JPS blames OUR protection of customers for falling profits
Published:Sunday | November 27, 2011 | 12:00 AM
Electricity provider Jamaica Public Service Company (JPS) has blamed, in part, new measures demanded by its regulator that protect customers from the full brunt of oil-price hikes for its profit decline in the third quarter.
The new mandate forced JPS to absorb more system losses instead of passing them on to customers through higher light bills.
The utility company's net profit was slashed in half to US$5.8 million (J$500 million) during the quarter compared with year-earlier levels.
"JPS' weakened third quarter performance was due primarily to an increase in fuel costs, compounded by JPS' inability to recover the full cost of the fuel used to generate electricity," said JPS head of corporate communications Winsome Callum in response to Sunday Business queries.
"The company's inability to recover full fuel costs is as a result of the system losses fuel penalty imposed by the Office of Utilities Regulation [OUR]," Callum said.
The OUR did not respond to queries up to press time.
operational efficiency
JPS' licence requires it to maintain a certain level of operational efficiency and since July, its tariff enacted a two percentage point reduction in its system-loss threshold from 19.5 per cent to 17.5 per cent, according to the utility.
"This means that customers are paying less for losses, as JPS has to absorb all fuel costs associated with system losses above 17.5 per cent," said JPS.
According to JPS' 2010 annual report, systems losses as a percentage of net generation dipped to 23 per cent from 24 per cent in 2009.
JPS said that for the July-September 2011 period it spent US$205.6 million (J$1.77b), or approximately US$68.5 million per month, on fuel purchased from Petrojam.
"However, the company was able to recover only US$198.4 million of this amount from customers. The under-recovery of US$7.2 million on fuel for the quarter is largely as a result of the lowering of the system losses target by the OUR," JPS said.
Another factor contributing to the relatively weak performance in the 2011 third quarter was a near 10 per cent increase in operating and maintenance costs to US$44.2 million in the quarter.
JPS argued that positive financial performance puts it in a much better position to continue improving the service it delivers to more than half-million customers.
In recent years, JPS has consistently invested more than it earns back into the business. The company's capital expenditure on infrastructure improvements in the last four years has ranged, on average, between US$50 million and US$60 million per annum.