The Jamaican office of Utilities Regulation Wednesday rejected the full $1.5 billion hurricane damage claim from the Jamaica Public Service Company.
However, the light and power company will still be allowed to recover nearly a third of the claim, or $458 million, through customer billing. This, the OUR says, will translate to under one per cent increase in electricity rates.
“This translates to seven Jamaican cents per kilowatt hour,” the utilities regulating body explained.
The approximately 0.5 per cent rate increase follows the regulators’ granting of a 3.5 per cent rate increase earlier this month. That increase, which takes effect September 1, represented the company’s annual inflation adjustment.
But yesterday the JPS said it was “extremely disappointed” in the OUR’s ruling and that the need for a hurricane recovery surcharge resulted from the unavailability of insurance for the country’s transmission and distribution systems.
JPS President and CEO, Charles Matthews, said the OUR’s ruling threatened JPS’ viability and efforts at improving its service to customers.
“Given the OUR’s decision we must now weigh our options and decide on our next course of action,” Mr. Matthews said.
The JPS had wanted permission to charge customers the full cost of the company’s property damage and lost revenue in the wake of Hurricane Ivan, which struck the island last September.
The hurricane had caused damage to electricity posts, power lines, and other JPS transmission and distribution infrastructure across the island.
According to the JPS president, the price increase was needed because electricity companies in the Caribbean had been unable to find insurance because of hurricane risks.
Last year, however, the OUR allowed the utility company a US$10 million self-insurance fund financed by a two per cent tariff increase.
But Mr. Matthews said Hurricane Ivan came only three months after the rate increase was approved and the amount accumulated in the fund was insignificant compared to the total damage incurred.
The JPS had made the hurricane damage claim under the ‘z-factor’ provision of their 2001 license.
According to the OUR, that rule allows for price rises “to reflect special circumstances outside the utility company’s control which impact cost.”
Despite JPS’ claim of lost revenue the OUR received 1,294 complaints against the company for bills in the three months following ‘Ivan’ last September. The preceding nine months yielded just 1,100 complaints.
Mr. Matthews said the ruling went against recent precedence in the Caribbean involving the Cayman Utility Company and the Florida Light & Power Company, which both raised their prices to recover losses from Ivan.