Energy Tariff Submission for Jamaica Public Service Company

The problem

Jamaica’s national electricity utility (JPS) was not earning an adequate return on capital and was at risk of customers switching to self-generation.

How we helped

Castalia prepared an energy tariff submission to the regulator arguing for a tariff increase. To do this, we forecast electricity demand, calculated JPS’s cost of capital, and used Data Envelope Analysis to estimate an appropriate X-factor. We also made the case of a revenue cap to protect the utility from demand risk and to decouple distribution revenues from energy sold.

Impact

The OUR rejected the energy tariff submission for increase and the appealed revenue cap proposal. Castalia provided expert testimony. The OUR’s surprise decision contributed to a rethinking of electricity regulation in Jamaica. The Office of Utilities Regulation Act was amended to require the regulator to establish and follow clear procedures for the use of analytical tools in setting electricity tariffs. Non-Executive Directors were appointed to oversee the technical staff and hold them accountable. The government granted JPS a new license, which provided for a revenue cap. JPS settled its appeal against the regulator’s decision on these agreed changes.