On 2016 January 27, the Jamaica Public Service Company Limited (JPS) was issued a new licence, the Electricity Licence, 2016 (the Licence). The Licence introduced a number of changes in the regulatory framework governing the electricity sector. The two most notable changes are (1) the introduction of a revenue cap approach which replaces the price cap mechanism; and (2) the substitution of a forward looking approach to the calculation of the tariff for the historic test-year approach.
The forward looking approach requires that JPS’ rates be based on, among other things, forecasted expenditure, revenue and demand. While such an approach allows for a better matching of JPS’ activities with its revenues, it may be problematic if there are wide variances in the projections. Consequently, the Licence stipulates that rate setting ought to be based on JPS’ Business Plan which should be guided by an Integrated Resource Plan produced by the Ministry responsible for energy and a Final Criteria developed by the Office of Utilities Regulation (“OUR/Office”).
In arriving at the Final Criteria, the Licence requires the Office to publish its Proposed Criteria and consult with stakeholders. The Proposed Criteria and a Further Proposed Criteria was published on 2018 May 01 and 2018 November 09, respectively. Comments and inputs were received from stakeholders and these were taken into consideration by the OUR in arriving at this Final Criteria.
