Sat | Sep 19, 2020

Not on OUR watch

Published:Monday | January 12, 2015 | 12:00 AM

Regulator rejects JPS's request for 15% penalty for late bill payments

Tyrone Thompson, Staff Reporter

The Office of Utilities Regulation (OUR) has rejected a request from the Jamaica Public Service (JPS) to charge 15 per cent interest on customer accounts that are overdue for any period over three days.

The request was made by the JPS in its rate-review application to the OUR in 2014. The power company had stated in its request that on average, only 30 per cent of its commercial customers paid their bills on time, with bill settlement in all rate classes averaging 52 days late.

The power company argued that while it was able to disconnect 20,000-30,000 accounts monthly, accounts of essential services, government agencies, and the National Water Commission could not be disconnected, even though those accounts averaged 120 days late in settlements.

The power company posited that while it was unable to charge interest on these late accounts, the company was suffering "significant interest costs on the additional working capital required to fund the business".

The company also said it was suffering significant losses because it has to settle its debts to Petrojam in US dollars. The power company said due to devaluation of the Jamaican dollar, which averaged 14 per cent in 2013, overdue accounts were costing it US$21 million.

The OUR, however, rejected that argument, stating that the agreement between the JPS and Petrojam stipulated that payment could be made in either US or Jamaican dollars.

The agreement between the parties states: "[The] buyer retains the option to pay monies due in US dollars. Where invoices are settled in US dollars, the seller shall pass on to buyer, as a financing incentive, a sum equivalent to one per cent of the CIF (cost in freight)."

The OUR stated that it was the JPS's prerogative to purchase fuel in US dollars and said a lack of contingency planning by the company had led to it being exposed to losses due to currency devaluation.

The OUR, in its rate determination, stated: "Having not made sufficient contingencies to address that concern, the office is of the view that it is not now appropriate to pass this (currency devaluation costs) on to the consumers by way of an interest charge."

The regulator also rejected the claim by the JPS that late payments were affecting the company's working capital.

The report declared: "The office wishes to underscore that JPS is already compensated for interest on receivables by virtue of the fact that these are included as part of its working capital on which it earns a return."

It added: "The office has, therefore, determined that no interest shall be applied to receivables for commercial customers. JPS's application in respect of the approval of a 15 per cent charge on such receivables is, therefore, denied."