- WINSTON SILL/ FREELANCE PHOTOGRAPHER
Frank 'Tony' Ray, director, external affairs, Jamaica Public Service.
THE EDITOR, Sir:
AN ARTICLE in The Sunday Gleaner of October 30 entitled 'Are we Game? Mirant's sophisticated games: Ricochet, Death Star, Fat Boy and Get Shorty', contains a number of inaccurate and misleading statements, which we wish to address.
1. Manipulation of billing system: The article's claim that "JPS' billing system is open to varying degrees of manipulation" is not only patently incorrect, but borders on the malicious.
The fact is that JPS operates in a regulated and auditable environment. JPS' prices are set independently of the company by the Office of Utilities Regulation (OUR), and are published. The OUR monitors all allowed monthly changes and customers can track these changes on their bills also.
Additionally, there are at least two other layers of security against any such alleged manipulation. JPS' financial statements are subject to audit by independent external auditors. In accepting that our accounts accurately reflect the true state of affairs of the company, the auditors must satisfy themselves that the billing system is capable of properly and accurately computing the revenue of the company.
Furthermore, unlike many local companies, JPS' business processes must comply with very stringent standards under the Sarbanes-Oxley Act, which was passed in the U.S. in 2002. Under this act, U.S. companies and their subsidiaries must establish and implement clear internal controls to prevent "manipulation" of business processes and transactions. JPS undergoes a separate audit to ensure compliance with this act.
2. OUR's power to verify reports: The article claims that the OUR has no real power to unequivocally verify reports from JPS. The OUR, we are sure, can adequately defend itself. Suffice it to say that under our operating licence, the OUR is empowered to demand any information it requires of JPS. It also has the power of unannounced audits of the company's books and processes.
3. Mirant's corporate conduct: The allegations in question are the same as those made against many North American power companies that did business in California during the state's energy crisis several years ago.
The U.S. Federal Energy Regulatory Commission - which oversees the country's energy industries - never found that Mirant participated in wrongdoing in California. Additionally, Mirant has never been found guilty of wrongdoing by any state or federal agency or judicial tribunal.
Mirant has asserted publicly that it believes it did not violate any laws in its power sales transactions in California.
In January 2005, the company reached a settlement with the state and other entities who sought claims for billions of dollars. By settling those claims on a basis similar to settlements agreed to by other energy providers in California, Mirant removed significant financial uncertainty from its economic future and eliminated a potential roadblock to its emergence from Chapter 11 protection.
4. Testing of meters: This matter has now been settled and so we do not feel it necessary to reopen the arguments. JPS is satisfied that the core principles that we insisted on are now agreed and independent verification of meters can now proceed within a clearly-defined regulatory framework, without duplication of effort and, most importantly, without undue cost to customers.
5. High/low rejection criterion: The article refers to 'the band' that is "the percentage increase or decrease in consumption which the OUR formerly allowed the JPS to charge customers". The high/low threshold is a quality control feature that identifies bills showing a change in consumption of greater than 80 per cent in either direction - high or low. These bills are then manually reviewed for consistency with past consumption or special circumstances - such as multiple estimations - that could cause such fluctuations.
6. The issue of the '21,000' erroneous accounts: Facts are that the OUR in its August 2005 report, clearly states that "10,749 accounts have been identified as problematic". While we are not happy with this figure, it is half of the number reported.
JPS has complied with the OUR's directive to make some sort of reconciliation of the consumption patterns of these accounts before and after Hurricane Ivan.
Notwithstanding this and for the benefit of your readers, JPS restates its position as follows: After billing in November 2004, some 80,000 accounts were flagged for review on the basis of the high/low criterion referred to earlier. Of these, over 60,000 were flagged for being low, for zero consumption, or implying negative electricity usage. Another 21,000 were flagged as being high relative to previous bill. Our investigations revealed that this unusually high rate of flagged accounts was due to the following factors:
i) Reading 100 per cent of meters in November compared to the typical 50 per cent per month prior to that;
ii) The reconciling effect of reading all meters after two months, and in some instances three months, of consecutive estimation due to the impacts of Hurricane Ivan on JPS' normal operations.
iii) The impact of applying a 25 per cent reduction in consumption to all accounts in October in recognition of the delay in restoring power after the storm.
7. Increases in electricity bills: Fuel rates, which account for over 50 per cent of customers' electricity bills, have increased by over 100 per cent in the last 18 months, as a direct result of movements in world oil prices. This is the main driver behind increases in electricity bills.
Neither JPS nor Mirant makes any money from the increase in fuel charges on customers' bills. The fact is that JPS currently makes a loss on fuel. Of the approximately $18 billion in fuel purchases from Petrojam this year, the Company has only been able to bill approximately $17 billion to customers.
8. Claims for hurricane damage: The fact is that JPS' claim was consistent with industry practice and there has been no suggestion of impropriety or imprudence by the independent insurance assessors hired by the OUR to evaluate the claim. The consultants, in fact, recommended that the claim be substantially allowed.
- FRANK A. RAY, Director, external affairs
Steps to the story
THE SUNDAY Gleaner story 'Are we game?', published on October 30, was a well-investigated piece which took into account background research from California, U.S.A. and information garnered from local archives. We followed the trail through the Office of Utilities Regulation, the Jamaica Public Service (JPS), the National Investment Bank of Jamaica (NIBJ) and the Bureau of Standards. Below, we outline the path of our investigations into the JPS and its parent company, Mirant.
CHECKLIST
We found out more about Mirant and its history from the JPS' website.We did Internet research which revealed articles from The Atlanta Business Chronicle showing a timeline of allegations of misconduct against Mirant and other energy firms in California's energy markets.We located several press releases on the case against Mirant, posted on the website of the Attorney-General of California, detailing investigations of price gouging against Mirant and other energy firms.We contacted the office of the Attorney-General in California to verify the information posted on the website. It was confirmed that the information was legitimate.We contacted The Atlanta Business Chronicle and made attempts to speak with utilities reporters. We were unable to get much more than what was posted.Based on Mirant's history in California, we sought to query whether or not the Jamaican Government had been aware of the allegations against Mirant which subsequently led to a US$750 settlement with the state of California.We sought and got from the Supreme Court, the records of proceedings and the Minutes of Order on the law suit between the JPS and the Bureau of Standards over the testing of JPS meters, in order to verify that the readings were accurate.We had several interviews with the OUR.We sought to get a due diligence report from the Ministry of Finance which directed us to the National Investment Bank of Jamaica.On June 22, 2005, we requested from the NIBJ, documentation on the procedures followed by the Government in privatising the JPS as well as the due diligence report on Mirant. The request was made under the Access to Information Act.While we awaited a response from the NIBJ, the JPS announced back-to-back price increases. (One they say was as a result of rising fuel costs and the other was to recover costs for damage incurred during Hurricane Ivan).This move by the JPS sparked at least three public protests, hence our first article, published on August 28, a hot-button issue in a matter of public interest.We took a deliberate decision to test JPS' system, using a light bill which was showing an unusual consumption pattern. We also used it to test the complaints of poor service.The NIBJ responded on September 23, 2005.The article on October 30 represented a continuation of The Gleaner's investigation into the matter.
