Prudence N. Barnes, Gleaner Writer
Jamaica Public Service Company employees check a utility pole on Walks Road near Angels Estate in St. Catherine. - FILE
THE OFFICE of Utilities Regulation (OUR) is anticipating at least a two-month delay in the implementation of any new increase in electricity rates to the Jamaica Public Service Company (JPS), according to its Deputy Director-General, Raymond Silvera.
This is to allow its team of consultants to assess the JPS' submission to the regulatory body, particularly the aspect of the claim associated with recovery of expenditure relating to Hurricane Ivan.
APPPLICATION
It was announced in March that the JPS had made an application to the OUR for an increase in non-fuel base rates. At the time of the announcement it was stated that the new rates if approved by the OUR, would have been implemented in June 2005.
But speaking in an interview with Wednesday Business on Monday, Mr. Silvera noted that there is likely to be "at least a two-month delay in any final decision", as the OUR's team of loss adjustors carefully evaluate the aspect of the JPS' application which is related to Hurricane Ivan recovery.
The request for a rate increase in electricity charges is in keeping with standing provisions embedded in the All Island Electric Licence 2001 and the Rate Schedules 2004 agreed on between the OUR and JPS. Under the agreement, there is an annual adjustment clause which takes effect June 1 each year, which allows JPS to seek adjustments to rates, based on inflation, the foreign exchange rate and fuel adjustments (adjusted monthly). The agreement also has clauses for upward or downward movement based on quality of service and efficiency, as well as adjustments based on what is termed the "Z factor", which is defined in the Rate Schedule 2004 as "any adjustments allowed by the OUR to reflect events that affect JPS' costs, which are not due to JPS' managerial decisions and which are not captured by other elements in the price cap mechanism".
The JPSCo has reported that damage to its transmission and distribution system by Hurricane Ivan cost the company some $J1.52 billion. This expenditure, it said, "had to be fund from existing cash flows".
Wednesday was unable to get a response from the JPSCo about the delay from the OUR.
In further explaining the situation facing JPSCo, Mr. Silvera said that while the power plants are insured, insurance companies are reluctant to insure transmission and distribution systems in the Caribbean and other disaster prone areas. As a result, he said, "a self- insurance fund was established (by the JPSCo) in June last year". "Unfortunately the fund was established in June and the Hurricane hit in September, before there could be any significant accumulation of funds to cover any damage" he said.
It has been reported that the rate increase, if approved, will result in an average increase of 11 to 18 per cent on customers' bills.
Mr. Silvera however emphasised that no decision has yet been taken on the net increase to be granted to the JPSCO, or on whether the hurricane devastation portion of its claim will be granted.
Mr. Silvera nevertheless revealed that this Z-factor would have "a significant impact" on rates if it is allowed. Also impacting on cost is whether the cost recovery is implemented over the short-term or a longer term, he said. "Our team of loss adjustors are evaluating the claim, and they will make recommendations to the OUR," Mr. Silvera disclosed.
He said that the OUR would also take steps to educate the public on any increase in rates and their likely impact. While the OUR would not want to make any decision without taking the welfare of the public into account, he added that "if a decision is to be taken, it has to be made, even it is not popular".
On the question of whether the reimbursement of the 20,000 JPSCo customers over-billed on their electricity, will be linked to the granting of the increase to the light and power company, Mr. Silvera said there are no plans to connect the two issues by tying any increase to JPSCo, to the settlement of these claims.
"There are other avenues to seek recourse," the Deputy Director General stated. He added that the OUR and the JPSCo were working out a formula for reimbursement to customers and while it is taking longer than expected, he gave the assurance that customers will eventually see a resolution.
