THE Jamaica Public Service Company (JPS) has again found itself on the receiving end of an unfavourable decision by the Office of Utilities Regulation (OUR), after it was yesterday slapped with an order to refund close to $1 billion to customers.
The sum is for charges made to customers’ accounts from March to December 2013 for foreign exchange adjustment on fuel supplied by Petrojam. In a lengthy release, the utility regulator said the light and power company is to refund customers for the charges, which it included on their bills without consultation.
Public education specialist at the OUR, Elizabeth Bennett-Marsh told the Jamaica Observer that the JPS’s justification for the charge was that “it adjusts the fuel cost recovered for any differences between the estimated fuel cost computed at the exchange rate at the end of the month in which it incurs the fuel cost and the exchange rate at which these US$ invoices were actually settled”.
However, the OUR determined that the sum taken from customers, totalling $973,373 million, was in contravention of the Amended and Restated All-Island Electric Licence.
“The OUR, having received JPS’s explanation for making the adjustments, considered the matter and concluded that JPS had no authority under the existing regulatory framework to unilaterally impose the additional costs on customers.
The licence explicitly states how the charges are to be determined, and once this is done, there is no provision for an adjustment and, even so, JPS is not entitled to levy charges unilaterally,” Bennett-Marsh further stated.
The regulator has also given JPS a week to submit details of how the company plans to repay customers, and when refunds would begin.
“Customers are to be fully refunded within six months of the effective date of the directive,” the OUR ordered.
Just a month ago, the OUR rejected the JPS’s application for an increase in non-fuel rates, and instead handed down a determination for the company to reduce electricity rates by an average of two per cent.
In a release late yesterday, the light and power company said that it was reviewing the OUR directive, explaining that the sum quoted by the regulatory body “was paid to Petrojam for oil used to generate electricity”.
“[The amount] represents the difference between the estimated amounts for which JPS was billed in Jamaica dollar terms, and the actual amount paid to Petrojam. The J$973m accounts for approximately one per cent of the total fuel bill of close to J$73 billion paid by JPS to Petrojam for fuel in 2013,” JPS said.
Meanwhile, JPS President and CEO Kelly Tomblin questioned why the company was only hearing from the OUR just now when the light and power company had already provided an explanation for the charges based on a request made in 2013.
“The OUR asked for an explanation of the charges in May 2013, which we provided in a matter of days.
It is not clear why we did not hear from the OUR until more than a year later on this issue,” Tomblin said.
“JPS believes we acted within the confines of the licence, but it appears, once again, that the OUR and JPS have a fundamental difference on what prudently incurred costs include,” she explained.
“Legitimate cost recovery is one of the regulatory principles on which we are asking an independent tribunal to arbitrate in our appeal of the recent OUR rate determination.
We believe that we should be allowed to recover the actual cost of doing business. Fuel is fundamentally a pass-through cost, like other normal operating costs, and we do not charge our customers one dollar more for fuel than what we incur in cost,” Tomblin added.
She said that JPS experienced an under-recovery of its fuel cost amounting to US$42 million in 2013 and US$18 million in 2014.
“No business can survive in the long run, nor attract much-needed capital if it cannot recover its actual prudently incurred business costs,” Tomblin declared.