society. But I have these questions: Is what constitute a properly regulated monopoly? Is he implicitly making the case for a natural monopoly for electricity?

STIR UP CONFUSION

Certainly, the latest statement from Dr Davis contradicts that of Phillip Paulwell, energy minister, and is creating confusion among the public. Dr Davis' expression is untimely when our economy is moribund, amid a lot of justifiable angst coming from consumers of JPS.

Oftentimes we have heard cries about the high cost of energy, and absolutely nothing has been done to alleviate the problem. For decades, Jamaica has been experiencing high electricity cost, and as a people, we must be resolved to reduce this cost, or to find alternative sources of energy so that we can become competitive globally.

It has been shown that electricity in Jamaica costs US 42 cents, while in Trinidad, our regional competitor, it is US 5 cents, making Jamaica's per-kilowatt-hour price one of the highest in region. Jamaica is uncompetitive regionally, as well as globally, especially in the area of manufacturing.

A perusal will be done of the various elements comprising the cost of electricity of residential consumers during the seven-year period August 2005-July 2012 to provide an insight into the cost of energy. During the period under review, fuel and IPP move from $8.25 to $20.45 per unit, an increase of $12.20, representing 148.80 per cent.

Over the same period, a barrel of oil moves from US$66.80 to US$95, an increase of $28.20, representing 42.20 per cent. The exchange rate for that period increases by 43.11 per cent, and cost relating to usage exceeding 100 watts increases by 79.60 per cent per unit.

THE OUTSIDE FACTORS

Based on the foregoing infor-mation, it appears that there are other factors, separate and apart from price of oil and the exchange rate, that are influencing the cost of electricity. It would be interesting to ascertain what those other factors are.

The issue of reducing energy cost in Jamaica must be placed on the Government's agenda as a necessary condition, sine qua non, which should be discussed robustly and intelligently to arrive at innovative and durable solutions.

It is evident from the analysis of cost that Jamaica will have to deal expeditiously with its energy cost to survive the global competition. While Jamaica may not be able to reduce its kilowatt-hour cost to that of Trinidad, our regional competitor, we must find the political will to reduce drastically our energy cost to make it competitive.

THE SPIRIT OF COMPETITION

A possible solution is for the Government to make the energy sector a contestable market so that the JPS operates like a firm under perfect competition. A contestable market, through competition, will keep cost down through economies of scale, and, hence, drive prices down.

A look at the telecommunications sector has shown the great level of benefits consumers are accruing as a result of open competition. Consequently, consumers, as well as the manufacturing sector, will benefit tremendously from the dismantling of the JPS's monopoly.

In conclusion, I am encouraging the Government to continue its relentless drive to dismantle the monopoly because competition best serves the interests of the nation. Moreover, the country will become competitive.

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