JPS submits 2017 annual tariff adjustment proposal

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JPS submits 2017 annual tariff adjustment proposal

This submission is made in relation to the annual Performance-Based Rate-Making (PBRM) tariff
adjustment filing for 2017, in accordance with Electricity Licence 2016 (the Licence), Schedule 3,
Paragraph 43, which states:

    “The Licensee shall make annual filings to the Office at least sixty (60) days prior to the
    Adjustment Date. These filings shall include the support for the performance indices, the inflation
    and the proposed Non-Fuel Base Rates for electricity, and other information as may be necessary
    to support such filings….”

In accordance with the Licence, the OUR’s January 7, 2015 Determination Notice, Determination
Notice Addendum 1 and the Extraordinary Rate Review Determination Notice
(2017/ELE/001/DET.001), the 2017 annual non-fuel tariff adjustment will incorporate changes to
the annual inflation adjustment, the resetting of the new foreign exchange rate and a Z factor
adjustment that became applicable as a requirement of Determination 4 of the Extraordinary Rate
Review Determination. Determination 1 of the Extraordinary Rate Review Determination also
stipulates that JPS’ Revenue Requirement should be reviewed in light of JPS’ application for the
recovery of asset impairment cost and accelerated depreciation expenses. JPS will review the
revenue requirement approved by the OUR in the 2014 – 2019 Determination Notice in accordance
with the requirements of Determination 4 while taking note of our earlier communication to the
OUR in which JPS indicated its state of readiness for implementing Determination 3. The
application will not include a Q factor adjustment as JPS and the OUR continue to work towards
the establishment of a baseline.

The 2017 Annual Adjustment filing is developed in the context of the new Electricity Licence that
was established in January 2016. Several new parameters were introduced in the Licence. In the
absence of a prior consensus between the OUR and JPS on the setting of these parameters, JPS
outlined its position in relation to the parameters in its 2016 Annual Adjustment Filing. The OUR
concurred with several of these positions and, in the 2017 Annual Tariff Filing, JPS’ proposal is
informed by the precedence established by the OUR in the 2016 Annual Tariff Adjustment
Determination Notice.

In the past year, JPS along with major sector stakeholders accomplished the historic achievement
of bringing LNG to Jamaica. The introduction of LNG into the Jamaican market has been a major
game changer for the industry as many of our larger customers are now seriously contemplating
self-generating using gas as the fuel of choice. JPS’ analysis indicates that the best alternative
option (BAO) is at a cost which is lower than the grid cost for our larger customers and there is a
real possibility of significant grid defection. The impact of grid defection by the larger customers
would be significant for other rate classes and it is because of this that JPS is proposing the
introduction of a new rate class for customers whose peak demand at a single location is at or
above 2MVA in the 2017 tariff adjustment filing.