Dionne Rose, Business Reporter
Callum
Jamaica Public Service Company Limited has begun rolling out a near $1-billion plan to safeguard its systems from storm damage in what is expected to be a volatile hurricane season.
But the power utility's self-insurance fund that is meant as a ready source of cash to repair transmission and distribution systems after a storm hits is currently at less than half the level recommended by regulators and a fraction what it is likely to cost to put the system back online.
JPS says the insurance fund - financed by a cess on customers and from JPS's revenues - now stands at US$4 million (J$285m), a million below the newly recommended US$5-million floor.
Indeed, to keep the fund viable, the OUR stipulates that it be replenished annually by US$5 million - adjusted just this month from US$3 million, according to the OUR's Raymond Silvera, acting director general and resident expert on the electricity sector.
Silvera also told Wednesday Business that the cap on the fund has been raised to US$20 million, up from US$10 million.
The fund was established in June 2004 with seeding of US$2 million - just three months before Hurricane Ivan hit - to underwrite recovery costs from natural disasters - under a section of JPS's licence, called the Z-factor, which allows the monopoly power provider to recoup capital, or a portion of the funds, for damage from events deemed "beyond its control".
The Z-factor is also triggered if the fund were to fall below the new US$5m floor, said Silvera.
Above-average season
Already predictions are that this will be a "well above-average" hurricane season with 15 named tropical storms expected to form in the Atlantic.
Eight of those storms are expected to develop into hurricanes, with the forecast indicating an "above-average" chance that at least one major hurricane will make landfall in the Caribbean during the June 1-November 30 season.
Winsome Callum, head of communications at JPS, said the $1 billion spend is to boost the Marubeni-owned company's transmission and distribution inventories, a significant portion being for disaster preparedness.
"JPS has carried out its annual preparation activities and is now on target with its preparation for the 2008 hurricane season," said Callum.
"The company has been actively preparing for the season by taking steps to ensure that all areas of our operation are ready to respond to a hurricane."
It cost JPS $1.52 billion to repair and replace infrastructure and restore service to the island after Ivan.
But OUR later ruled that it would be allowed to recover 30 per cent of the expense, or $457.5 million, which JPS customers continue to pay for monthly at a rate of seven cents per KWh consumed.
That translates, on average, to less than $20 per month per customer, which the utility began collecting in 2007.
JPS has so far recovered US$3.2 million of the allowed US$7 million for Ivan, but has up to mid-year 2009 to complete the collections.
Decision pending
A downed Jamaica Public Service utility pole on East Street, Kingston, is seen in this August 24, 2007 file photo after Hurricane Dean.The storm caused $1.2 billion of damage to JPS's transmission and distribution system. The company is seeking the approval of regulators to recover $688m of the repair bill. - Norman Grindley/Deputy Chief Photographer
A decision is also pending on how much of the repair bill for Hurricane Dean - which hit August 2007 - JPS will be allowed to recover.
The storm, which pummelled Jamaica at Category-Four strength, left JPS with another repair bill of $1.234 billion.
The utility wants to recover just under 56 per cent or $688.538 million, of that bill, an application that the OUR continues to mull over, according to the agency's director of consumer and public affairs, David Geddes.
The OUR says that JPS has already pulled US$5 million (approx J$355 million) from the insurance fund to finance, the recovery from Dean, which the regulatory agency says, explains its depletion to the current US$4 million.
(US$1=J$71.62 spot)
dionne.rose@gleanerjm.com
