OOCUR Annual Conference Belize – November 6 to 8, 2013

1. OOCUR Annual ConferenceBelize – November 6 to 8, 2013 Electrical System Losses Impacts on Customers and Economies Presented by: Allison A. Jean Executive Director, CARILEC

2. About CARILEC • CARILEC • Established 1989. Secretariat based in St. Lucia • 32 member utilities from the English, Dutch and French speaking Caribbean • Over 3 million customers served by 12,800 employees • 50 Associate & Affiliate Members (consultants & suppliers) • Services provided • Training & development • Conferences & Trade Shows • Benchmark & Tariff Studies • Regulatory Forums • Disaster Response Coordination • Advocacy 2

3. System Losses = Net Generation ∑ Net output of all generators excluding station use Plus energy from distributed generators that feed into the grid – Utility “own use” Energy consumed by utility facilities if not included in sales – Total Sales ∑ energy consumed by all customers Note: Meter readings are not taken at the same moment in time and may cover a different number of days between readings. This creates monthly variations and it is better to use a 12 month running average for losses. Determining System Losses 3

4. Technical Losses Losses are an inevitable result of the transmission and distribution of electricity. Losses occur as a current passes through a conductor and causes heating. The amount of heating is a factor of the resistance of the conductor times the square of the current (Referred to as I2R losses) Losses also occur in the transformers due to heating of the windings and losses in the magnetic core. Metering inaccuracies Non-technical Losses (Theft) Illegal connections Meter tampering Why Losses Occur 4

5. Where Losses Occur Sub-transmission Customer Transmission Lines Substation Step-Down Transformer Primary Customer Generator Step-Up Transformer Secondary Customer Generating Station Losses occur in every element of the utility network 5

6. Sample Utility Analysis Component Efficiencies & Energy Delivered by Level 6

7. CARILEC Benchmark Results System Losses % Caribbean average is about 10% Caribbean Utility 7

8. Losses vary significantly among Caribbean utilities – 5% to 25% Some variation can be explained by technical differences: Operating voltages and transformer efficiency Geographic cover of the utility Average usage levels A major factor is that electricity theft is prevalent in some countries and almost non-existent in others. Why losses differ? 8

9. Lowering losses comes at a cost. Aim is to optimize the balance between capital cost and the cost of losses. Design of T&D network Proper selection of voltage level. Higher voltages entail higher equipment costs, but result in lower losses. Conduct an economic & technical evaluation to determine optimum voltage levels. Transformer losses Incorporate a loss evaluation formula when procuring transformers to factor in both the capital cost as well as the lifecycle operating cost of transformers. Transformer with overall lowest lifecycle cost is selected. Optimizing Technical Losses 9

10. What the data suggests! • As seen from the table below, geographic spread and electricity consumption levels alone cannot explain differences in loss levels 10

11. Impact of theft Jamaica Public Service - "About 14 per cent of the electricity produced by JPS is stolen, and the cost of this theft is shared by both JPS and our customers” – Kelly Tomblin, JPS President Almost 600 persons arrested for this year for electricity theft in Jamaica – Jamaica Gleaner (November 2013) US$482 million just from the theft of electricity by illegal consumers in Santo Domingo – DiarioLibre.com (June 14, 2013) Reasons for Theft Culture – expectation that electricity is a “right” Absence of appropriate legislation Inability or unwillingness to deal with instances of theft Electricity Theft 11

12. Electricity Theft • Utility programmes to combat theft • Meter seals, locks and anti-tampering devices • Advanced metering systems to alert to tampering • Customer disconnection of service when theft identified • Investigation and prosecution of customers who steal 12

13. Customers Losses are a natural outcome from the transmission and distribution of electricity Customers should pay their fair share for losses Theft penalizes those customers who are paying Utilities can be incentivized to improve efficiency. Reducing technical losses takes time as it is a factor of the design of the system rather than an operating parameter Theft is a more difficult matter as the utility must be supported by the policital directorate, police and courts in prosecuting offenders. Who pays for Losses 13

14. Sample cost of electricity in the Caribbean Base cost 12 US cents per kWh Fuel 22 US cents per kWh Cost of losses – US cents / kWh Fuel costs + variable costs Estimated cost of 10% loss level 15 MW Utility – US$2.3 Million per year 150 MW Utility – US$23 Million per year 500 MW Utility – US$78 Million per year Cost of losses is significant. Fuel is a major element in the above costs and is a direct foreign exchange spend. Significant impact on economy if losses are not kept to a minimum. The Cost of Losses 14

15. CARILEC’s Position of Regulation • Welcome and support regulation in Caribbean as it will play a crucial role in further shaping and developing power sectors in the region. • To assure effective regulation, design of regulatory framework must properly incorporate specific characteristics and realities of Caribbean region. • Stable, competent and independent regulatory framework important to assure financially healthy sector in which investments can be undertaken to facilitate growth in demand and sustain economic development of Caribbean countries.

16. CARILEC’s Position of Regulation • Electric utility should continue to be responsible for planning the power system and tendering for new capacity, including those based on renewable technologies. • Where competition is introduced in electricity generation this should be based on Single Buyer Model. • For small-scale renewable energy, regulation should be in place that allows customers to use and interconnect these systems to main grid

17. CARILEC’s Position of Regulation • Incentives in area of tariff setting and quality standards should be fair and symmetric. Utilities should not only be penalized for low performance but also be rewarded for good performance. • Governments, with help of utility, should actively promote and support renewable technologies. Government can provide incentives but these should be outside tariff system and not affect utility financially.

18. CARILEC’s Position of Regulation • Principles of best-practice regulation namely independence, communication, consultation, consistency, predictability, flexibility, capacity, effectiveness, accountability, and transparency must be upheld. • CARILEC and its member utilities will continue to play a constructive role as subject matter experts in the further progressing the regulatory landscape in the Caribbean to move towards an effective regulatory framework for Caribbean power sector.

19. Losses are an inevitable aspect of utility operations Caribbean losses are about 10% on average Loss levels can be optimized All customers pay for losses Theft is a major factor in the high loss levels of some Caribbean utilities In regulating the utility one cannot impose a benchmark of one utility on another Summary Points 19

20. THANK YOU! CARILEC Desir Avenue Sans Souci Saint Lucia Tel: (758)452–0140 Fax: (758)452-0142 www.carilec.org Allison A. Jean Executive Director aajean@carilec.org