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1/ Recently, there has been alot of discussion regarding JPS bills, oil prices and the link between the two, so I decided to do a thread that I hope is informational and adds value to the discussion with some factual info.
2/ According to the JPS website the Fuel & IPP Charge on your bill combines two factors:
1. The cost of fuel used to generate electricity; and
2. The cost of the electricity supplied by Independent Power Producers (IPPs).
https://www.jpsco.com/jps-business/fuel-rates/
1. The cost of fuel used to generate electricity; and
2. The cost of the electricity supplied by Independent Power Producers (IPPs).
https://www.jpsco.com/jps-business/fuel-rates/
3/ For residential customers, their website further says that the the fuel charge is the largest contributor, to the Fuel & IPP charge since the IPP charge is minimal (less than 1%).
4/ The graph below shows the trend of % changes in the monthly JPS Fuel & IPP charge to the % change in the monthly trailing 3-month average Brent International Crude oil prices.
5/ The graph shows that the Fuel & IPP charge tracks pretty well with the Brent crude oil index, but experiences much greater swings, in both directions.
6/ Said differently, according to the trend, the Fuel & IPP charge tends to both increase and decrease much more sharply than Brent prices do.
7/ In Jan 2016, JPS started its journey to migrate from fuel to LNG with the conversion of its Bogue Plant, one of its 4 main power stations, to operate on LNG. The plant was commissioned in April 2016.
8/ In 2017, JPS entered into a Power Purchase Agreement with New Fortress South Power Holdings Ltd, to purchase power from the LNG power plant being constructed on the JAMALCO's grounds in Clarendon and also broke ground on the construction of a new LNG plant in Old Harbour.
9/ The Old Harbour and New Fortress' JAMALCO plant became operational in Dec 2019 and March 2020, respectively.
10/ With these completed projects, LNG is now expected to account for 45% of its overall energy mix, increasing to 50% by the time it decomissions its plants that run on heavy fuel oil, which is slated for the end of 2020.
11/ So today, JPS is much less reliant on heavy fuel in its energy provision as it was 5 years ago. And this trend will continue as JPS furthers its drive to diversify its energy sources to cleaner and renewable sources.
12/ As a knock on effect, as JPS becomes less reliant on fuel oil as a major input, so too will crude oil prices have less of an impact on our bills going forward.
