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Friday, 17 April, 2020

Electric Utilities Feel the Side Effects



No matter how many movies families watch in home isolation or how many hours they run their air conditioners, play their radios, or work on their computers, they will not use nearly as much electricity as a working factory or a bustling hotel. As a result, the widespread shutdown of commercial and industrial activity across the region has led to lower demand for electric power. This creates challenges for utilities—especially at a time when many of their customers will struggle to pay their electric bills.


Electricity usage provides a useful snapshot of an economy; in fact, some economists consider the data an early indicator of growth or slowdown. The New York Times recently published a series of graphs showing how electricity use dropped in different U.S. cities and regions beginning in March, suggesting a decline in economic activity “on par with that of the Great Recession.”

A similar pattern is being seen across Latin America and the Caribbean, though the decrease in demand varies depending on the nature of each economy, the extent of the shutdown, and the day of the week and time of day. During a webinar on the outlook for the Central American and Caribbean electricity sector in the wake of Covid-19—held on April 8 by the Energy and Climate Partnership of the Americas (ECPA)—participants said demand had dropped by an average of 10% to 30%.

The sudden disappearance of tourism has caused commercial demand to plummet in the Caribbean, according to Cletus Bertin, Executive Director of the Caribbean Utility Services Corporation (CARILEC), an industry association that includes 32 electric utilities. Citing one extreme case, Bertin said that tourism accounts for over 85% of the power load of a private utility serving the Punta Cana resort area, in the Dominican Republic, and “that is down to just about zero.”

While the decline is not as pronounced in other places, “all of our electric utilities have been experiencing a significant drop in demand due to the closure of the tourism sector,” he added.

At the same time electric utilities are seeing revenues fall, most residential customers will see their electric bills go up—a reflection of more hours spent at home during the Covid-19 shutdown. Governments across the region have adopted different measures to ensure that people will not have their electricity shut off due to an inability to pay.

In Panama, for example, the government is subsidizing electricity for low-income customers who use small amounts each month, according to Guadalupe González, Director of Electricity for the National Secretariat of Energy. And under a new policy adopted by that agency and government regulators, people can spread out payment of their April, May, and June electric bills over the rest of the year.

The Costa Rican Institute of Electricity (ICE)—the public utility that supplies most of the country’s electric power—has allowed customers to pay 50% of their bills and finance the rest over several months with no-interest loans, according to Marco Acuña, Electricity Business Manager for ICE. That reduces the income of the company, which still must cover its operational expenses and pay its employees. “We have to be very careful about the cash flow,” he said.

Other participants echoed the concern about cash flow. In the case of the CARILEC member utilities, about 60% of which are government-owned, “most are in a financially stable enough position as we speak to weather that storm, depending on how much longer it will last,” said Bertin.

“We are really hoping and praying that the hurricane season doesn’t bring another whirlwind of disasters to our shores,” he added.

Changing Operations


Electric power companies have had to quickly adjust their operations so that they can keep the lights on. During a recent webinar held by New Energy Events, Rick Case, Director of Engineering Services for Jamaica Public Service Company (JPS), said that the utility has reprioritized and deferred some projects to preserve working capital. In some cases, he said, projects may be put on hold if they require bringing in experts from other countries that have been severely affected by Covid-19.

Participants in the ECPA webinar talked about other adjustments they have made so that their work crews can perform regular maintenance while many other employees work remotely. “This emergency has shown us that we can make decisions about working from home,” Acuña said, adding that the company needs to improve and accelerate the digitalization of procedures. “In the future, we see that business won’t be the same,” he said.

One company that has already made huge strides in digitalizing operations is the Enel Group, an Italian multinational energy corporation that operates throughout much of Central and South America. Maurizio Bezzeccheri, who heads the company’s Latin American operations, said during the webinar that well before the current crisis, Enel had adopted cloud computing, which meant that employees who didn’t have to work in the field could quickly switch to working remotely.  

Enel employs about 20,000 people directly in the region and has another 20,000 working under contract. It is one of the region’s largest private electricity distribution companies, serving many of South America’s largest cities. It also generates about 15 gigawatts of renewable energy in the region.
   
In a phone interview, Bezzeccheri said that about half the company’s employees in Latin America are now working from home. The company has also adopted measures in the field to keep its workers safe, such as deploying smaller crews and keeping the same crews together to limit spread in case one of them contracts the coronavirus. It has provided them with masks and gloves and has adjusted procedures so they can keep more of a distance from each other where possible. 
 
“We have totally changed our way of working,” he said. Because of the company’s digital capabilities, it is able to handle billing electronically through apps, which Bezzeccheri said has been working well.

South American governments are taking different approaches to helping the neediest with their electric bills, he said, in some cases paying utilities directly and in other cases essentially loaning them the money, which they will have to pay back once they collect from end users.

Electric bills have three components, Bezzeccheri explained: government taxes and fees, which may make up 25% to 45% of the bill; payment to the distribution company (20-30%), which covers expenses related to employment and operations, as well as profit; and the rest a “pass-through” payment to the company that generates the electricity. When a utility cannot collect payments, this can affect the whole value chain and “put electric service at risk,” he said.
 
One thing the current crisis has shown, Marco Acuña pointed out during the ECPA webinar, is the importance of electricity, whether to ensure that hospitals can operate, water can flow, or people can work from home. “The electricity sector is key for society,” he said, “and so the responsibility we have is enormous.” 

 


Wednesday, April 8, 2020 10:00 AM - 11:00 AM

WEBINAR: Outlook of Central America and the Caribbean Electricity Sector Post-Covid-19

Last month a virus almost no one had ever heard of before upended the lives of billions of people across the globe. The measures taken to contain the virus are putting huge pressure on water, health, sanitation, and telecommunication services, none of which can be provided without energy. Read more


 




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