On 2016 January 27, the Jamaica Public Service Company Limited (JPS) was issued a new licence, the Electricity Licence, 2016 (the Licence). The Licence has 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 be based on JPS’ five-year Business Plan which should be guided by an Integrated Resource Plan produced by the Ministry responsible for energy and Criteria developed by the the Offices of Utilities Regulation (“OUR/Office”).
The Licence requires that the Office publishes its Proposed Criteria and consults with stakeholders to arrive at the Final Criteria. Consequently, the purpose of this Consultation Document is to present an outline of the principles, methodologies and procedures that the OUR proposes to use in the rate setting exercise and to elicit comments and inputs from all stakeholders. All responses and comments will be taken into consideration in the process of development and promulgation of the Final Criteria.
