decades, a number of Caribbean electric utilities, within the hurricane belt, have opted to create self-insurance funds as a way of lowering the cost customers pay in their bills for insurance while offering some protection to the utilities against hurricane damage to their transmission and distribution systems.

In light of the above factors, at the time of the JPS rate (tariff ) review in 2004, the decision was made to establish a self- insurance fund for the company. The Fund was established in June and hurricane Ivan affected the island three months later, in September. The amount that had accumulated in the Fund was not enough to cover five percent (5%) of the cost submitted by JPS to restore the system. This led to the JPS making a claim under the Z-factor provision of its licence which allows the company to apply to the OUR for an adjustment (allowed percentage increase) in its rates to recover amounts that:

affect the company’s cost; •are not due to the company’s managerial decisions; •and are not captured by the other elements of the rate •setting mechanism.

In its hurricane Ivan Z-Factor claim, JPS applied for a recovery amount of J$1,431 million. However, after careful analysis by the OUR, the company was only allowed to collect J$457.5 million, which represents the amount necessary to restore the company to the position it was in just before the hurricane. Consequently, the hurricane Ivan recovery charge of J$0.0729 per kilowatt hour (kWh) was applied to JPS customers’ accounts for the 24 month period, June 2007 – June 2009.

As the 2012 hurricane season is upon us, we are reminded that on September 12, 2004, Jamaica was affected by hurricane Ivan. The damage caused by the hurricane on the island extended to the transmission and distribution system of the electricity provider.

While the transmission and distribution system is owned by Jamaica Public Service Company Ltd. (JPS), customers of the utility provider were asked to contribute financially

to the work that was carried out to repair the system. Many, if not all, JPS customers remain uncertain as to the reason/basis on which they were asked to pay this cost. The general sentiment expressed by customers since that hurricane is, JPS should have borne the cost to restore the system as the company should have insured its equipment.

Why were JPS customers asked to pay for Hurricane Ivan damage?

Since the 1900s there has been a significant increase in the frequency and intensity of tropical cyclones (including hurricanes) in the Caribbean region, as well as the south eastern and eastern United States. This region is sometimes referred to as the ‘hurricane belt’.

Overhead transmission and distribution systems are extremely vulnerable to damage from hurricane force winds. This has caused insurance companies to offer coverage at extremely high premiums and at unattractive terms for transmission and distribution systems in the region. As such, over the last two to three

The Self Insurance (Natural Disaster) Fund for the electricity provider

Cont’d on page 2

REGULATORThe

Newsletter of the Office of Utilities Regulation Vol. 10, No. 2 April - June 2012

Also Inside This Issue

Did you knowThe process to sell excess power to JPSAnswers to “SuDoKu” from last editionSuDoKu

Regulating Utilities for the Benefit of All

THE OFFICE

Director GeneralAhmad Zia Mian

Deputy Directors GeneralMaurice B. CharvisHopeton P. Heron

Secretary to the Office (Actg.)

Amb. Peter C. Black

Director - Regulation, Policy, Monitoring & Enforcement

Dr. Clement J. Jackson

Director - Administration/HRCarolyn B. Young

Director - Consumer & Public AffairsMichael A. Bryce

Director - Information TechnologyLeighton G. Hamilton

Financial ControllerOlive C. Oakley

General CounselGeorge C. Wilson

SENIOR MANAGERS

EDITORIAL TEAM

Michael Bryce Collette Goode Kishana MunroeMarsha Minott

2

SuDuko answers from last edition

The OUR is headed by the Director General, who along with the Deputy Directors General comprise ‘the

Office’. The Director General is appointed by the Governor General and the Deputy Directors General are

appointed by the Prime Minister.

OUR’s Objectives

To ensure that consumers of utility services enjoy an acceptable quality of service at reasonable cost.

To establish and maintain transparent, consistent and objective rules for the regulation of utility

service providers.

To promote the long-term efficient provision of utility services for national development consistent

with Government policy.

To provide an avenue of appeal for consumers who have grievances with the utility service providers.

To work with other related agencies in the promotion of a sustainable environment.

To act independently and impartially. SuDoku Solution (from last issue)

6

9

8

2

5

1

3 7 4

5

2

4

8

3

7

9

6

1

1

7

3

6

4

9

2 8 5

7

1

5

4

8

2

6 9 3

8

4

9

3

7

6

1 5 2

3

6

2

1

9

5

7

4

8

2

8

6

7

1

4

5 3 9

4

5

7

9

2

3

8 1 6

9

3

1

5

6

8

4 2 7

The Self Insurance (Natural Disaster) Fund for the electricity provider

Cont’d from page 1

Why were customers who got connected to JPS’ supply after the passage of the hurricane required to pay the recovery charge?

Customers of the electricity provider whose accounts were established after the passage and effects of the hurricane in September 2004 also had to pay the hurricane Ivan recovery charge. This is in keeping with the principle that the charge was established to allow JPS to recover the amounts spent on restoring the service after the damage. Had the company not been provided with the resources to restore the service, then it would not likely have been able to provide an acceptable service to its existing and new customers. Consequently, the recovery charge was applicable to all JPS customers up to the end of the allowed recovery period of June 2009.

It should be noted that for the years leading up to the June 2004 JPS Tariff Determination, JPS rates did not include insurance premium charges for its Transmission and Distribution system. As a result, electricity rates were lower than what they would have been (if charges for insurance premium were included).

Typically, the rates customers pay should include charges for insurance coverage of the Transmission and Distribution systems. This would facilitate the availability of funds to recover from any disaster before its occurrence. However, in the case of Hurricane Ivan, JPS customers paid for the restoration works after the passage of the hurricane.

Will JPS customers be asked to pay for any other hurricane damage?

Since hurricane Ivan, JPS’ transmission and distribution system suffered weather related damage from Hurricanes Dennis, Emily and Wilma (2005); Hurricane Dean (2007) and Tropical Storm Gustav (2008). In all these cases, the self- insurance fund has covered the compensation payments to JPS, without the need for a claim under the Z-factor. The total amount paid to JPS from the Fund is approximately US$10.5 million.

Cont’d on page 4

To ensure that consumers of utility services enjoy an acceptable quality of service at reasonable cost.

To establish and maintain transparent, consistent and objective rules for the regulation of utility service providers.

To promote the long-term efficient provision of utility services for national development consistent with Government policy.

To provide an avenue of appeal for consumers who have grievances with the utility service providers.

To work with other related agencies in the promotion of a sustainable environment.

To act independently and impartially.

OUR’s Objectives

3

With the development of the Standard Offer Contract (SOC), customers of the Jamaica Public Service Company Ltd. (JPS) can now sell excess renewable energy to the company. Participation in the SOC arrangement is open to residential and commercial JPS customers who generate their own electricity using renewable generating facilities with capacity of less than or equal to 10kW or 100kW respectively.

To ensure that facilities wishing to participate in the SOC arrangement meet the relevant requirements, the following process has been developed:

1.

2.

Firstly, the customer needs to submit the SOC application form in duplicate to JPS. On receipt of the application forms, JPS should stamp one copy and immediately return it to the customer.

The customer should submit the stamped SOC application form to the OUR and pay the relevant fee. The OUR will confirm receipt of application with JPS.

3.

4.

5.

6.

7.The process to sell excess power to JPS

Did You Know?“Where the National Water Commission (NWC) fails to read a meter for any period greater than three (3) months, then the amount owed to the Commission shall be determined by an actual meter reading or the total value of the interim estimated bills, whichever is less.”

For example: the NWC applies estimated consumption to an account during the five (5) month period January to May 2012, even though a meter is at the premises and is accessible. The sum of the estimated consumption during the period is 25,000 litres. However, when the meter reading is obtained in June 2012, it indicates that 35,000 litres of water was actually consumed. Under the above policy, the Commission ought not to bill the account for the difference of the 10,000 litres (35,000 liters less 25,000 litres). Instead, the Commission should allow the billed estimated consumption for the January to May period to remain on the account and resume billing the account based on meter readings with the one obtained in June.

Conversely, if the June 2012 meter reading was 15,000, then the Commission ought to apply the meter reading and adjust the account for the over-estimation of the consumption; which will result in a credit being applied.

JPS will review the application, verifying accessibility and feasibility to connect to the grid. If the application review process is not satisfactory, JPS will advise both the OUR and customer, indicating the reason for the rejection. Should the customer still wish to participate in the arrangement, an application would have to be resubmitted. No additional application fee is required for resubmission.

However, if the application review is satisfactory, JPS will advise the OUR and the customer of acceptance. The OUR will then submit its licence recommendation to the Ministry of Energy & Mining. If the licence recommendation is denied, then the customer and JPS would be so advised by the OUR.

Where the Ministry approves the licence, the customer and JPS would be so advised by the OUR. The customer would then sign the SOC with JPS.

After the signing of the SOC, the customer would then be required to:

a.b.

c.

d.

A commissioning test of the facility would then be conducted by JPS. If all criteria are satisfied, then the customer’s facility would be authorized for connection to the grid. However, where the facility does not satisfy the criteria, then the customer would need to repeat the activities in number 6 above.

configure the physical location to meet standardsget the premises certified by the Government Electrical Inspector (GEI)insure the facility with a reputable insurance companyadvise JPS when items a, b and c above are complete, submitting all associated documentation

Be an informed consumer – get information on your rights under the Guaranteed Standards Scheme

and submit your claim for breaches to the service provider, where compensation is not automatic. Copies of the Guaranteed Standards are available at the JPS and NWC offices islandwide as well as the OUR website at www.our.org.jm. You can also get information on utility subjects through our Information Centre. If you remain dissatisfied with the service provider’s response to your complaint, you may appeal the utility company’s decision to the OUR in writing.

Office of Utilities Regulation3rd Floor, PCJ Resource Centre,

36 Trafalgar Road,Kingston 10, Jamaica, W.I.

Tel: (876) 968-6053Fax: (876) 929-3635REGULATOR

The

E-mail: consumer@our.org.jm Website: www.our.org.jm

OUR’s Role

The Office of Utilities Regulation Act of 1995 established the Office of Utilities Regulation (OUR) as a body corporate. Under the Act, the OUR is charged with the responsibility of regulating the provision of utility services in the following sectors:

o Electricityo Telecommunicationso Water & Sewerageo Public transportation by road, rail and ferry

The OUR is headed by the Director General, who along with the Deputy Directors General comprise ‘the Office’. The Director General is appointed by the Governor General and the Deputy Directors General are appointed by the Prime Minister.

Design & Layout by iMageination Plus

4

But how do I do it?

The object is to insert the numbers in the boxes to satisfy only one condition: each row, column and 3x3 boxes must contain the digits 1 through 9 exactly once.

Su KuDo

Regulating Utilities for the Benefit of All

To contribute to national development by creating an environment for the efficient delivery of utility services to the

customers while ensuring that service providers have the opportunity to make a reasonable return on investment.

Mission Statement

New Puzzle

5

3

2

7 1

4

8

1

5

4

1

4

9

3

2

5

3

8

9

6

6

7

8

1

3

6

6

4

2

9

3

The continued growth of the Fund is guaranteed with 14 cents (J$) for every kWh of energy consumed being contributed to it. In light of the approximately US$20 million which has accumulated so far, it is envisaged that providing the effects of damage from natural disasters remain minimal, restoration costs can be covered by the Fund. It is therefore unlikely that the need would again arise for JPS customers to be asked to pay for damage resulting from the effects of a hurricane or any other natural disasters.

It is also important to note that, according to the Rules governing the Fund, the maximum amount that is allowed to accumulate, subject to the OUR’s decision, is 15% of the net book value of JPS’ transmission and distribution assets. Given the value of JPS’ transmission and distribution assets to date, the allowable amount would be approximately US$40 million or twice the sum currently in the Fund. Should the Fund reach the US$40 million limit, again subject to the OUR’s decision, customers would cease contributing to it until another disaster strikes or the net book value of JPS’ transmission and distribution assets increase.

The Self Insurance (Natural Disaster) Fund for the electricity provider

Cont’d from page 2