The Jamaica Public Service Company Limited's head office in New Kingston.
Jamaica Public Service Company (JPS), earlier this year, attempted to make the case that it would take US$1 billion (J$89 billion) invested over five years to keep Jamaican homes and businesses efficiently powered.
But the company now tells the Financial Gleaner that its plan is for a more modest $20-billion capital outlay - the equivalent of US$225 million - in the same period to develop its electricity generation and distribution network.
The more than 77 per cent scale back, it claims, is the result of the recent three per cent rate increase granted by watchdog, the Office of Utilities Regulation (OUR), which is less than a seventh of the 23 per cent requested.
"Jamaica will need, in the next five years, US$1 billion of new investment in generation to reduce the cost of power, at least in real terms, by 30 to 40 per cent," Damian Obiglio, JPS president and chief executive officer said in March.
At the time, Obliglio told journalists that the JPS had invested $4 billion per year over the past three years, an amount he calculated to have been three times the company's earnings in the past five years.
Now the company, through one of its spokespersons Ruthlyn Johnson, is blaming OUR, saying its decisions has placed limits on its investment programme, which, at current conversion rates, will remain at the said $4 billion per annum for the next five years.
"The increase that was granted by the OUR falls short of what was required by the JPS business plan (and) this poses a real challenge to the company's overall performance and will result in significant adjustments to our operations," Ruthlyn Johnson, the company's corporate communication officer said.
But, in September, OUR Deputy Director-General Maurice Charvis said JPS' operations should not be compromised by the lower than applied for tariff adjustment.
"We gave them enough of legitimate cost for a fair return on their investment and to ensure sustainability," he said.
Johnson, while suggesting that the regulator's decision forced a radical scale back, was also quick to place on record what she said was the company's commitment to improve operational performance and customer satisfaction.
Large commercial customers saw the new rates on their October bills, while residential and small commercial customers will see the higher charges this month end.
The JPS capital spend will include US$25 million for transmission including US$6.63 million for the maintenance of lines and just over US$15 million on substation rehabilitation, upgrading and maintenance. It will also spend US$2.56 million on a protection system.
Distribution will get US$78 million, of which $42.49 million will be dedicated to customer growth and just over US$35.12 million on structural integrity and network maintenance.
Another US$57 million is for improvements to generation capacity, while US$65 million has been dedicated to the company's effort to reduce losses.
"In the area of loss reduction, we will focus on the use of smart meters or advanced metering infrastructure to assist in detecting system losses," said Johnson.
"Additionally, the company now has more than 250 personnel who are focused solely on loss reduction efforts."
The three per cent base rate increase granted JPS effect from October 1 includes a mechanism known as the X-factor, which forces JPS to improve its efficiencies by at least 2.72 per cent annually.
This means that as of June 2011, the power utility will be required to pass on to its 525,000 residential customers, 70,000 small and medium-sized commercial clients and 7,500 large commercial and industrial customers a productivity efficiency gain of 2.72 per cent each year.
This slight reduction in cost to consumers was signalled in September by the OUR deputy head.
"Once all these things start emerging — within three years if we have diversification, new plant, reduction in losses and smart meters — we can see a significant reduction in cost of electricity," Charvis said then.
mark.titus@gleanerjm.com