Ap­pli­ca­tion for elec­tric­ity rate in­crease irks small-busi­ness sec­tor

Jamaica Gleaner - - FRONT PAGE - Ed­mond Camp­bell Se­nior Staff Reporter ed­mond.camp­bell@ glean­erjm.com

AS THE Of­fice of Util­i­ties Reg­u­la­tion (OUR) pores over an ap­pli­ca­tion by the Ja­maica Pub­lic Ser­vice (JPS) for a rate in­crease af­fect­ing res­i­den­tial, small, and large com­mer­cial cus­tomers, at least one sec­tor group is ex­press­ing great con­cern that if a one per cent hike is granted by the reg­u­la­tory body, it could sig­nif­i­cantly af­fect the small-busi­ness sec­tor.

Hugh Johnson, pres­i­dent of the Small Busi­nesses As­so­ci­a­tion of Ja­maica (SBAJ), ar­gues that an in­crease in elec­tric­ity costs to small busi­nesses at this time would have a de­bil­i­tat­ing ef­fect on the sec­tor and notes that se­cu­rity and util­ity costs are the main fac­tors that make play­ers in the sec­tor un­com­pet­i­tive in re­la­tion to their coun­ter­parts in other ju­ris­dic­tions.

In its sub­mis­sion for a rate in­crease, dated Oc­to­ber 25, 2016, the JPS said that the elec­tric­ity li­cence, 2016, in­cludes sev­eral changes that af­fect the cal­cu­la­tion of its non-fuel rates.

The com­pany said the amend­ment to de­pre­ci­a­tion sched­ules has short­ened the lives al­lowed for a num­ber of as­sets in dif­fer­ent cat­e­gories.

As a result of this, the JPS is claim­ing as­set im­pair­ment based on what it de­scribes as “a re­com­pu­ta­tion of the lives of its as­set amount­ing to US$21.4 mil­lion over the pe­riod 2016 to 2018”.

How­ever, the light and power com­pany said the im­me­di­ate ap­pli­ca­tion is for US$13.4 mil­lion.

Fur­ther, the JPS es­ti­mates that if its pro­posal is ac­cepted, re­cov­er­ing the as­set im­pair­ment costs would result in an in­crease of ap­prox­i­mately one per cent on the av­er­age res­i­den­tial cus­tomer bill, 0.8 per cent on large com­mer­cial and in­dus­trial cus­tomers’ bills, and a pro­posed hike of 1.1 per cent on small com­mer­cial cus­tomers’ bills.


How­ever, Johnson said a one per cent in­crease in any util­ity cost would put the sec­tor at a grave dis­ad­van­tage in re­la­tion to its com­peti­tors from other ju­ris­dic­tions. “We are not com­pet­ing against the man down the street any­more. In ev­ery op­er­a­tion you are com­pet­ing against the man on the other side of the world. It’s a global en­vi­ron­ment, so get­ting to in­ter­na­tional com­pet­i­tive­ness is one of our mantras be­cause un­less we get there, we can’t sur­vive in the ex­port arena,” he said.

The SBAJ head con­tends that small busi­nesses in Ja­maica must be able to sur­vive in the ex­port arena in or­der to sus­tain the fivein-four con­cept of growth ar­tic­u­lated by the Andrew Hol­ness ad­min­is­tra­tion.

The Economic Growth Coun­cil, es­tab­lished by the Gov­ern­ment, has been man­dated to as­sist the ad­min­is­tra­tion in achiev­ing five per cent growth in gross do­mes­tic prod­uct by the 2020-2021 fi­nan­cial year.

Johnson told The Gleaner that the mem­ber­ship of the as­so­ci­a­tion would be re­view­ing this ap­pli­ca­tion for a 1.1 per cent rate in­crease to the small-busi­ness sec­tor.

“As soon as we di­gest the pro­posal, we will come up with a counter-pro­posal to see how best we can nav­i­gate this treach­er­ous path be­cause the JPS is a pri­vate en­tity that needs to op­er­ate, but at the same time, we have to be mind­ful of the fact that we are in a global en­vi­ron­ment, com­pet­ing against peo­ple from other re­gions that don’t suf­fer the same chal­lenges that we do as it re­lates to our util­ity rates,” he added.

The OUR’s team is cur­rently in the process of un­der­tak­ing the re­view and anal­y­sis of the ap­pli­ca­tion.


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