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Electricity tribunal trashes Office of Utitlies Regulations wheeling charges

Published:Friday | February 6, 2015 | 12:00 AM
Ian Allen/Staff Photographer Ansord Hewitt, Director, Regulations, Policy, Monitoring and Enforcement, OUR.

Jamaica's electricity tribunal has effectively sent utilities regulator, OUR, back to the drawing board to redesign the pricing structure plan for the wheeling of power through Jamaica Public Service Company's network.

The Office of Utilities Regulation has said it may appeal the ruling.

JPS had contested the wheeling prices set by the OUR as inadequate and in breach of its licence, and Chairman of the Electricity Appeals Tribunal, Justice Paul Harrison, issued a ruling in November 2014 that sided with the power utility. Justice Harrison described the pricing structure as 'irrational and flawed'.

OUR had intended to introduce electricity wheeling in 2013, but the programme was put on hold after JPS' legal challenge.

The regulatory agency said this week that it was still reviewing the tribunal's decision but expected to wrap up the assessment by the end of March.

Essentially, JPS had argued that wheeling prices should be set around the same time as the rate determination for electricity charges - the latter was decided last month - having noted that the 2013 wheeling rates were based on stale data.

JPS also argued that the approved wheeling charges were in breach of Condition 12 of its licence, neither were they guided by the cost of service study (COSS) conducted by the power utility.

"We are still assessing the effect and implications of the ruling," Ansord Hewitt, the OUR's director of regulation, policy, monitoring and enforcement, told the Financial Gleaner.

The review will determine the regulator's next step.

"If, for example, it decides to appeal the decision then the status quo remains," said Hewitt. "On the other hand, if it decides not to appeal the next step is to direct JPS to do a cost of service study stipulating the framework for it. We will have another round of consultations, then determine a system including charges and, thereafter, implement," he said.

Though a number of local com-panies have expressed interest in wheeling electricity, no applications have been made so far to the OUR.

As defined in the text of the Tribunal's decision: "Wheeling is a method by which a grid operator, for a price, allows another party to send electrical energy over the grid operator's transmission and distribution system, from a location at which the party generates the energy, to a location where it will be consumed."

The wheeling regime was introduced in Jamaica by the amendment of Condition 12 of JPS's licence in 2011.

To qualify for a wheeling licence, lasting 10 years, the applicant must be a self-generator with consumption facilities of 25kVA.

The OUR in 2013 determined annual wheeling rates at an average of US$105,312 per MW for primary distribution and US$53,545 for secondary distribution on a non-locational basis.

The regulator also estimated rates for 14 actual JPS customers at different locations across Jamaica, which ranged between US$83,100 per MW and US$629,900 per MW.

JPS argued on appeal that the wheeling charges were not consistent with the existing tariffs and price controls, in that the charges would not be revenue neutral to the utility. It also objected to the OUR's use of a Modern Equivalent Asset Valuation model for setting wheeling rates, instead of actual costs, and argued that the structure created by OUR would result in tariffs that discriminate by location.

The Electricity Appeals Tribunal, after hearing from expert witnesses on both sides, ruled "the OUR acted unlawfully in producing its own COSS [cost of service study], albeit with some 2009 data from JPS, in breach of Condition 12 and therefore, in that respect, its determination is flawed".

Harrison ruled that the OUR's decision not to consider JPS' COSS data, which was available to it in June 2013, a month before its wheeling determination, was "irrational".

He further noted that the OUR, being a statutory authority with powers and functions conferred by law and the power utility's licence, could not "arrogate to itself powers that are not conferred on it", and that it had no common law powers nor a legal basis or authority to conduct its own COSS.

Additionally, the wheeling charges proposed by the regulator were "not consistent with tariffs and the price controls as approved by the OUR," said Justice Harrison.

"... It was irrational for the OUR to issue the Determination Notice for the reason that it did. The said notice is accordingly flawed and irrational," he said.

avia.collinder@gleanerjm.com