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OFFICE OF UTILITIES REGULATIONRegulating Utilities for the Benefit of All
ISO 9001:2015 Certi�ed
ANNUAL REPORT
2017-2018
1OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
OFFICE OF UTILITIES REGULATIONRegulating Utilities for the Benefit of All
ISO 9001:2015 Certified
ANNUAL REPORT
2017-2018
OUR Annual Report Cover_inside.pdf 2 24/07/2018 2:06 PM
CONTENTS
Accredited by Member of the International Accreditation Forum Multilateral Recognition Arrangement for Quality Management Systems
Introduction, Mission Statement and Objectives
The Offi ce
Corporate Governance Report
Chairman’s Report
Director General’s Report
Summary of Achievements
The Executives
Departmental Reports
Secretary to the Offi ce (STTO)
Consumer & Public Affairs (CPA)
Regulation, Policy, Monitoring & Enforcement (RPME)
Legal
Information Technology & Risk (ITR)
Administration & Human Resource
Finance
Internal Audit
Consumer Advisory Committee on Utilities (CACU)
20th Anniversary Celebrations
Corporate Highlights
Organisational Chart
Senior Management Compensation
Financial Statements 2017/2018
Independent Auditors' Report to the Members
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Reserves
Statement of Cash Flows
Notes to the Financial Statements
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This, the twenty-fi rst report of the Offi ce of Utilities Regulation (OUR), will inform Parliament and the country of the regulatory activities
and fi nancial operations of the OUR for the period 2017 April 1 to 2018 March 31.
INTRODUCTION
The OUR was established in 1995 by the OUR Act as a body corporate with its operations beginning in 1997 January. Under the Act, and its
amendments thereafter, the OUR is charged with the responsibility of regulating the provision of utility services in the following areas:
• Electricity
• Telecommunications
• Water and Sewerage
THE OUR MISSION
OUR contributes to national development by effective regulation of utility services that enables consumer access to modern, reliable,
affordable and quality utility services while ensuring that service providers have the opportunity to make a reasonable return on their
investment.
VISION STATEMENT
The OUR is a trusted, purpose-driven and stakeholder-focused regulator, that has enabled Jamaica to be globally recognised as a leader in
utility consumer protection and satisfaction and sustainability of regulated entities.
OUR OBJECTIVES
• To ensure that consumers of utility services enjoy an acceptable quality of service at a reasonable cost.
• To establish and maintain transparent, consistent and objective rules for the regulation of utility service providers.
• To promote the long-term, effi cient provision of utility services for national development consistent with Government policy.
• To provide an avenue of appeal for consumers in their relationship with the utility providers.
• To work with other related agencies in the promotion of a sustainable environment.
• To act independently and impartially.
Accredited by Member of the International Accreditation Forum Multilateral Recognition Arrangement for Quality Management Systems
ANNUAL REPORT 2017-2018OFFICE OF UTILITIES REGULATION 3
OUR OBJECTIVESOUR OBJECTIVES
To provide an avenue of appeal for consumers in their relationship with the utility providers.To provide an avenue of appeal for consumers in their relationship with the utility providers.
The OUR is a trusted, purpose-driven and stakeholder-focused regulator, that has enabled Jamaica to be globally recognised as a leader in
utility consumer protection and satisfaction and sustainability of regulated entities.
OUR OBJECTIVES
•
•
•
•
•
•
The OUR is a trusted, purpose-driven and stakeholder-focused regulator, that has enabled Jamaica to be globally recognised as a leader in
utility consumer protection and satisfaction and sustainability of regulated entities.
The OUR is a trusted, purpose-driven and stakeholder-focused regulator, that has enabled Jamaica to be globally recognised as a leader in
utility consumer protection and satisfaction and sustainability of regulated entities.
To ensure that consumers of utility services enjoy an acceptable quality of service at a reasonable cost.
To establish and maintain transparent, consistent and objective rules for the regulation of utility service providers.
To promote the long-term, effi cient provision of utility services for national development consistent with Government policy.
To provide an avenue of appeal for consumers in their relationship with the utility providers.
To work with other related agencies in the promotion of a sustainable environment.
To promote the long-term, effi cient provision of utility services for national development consistent with Government policy.
To provide an avenue of appeal for consumers in their relationship with the utility providers.
To work with other related agencies in the promotion of a sustainable environment.
The OUR is a trusted, purpose-driven and stakeholder-focused regulator, that has enabled Jamaica to be globally recognised as a leader in
To ensure that consumers of utility services enjoy an acceptable quality of service at a reasonable cost.
To establish and maintain transparent, consistent and objective rules for the regulation of utility service providers.
To promote the long-term, effi cient provision of utility services for national development consistent with Government policy.
To provide an avenue of appeal for consumers in their relationship with the utility providers.
The OUR is a trusted, purpose-driven and stakeholder-focused regulator, that has enabled Jamaica to be globally recognised as a leader in
To ensure that consumers of utility services enjoy an acceptable quality of service at a reasonable cost.
To promote the long-term, effi cient provision of utility services for national development consistent with Government policy.
4OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
THE OFFICEMr. Matalon’s service to Jamaica’s � nancial and economic development has spanned his tenures on public and private sector boards, charitable organisations and national government-appointed committees.
His appointments included: Chair, Development Bank of Jamaica (DBJ) and in that capacity, serving on a number of Enterprise Teams overseeing privatisation as well as Public-Private Partnerships transactions; President of the Private Sector Organisation of Jamaica (PSOJ), and during his tenure initiating the formation of a Private Sector Working Group on Tax Reform (PSWG); Scotia Group Jamaica Limited (Director); RJR Gleaner Communications Group (Director); The Gleaner Company Limited (Vice Chairman); Chairman of ICD Group Holdings Limited and its subsidiary British
Caribbean Insurance Company Limited, and Director of other ICD subsidiary and associated companies. The charitable and other organisations he has served include: St. Patrick’s Foundation which supports charitable activities in inner-city communities (Honorary Chairman); Hillel Academy K-12 international and Multicare Youth Foundation, which supports 32 inner city schools in the KMA with curriculum enrichment, and operates the YUTE programme aimed at empowering unattached youth ages 17-29 (Chairman of the Board of Governors).
He was conferred with the Order of Distinction in the Rank of Commander for his contribution to the public and private sectors, and community service.
He is a graduate of the London School of Economics and Political Science.
Noel daCosta has served on numerous boards in the private and public sectors, and has been at the helm of several local and international organisations including Petrojam Ltd., the Jamaica Chamber of Commerce, the Jamaica Institution of Engineers, the Jamaica Debates Commission, the Master Brewers Association of the Americas, and the Caribbean Council of United Way Worldwide. A consultant with more than � fteen (15) years’ experience in Corporate Relations, he has over three decades in technical and engineering leadership. He
has worked in the beverage industry for many years and is a founding partner in the engineering � rm, Jentech Consultants Ltd.He has postgraduate degrees in Engineering, Business Administration and Insurance, and is a Fellow of the Jamaica Institution of Engineers, as well as the Institution of Chemical Engineers (UK).
In 2012 he was awarded the Jamaican National honour of Commander of the Order of Distinction for his contribution to engineering and manufacturing.
JOSEPH M. MATALON, CHAIRMAN
NOEL daCOSTA, DEPUTY CHAIRMAN
5OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Ms. Chong is an experienced business development and utilities regulation practitioner. For more than � fteen (15) years she has served on the Consumer Advisory Committee on Utilities (CACU) and as its Chairman since January 2004. Under her direction, the CACU has been at the forefront of consumer advocacy activities in Jamaica and has become an integral part of the utilities regulation landscape. She is also a member of the Consumer Protection Tribunal of the Consumer Affairs Commission.
As Trade Commissioner with the Government of Canada, Ms. Chong has successfully delivered several projects and contracts in the cleantech, transportation
and education sectors and has developed specialisation skills in the international business practice of Corporate Social Responsibility.
She is a graduate of Florida International University and the University of Florida with Bachelor and Masters degrees in International Relations (minor in Economics) and Public Administration respectively and other professional diploma and certi� cate courses.
Yasmin is a Rotarian, a practicing Roman Catholic, and a proud alumna of the Immaculate Conception High School.
He is the Executive Director of the Caribbean Policy Research Institute (CaPRI), the region's leading think-tank, focusing on public policy issues. Damien is also a senior lecturer in the Department of Economics at the University of the West Indies (UWI), Mona, where he has taught graduate and undergraduate courses in introductory economics, macroeconomic theory, and international trade and � nance.
Damien’s research has been in the areas of debt, poverty and distribution, and international trade, and has been published in international economics journals and also in edited collections. He is the author and editor (with
David Tennant) of Debt and Development in Small Island Developing States (Palgrave Macmillan, 2014).
In the corporate world, Damien has served on the boards of companies, including Desnoes & Geddes, the National Export-Import Bank of Jamaica, Dyoll Insurance Company, Mutual Life Assurance Company, and Bitt, Inc (Barbados).
Damien earned a B.A. from York University (Canada), a M.Sc. from UWI and a Ph.D. from New York University (USA), all in economics.
YASMIN CHONG
DAMIEN KING
He is a partner at Hart Muirhead Fatta, practising mainly in the areas of company law, securities, � nancial services, mergers and acquisitions, and capital market transactions.
Admitted to practice in Jamaica in 1993, he was educated at UWI and the Norman Manley Law School (NMLS). He joined Myers, Fletcher & Gordon as an associate focusing on commercial litigation. He entered the public sector in 1999, joining Financial Sector Adjustment Company (FINSAC) Limited, an agency under the Ministry of Finance & Planning set up to rescue and rehabilitate the local � nancial sector. On the substantial conclusion of FINSAC's activities, he joined Hart Muirhead Fatta in 2002.
He is a director of Independent Radio Company Limited and Portland JSX Limited and has served as a director of several entities in the public and private sectors. He is currently a member of the Commercial Law Committee of the Jamaican Bar Association and an Associate Tutor at the NMLS.
He serves on the Corporate Governance Committee of the PSOJ and conducts training in corporate governance. He has been consistently named as one of the leading commercial attorneys in Jamaica by both Chambers Global and the International Financial Law Review.
He is the Chief Information Of� cer (CIO) for the GraceKennedy Group. Prior to becoming CIO, he held several leadership roles within GraceKennedy. These include being General Manager of Dairy Industries (Jamaica) Ltd (DIJL), CEO of Hardware & Lumber Ltd., as well as being General Manager of several other GraceKennedy subsidiaries. He has also contributed to new product and process development, compensation design, major construction projects and community development projects since joining GraceKennedy in 1997.
Simon has more than � fteen (15) years experience in the steel industry in general management, engineering, metallurgy, customer service, quality assurance, process
improvement, product development and IT deployment. He is a director of GraceKennedy Properties Ltd., Grace & Staff Community Development Foundation, and the Grace Cooperative Credit Union. He is a director of the Jamaica Manufacturers and Exporters Association, Chairman of the Jamaica National Agency for Accreditation (JANAAC) [2007-2012 and current], and was Chairman of the National Quality Infrastructure Project from 2003 to 2007. He holds a Bachelor of Applied Science (Metallurgical and Materials Sciences) from the University of Toronto and a Master of Applied Science (Management Sciences) from the University of Waterloo. He is a registered Professional Engineer in Ontario.
NOVAR PATRICK MCDONALD
SIMON ROBERTS
6OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
He is the Director General of the OUR, and an ex of� cio member of the Of� ce.
He is a regulatory specialist, economist and attorney-at-law and has more than twenty � ve (25) years’ experience at various levels in quasi-judicial organisations. His educational background covers law, management and economics with extensive specialised training in, among other areas: regulation, competition analysis, strategic planning, leadership, international negotiation and corporate planning.
He joined the OUR in February 2000 and before that worked at the Jamaica Bauxite Institute and the Fair
Trading Commission as an economist. He also lectured at the post graduate level on Regulation and Regulatory Reform in the Department of Government, University of the West Indies (UWI), Mona for more than ten (10) years and served as a tutor in the UWI’s Masters In Telecommunications Regulation and Policy Programme. He has a Master’s degree in Regulation from the London School of Economics, obtained after being awarded a Chevening Scholarship in 1997, a Bachelor of Science (B.Sc.) in Economics & Management (UWI), and Bachelor of Law (LL.B) from the University of London. He also holds a Certi� cate in Legal Education from the NMLS.
ANSORD E. HEWITT, DIRECTOR GENERAL (EX OFFICIO MEMBER)
7OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
8OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
CORPORATEGOVERNANCE
REPORT
The Of�ce had twelve (12) meetings during the year under
review. It considered and took decisions on a wide range
of issues relating to all the sectors regulated by the OUR, and on
organisational policy matters. These included determinations and
decisions on tariffs, approvals for various projects, agreements,
codes, and protocols, directives to utility providers, audits of aspects
of utility companies’ operations, recommendations to the portfolio
ministers for the issue of licences, and policy directives and decisions
on administrative matters. Information on these activities can be
found in the Departmental Reports which follow.
Much of the work of the Of�ce is done through its �ve committees
which give initial consideration to matters before the Of�ce, and
make recommendations to the full Of�ce for �nal decisions and
determinations. The committees, their main responsibilities, and their
membership are set out, together with a record of the attendance of
the members of the Of�ce at Of�ce and Committee meetings.
9OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Committee Main Responsibilities Members
Audit and Conduct To ensure the OUR’s financial integrity, and to provide oversight of the organisation’s internal controls, risk management, and internal and external audit.
Damien King, ChairNoel daCosta, Deputy ChairSimon RobertsDonald Reynolds, (co-opted Member)
Finance and Budget To monitor and review the effectiveness of the accounting, treasury, materials management, and payroll activities.
Joseph Matalon, ChairDamien King, Deputy ChairSimon RobertsDonald Reynolds (co-opted Member)
Technical
To provide oversight on planning development, and the technical and operational functions of the OUR to ensure efficiency and effectiveness in the delivery of appropriate regulations for the sectors for which the OUR has responsibility.
Noel daCosta, ChairYasmin Chong, Deputy ChairSimon Roberts
Legal Affairs
To provide general legal oversight; advice to the Legal department; to conduct legal reviews of matters and to make recommendations to the Office, to review policy recommendations, and monitor the implementation of legislative revisions.
Novar Patrick McDonald, ChairJoseph Matalon, Deputy Chair
Human Resource and Compensation
To monitor and review the effectiveness of the Human Resource and Administration department’s activities and other related matters.
Yasmin Chong, ChairNoel daCosta, Deputy Chair
Table 2: Office Members' Skill Set
Name General
Man. Finance & Audit
Strategic Man.
HumanResource
LegalUtilities
RegulationGovernance IT Engineering
Joseph Matalon,Chairman
x x x x x
Noel daCosta,Deputy Chairman
x x x x x
Yasmin Chong x x x
Damien King x x x x
N. Patrick McDonald x x x x
Simon Roberts x x x x
Ansord Hewitt x x x x
Table 1
10OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
The Of�ce gave considerable attention to corporate governance. Of special note is the Governance Framework Project, designed to strengthen the OUR’s institutional capacity to carry out its prescribed functions and improve the quality and sustainability of its governance framework. This Inter-American Development Bank-�nanced project, will be carried out in three phases, following a successful initial �rst phase which resulted in the development of a Governance Manual. This Manual was formally adopted by the Of�ce in 2016. Phases two and three will be implemented in 2018/2019.
At its meeting in 2017 May, the Of�ce agreed to conduct a performance evaluation survey as part of its commitment to the highest standards
of corporate governance, and in accordance with the requirements of the Government of Jamaica’s Revised Corporate Governance Framework for Public Bodies (2012). This survey was divided into three sections: General Information; Of�ce and Of�ce Committee Performance Evaluation; and Of�ce Member and Committee Chair Performance Appraisal. It was structured around the ten dimensions of good Of�ce governance. The purpose of the survey was to gain an insight into how the Of�ce members perceive the Of�ce to be performing in key areas, and for each Of�ce member to undertake an assessment of his/her performance.
All members of the Of�ce completed the survey, and their responses were reviewed and analysed by an independent consultant. This consultant is scheduled to present her report and recommendations to the Of�ce in 2018 May. The Of�ce will consider the report, and discuss improvements that can address any identi�ed gaps or weaknesses. All agreed actions are to be included in an Of�ce implementation improvement plan containing the key actions, timeframes, and responsibilities.
The Of�ce was also fully involved in the development of the OUR’s Corporate Business Plan and Budget 2018/2019 – 2021/2022: from providing policy direction in the initial strategic planning stage, through to approving the �nal
Table 3: Of�ce Attendance Record for the Full Of�ce & Of�ce Committees Meetings 2017/2018
Of�ceFull Of�ce
(N=13)Audit(N=4)
Finance & Budget(N=6)
Human Resource & Compensation
(N=11)
Technical(N=10)
Legal Affairs(N=0)**
Joseph Matalon 12 N/A 5 2* 9* 0
Noel daCosta 13 3 N/A 9 10 N/A
Damien King 13 4 5 N/A N/A N/A
Simon Roberts 10 3 5 N/A 9 N/A
N Patrick McDonald 9 N/A N/A N/A N/A 0
Yasmin Chong 11 N/A N/A 11 8 N/A
Ansord E. Hewitt 10 N/A 4 7 9 0
KEY: N - Total number of meetings. N/A: - Not Applicable, i.e the person is not a Member of that Committee* Attendance Optional** Although the Legal Affairs Committee had no meetings during the year, the members held a number of informal consultations and reviewed documents affecting the OUR. Chairpersons highlighted.
11OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
draft plan for submission to the Ministry of Finance and the Public Service, in accordance with the requirements of the Public Bodies Management and Accountability Act. There were no sigini�cant adjustments or amendments to this Plan during the year under review.
The Of�ce has paid special attention to risk management, and has ensured that this has become a central element in the organisation’s planning, projects, and activities. The Of�ce has moved to strengthen internal �nancial management, including controls and reporting, and the preparation of a Finance Manual which should be completed by mid-2018.
Members of the Of�ce have participated in conferences, workshops and training programmes, to enhance their understanding of the most recent developments affecting utilities and the role of regulators, and to better equip them to deal with regulatory and leadership challenges.
COMMITTEES
Audit CommitteeThe Audit Committee had four quarterly meetings during the year under review. The Committee devoted much attention to the operational and process audits conducted by the Internal Auditor, and to the resolution of the �ndings of these audits. The Committee also gave priority to the issue of risk management, and provided guidance for the development
of a Risk Register for the organisation. Other issues included the appointment of an External Auditor; procurement matters; the Ministry of Finance’s reporting requirements; and policies on the organisation’s credit card, motor vehicles, and telephone usage. It also developed procedures to deal with any potential con�icts of interest which may arise affecting members of the Of�ce. The Audit Committee, in a joint meeting with the Finance and Budget Committee, also reviewed and approved the report of the external auditors on the OUR’s �nancial statements for 2017/2018.
Finance and Budget CommitteeThe Finance and Budget Committee, which had �ve meetings during 2017/2018, focused its attention on the proper management of the organisation’s �nancial affairs, and mandated action to improve and strengthen �nancial accountability, controls, and reporting. It initiated the preparation of a Finance Manual; revised the investment rules; and dealt with a range of issues under its purview, such as the organisation’s tax liabilities, resolving the long-outstanding start-up loan from the Government of Jamaica, foreign exchange requirements, external consultancies for projects, and �xed assets. The Committee also played a pivotal role in the development and approval of the organisation’s annual budget.
Technical CommitteeThe Technical Committee, consistent with its mandate, addressed issues in all the sectors regulated by the OUR. It provided policy guidance to the technical staff, reviewed their
submissions, and made recommendations to the Of�ce on determinations, decisions, and other actions. These included, in the electricity sector: power purchase agreements (Jamaica Private Power Company, JAMALCO’s 94MW plant); the Jamaica Public Service Company Limited’s (JPS’s) 2017 annual tariff adjustment and extraordinary tariff application; preparatory studies for the JPS’s 2019 rate review; JPS’s grid scale energy storage project; JPS’s proposed 14MW distributed generation project; the development of proposed accounting separation; meter testing; electricity sector codes; a review of the Electricity Disaster Fund investment plan; the termination of the Electricity Ef�ciency Improvement Fund; and the introduction of the System Bene�t Fund.
In the water and sewerage sectors, the Committee recommended tariffs for small water suppliers: Dynamic Environmental Management Limited, Runaway Bay Water Company Limited, Can Cara, Landmark Developers Limited; made a recommendation for a water supply licence for Tryall Golf and Beach Club; reviewed business proposals from the National Water Commission; reviewed a meter testing protocol developed by the OUR’s technical staff and the Jamaica Bureau of Standards; and approved a follow-up plan of action arising from an audit of the K-Factor programme. The Committee’s work in telecommunications included recommendations for service provider licences: (S&B Communications Limited and Verge Communications). It reviewed and made recommendations on �xed termination rates, a common short code scheme; the
12OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
development of infrastructure sharing rules; the establishment of a new area code for Jamaica; RIO 6 revised tariff schedule; and began work on monitoring the quality of service from broadband providers and an ICT usage and adoption survey. The Committee also played a role in Jamaica’s �rst Natural Gas Conference and contributed to the development of a gas policy.
Human Resource and Compensation CommitteeHuman Resource and Compensation Committee paid much attention to the revision of sections of the Personnel Policy and Procedural Manual, which was necessary to resolve non-conformances revealed by internal audits. These included amendments to the Leave Policy, the Promotions Policy, the performance appraisal process, staff loans, attendance reporting, and the establishment of minimum standards for employees’ records. The Committee reviewed the operations of the OUR’s Pension Fund, and initiated the development of a retirement preparation programme. The Committee took action to ensure that the OUR would have a comprehensive disaster preparedness and staff emergency plan. The Committee also began an institutional review, aimed at strengthening the organisation. This will be further developed under the previously mentioned IDB-supported Governance Project.
Corporate Social ResponsibilityIn the area of corporate social responsibility, the OUR is guided by the relevant principles in the Government of Jamaica’s Corporate
Governance Framework for Public Bodies, and in the PSOJ’s Corporate Governance Code. The OUR’s Mission Statement and Objectives, also apply to the Of�ce’s philosophy towards corporate social responsibility. For the Of�ce, it is a sine qua non that, as a public entity, everything that the OUR does must be in the public interest and for the public good.
It must also be recognised that the OUR’s sole source of income is the fees it collects from the regulated entities, and that the statutes under which it operates prohibit the OUR from using any part of these fees for non-regulatory purposes. This restriction therefore excludes the OUR from participating in philanthropic activities in the area of corporate social responsibility. Nevertheless, the OUR’s approach has been to incorporate, where possible, elements that accord with these responsibilities, in various activities which it undertakes in the
ful�lment of its regulatory mandate. The OUR also encourages voluntarism in charitable activities by its staff.
Among the OUR’s activities are initiatives aimed at facilitating access to utility services by persons with disabilities; involvement in the Girls in ICT Day programme; participation in national events such as the annual Denbigh Agricultural Show; and the employment of university undergraduates as summer interns. The OUR has also transformed its library into an Information Centre (OURIC), and has opened it to the public. OURIC is a valuable resource for research, particularly to persons with an interest in regulation and the regulated entities. At a voluntary level, OUR staff members have participated in annual Labour Day projects (with an emphasis in recent years on elementary education), and in corporate fund-raising activities for charities, such as the Sigma Run.
Table 4: Of�ce Remuneration (2017/2018)Position Board Fees ($) Remuneration ($)
Chairman 2,170,000
Deputy Chairman 2,280,000
Members 4,900,000
Director General 15,799,420
Total 9,350,000 15,799,420
13OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
CHAIRMAN'SREPORT
Apart from continuing its work to ensure that the OUR achieves and
maintains the highest international standards in corporate governance,
the Of� ce has seen off another year packed with a range of regulatory activities
which called into play the full array of skills, knowledge and experience of its
diverse membership. The listings of publications by the OUR provided elsewhere
in this report provide ample evidence of the wide scope of regulatory matters on
which the Of� ce was called upon to adjudicate, offer advice, issue prescriptions
and directives, litigate or respond to litigation by others.
As regards corporate governance, our prime responsibility is to make sure that
the OUR’s vision, mission, mandate and independence are maintained, while
balancing stakeholders’ interests. We are also tasked with the responsibilities
assigned under the OUR Act and other sector-speci� c legislation. These
responsibilities are carried out by the Of� ce as a whole, through Committees of
the Of� ce, or through delegation to professional Staff.
Our Audit and Conduct, Finance and Budget, Technical, Legal Affairs and Human
Resource and Compensation Committees all worked assiduously throughout
the year to carry out their individual mandates. The details of their activities are
set out in our newly designated Corporate Governance Report.
The OUR’s governance framework underpins clear and transparent processes
for making decisions and providing recommendations. The Of� ce advises
Joseph M. Matalon
14OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
management and oversees the organisation’s
strategic direction and planning, taking into
account both the opportunities and risks to
the OUR, to the regulated sectors, and to the
nation. We have also sought to ensure that we
follow established decision-making procedures
which are described in our Terms of Reference
and detailed in the OUR’s Operations Manual.
During the year we worked with the Inter-
American Development Bank to implement and
progress the Governance Framework Project,
an institutional capacity building project being
implemented in three phases. The �rst phase
produced the Governance Manual adopted
in 2016, and two further phases are to be
implemented in 2018 -2019. Notably, the Of�ce
commissioned a performance evaluation survey
on its performance as part of our commitment
to corporate governance, and in accordance
with the requirements of the Government
of Jamaica’s Revised Corporate Governance
Framework for Public Bodies (2012). This
exercise has produced valuable insights and
has resulted in an Action Plan of corrective
measures which the Of�ce is committed to
implement in 2018/2019. We are resolved to
make this survey an annual exercise.
Another of the key priorities identi�ed by the
Of�ce is to embed a strong risk assessment,
management and mitigation culture throughout
the organisation. During the period under
review, the Of�ce took steps to actively assess
and determine the organisation’s risk pro�le
relative to its risk appetite, and mandated the
management to implement plans and activities
that are appropriate and adequate to mitigate
all identi�ed sources of risk. As regards
the OUR’s �nances, we have continued the
initiative commenced last year to complete the
development of a Finance Manual to bolster
internal processes and controls. I expect that
the Finance Manual will be completed and the
policies contained therein fully implemented
during �scal year 2018/2019.
It is imperative that the OUR’s approach to
regulation remains consultative, facilitative,
current and forwarding looking. The Of�ce
therefore considers it part of its responsibility to
keep abreast of, and indeed insofar as possible,
to anticipate the major challenges requiring
regulatory and policy interventions across the
different sectors with a view to either taking
action or recommending measures to address
such challenges. In this regard, while we can
take some satisfaction in several achievements
in which the OUR has played a pivotal role in
the �scal year 2017/2018, I am also cognizant
that de�ciencies, challenges and opportunities
are still to be addressed.
In the electricity sector, I am convinced that
the seemingly intractable problem of losses
presents an opportunity for collaboration
across a broad spectrum of stakeholders in
the public and private spheres to diagnose,
plan and embark on both technical and social
interventions to arrest the unsustainable level
of losses that continue unabated, and which
place upward pressure on tariffs and a drag on
the competitiveness of the Jamaican economy
in general. In this regard, I continue to urge the
authorities to convene such a grouping with a
clear terms of reference to address the matter.
Elsewhere in the sector I expect the drive to
continue to increase renewable penetration
even while giving even greater focus to storage,
The Government’s decision to assign responsibility to the OUR for regulating the emerging natural gas sector is new and exciting, and a major vote of con�dence in the organisation.
15OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
distributive generation and grid modernisation.
The latter especially with a view to leveraging
all the bene�ts of smart technology to improve
demand side management, customer choices,
losses management and automation.
As with the electricity sector, the losses in the
water sector experienced by the National Water
Commission are also at unsustainable levels.
Here again I expect continued focused attention
on the management of this problem. It is hoped
that the NWC’s current initiatives to address
this problem through network upgrades, use of
technology and private sector collaboration will
yield fruit. I am also pleased to see the continued
interest in developing private sector-led projects
in the water and sewerage sector to address the
demand and coverage gaps. In this context the
lack of adequate policy, strategy and legislation
for this sector, which has resulted in the absence
of a framework for its development, continues
to be a source of disappointment for the OUR,
as it is dif�cult and more expensive to attract
private sector investments in the absence of
such a framework. I urge policy makers to
address this de�ciency without further delay.
The Government’s decision to assign
responsibility to the OUR for regulating the
emerging natural gas sector is new and
exciting, and a major vote of con�dence in
the organisation. The assumption of this
responsibility will have far-reaching implications
for the organisation, its structure, required
competencies, and work programme.
Turning to the telecommunication sector, I am
concerned that the momentum of dynamic
development may be slowed by lack of
investments in new technologies that will foster
innovation and increased productivity. At the
same time, the challenges and opportunities
posed by the Internet of Things (IOT), Arti�cial
Intelligence, Big Data Analytics and Block
Chain Technology can only be met by a re-
thinking of policies and incentives, both on the
demand and supply side of services. The OUR
is committed to undertake such interventions
as are within its gift to increase and sustain
competitive dynamics. At the same time, we
would urge the government to ensure that its
policy interventions and allocation of scarce
resources such as spectrum and licences serve
to increase investments and competition within
the sector.
I take this opportunity to commend the
management and staff of the organisation for
the efforts expended and results achieved in
2017/2018, and urge the continued pursuit of
excellence in 2018/2019. I also wish to record
my appreciation of the commitment and focus
displayed by my fellow Of�ce Members. It has
been another gruelling year, but we remain
deeply committed to our mandate and the
accomplishment of those tasks that lie ahead.
Once again we ask our stakeholders to join
and engage with us fully as we take on the
challenges and promises of 2018/2019, and
continue the OUR’s mission of contributing to
nation building.
I take this opportunity to commend the management and sta� of the organisation for the e�orts expended and results achieved in 2017/2018, and urge the continued pursuit of excellence in 2018/2019.
Joseph M. Matalon
Chairman
16OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Ensuring that they hew steadfastly to the principles and practices of
transparency and accountability are among the means by which non-elected
or non-majoritarian of� cials and institutions such as the OUR maintain their
legitimacy with the general public. Absent this, there is democratic de� cit. In
this regard, the production of the OUR’s Annual Report is not just a ful� llment
of a statutory obligation but represents for us a means by which we account to
our stakeholders on our stewardship each year.
I am happy to af� rm that the OUR remains cognizant of the implicit assumption
in its establishment that effective regulation will make a positive contribution
to Jamaica’s national development and economic transformation. We therefore
continue to emphasize the following as among our key objectives:
• Driving improved levels of ef� ciency in the utility sectors to facilitate
lowering of costs, improved service delivery, expanded access and improving
Jamaica’s overall economic competitiveness;
• Modernising Jamaica’s utility infrastructure keeping pace with technological
and other developments;
• Ensuring reliability and sustainability of utilities;
• Functioning as a central repository of readily accessible information to
inform all utility related decisions and stakeholders; and
• Providing informed analyses and policy advice.
DIRECTOR GENERAL'S
REPORT
Ansord E. Hewitt
17OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
During the review period there were signi� cant
and notable achievements in all of the regulated
sectors and the OUR continues to build on a
body of work of which it can be justly proud.
I have recounted some of these below and
there are additional details in the body of the
report. Even so, there are projects and activities
on our calendar running behind schedule. We
will redouble our efforts in 2018/2019 to get
these on track as I remain � rmly committed to
continuing to expedite our turnaround time on
projects and activities.
2017/2018 REVIEW
CONSUMER AND PUBLIC AFFAIRS
Improving responsiveness to Customers’ Complaints
Our Consumer and Public Affairs (CPA)
department pursued robust public education
outreach and complaints and appeals handling
programmes. Notably, the Consumer Affairs
Unit (CAU) handled over three thousand eight
hundred contacts which it reported was just
one per cent less than the 2016/2017 total. It
indicated that the majority of these contacts
related to billing matters (48%) and service
interruptions (18%).
I am pleased to observe that the department
has sought to re� ne its responsiveness to
trends in consumer complaints and issues.
This was particularly evident in the initiative
taken to get NWC to cease the application of
the Late Payment Fee (LPF) and address the
concerns regarding issuance of multiple bills
in a single billing period. A similar approach
was manifested with regard to one of the
telecommunication companies’ attempt to
impose a Pre-paid Maintenance Fee without
what the OUR deemed, the appropriate notice.
The unit is also leading the charge in addressing
concerns expressed by Persons With Disabilities
(PWDs) that they are adversely affected by
payment requirements and other service
providers’ policies. Cognizance of these issues
arose from review of complaints patterns and
engagement with representational groupings. I
have directed that the matter be given focused
attention and I am pleased to report that the
engagement with representative organisations
has proven enlightening and instructive so far.
A formal Mystery Shopping survey and the
inaugural customer service forum were two
commendable additions to the department's
activities. These are representative of the
OUR’s efforts to not only be innovative and
pre-emptive in its approach, but also to
ensure that it delivers tangible bene� ts to
stakeholders. Signi� cantly the � ndings of the
Mystery Shopping survey revealed a 30% gap
in customer service satisfaction. We expect and
will monitor to see the extent to which the
utilities take these � ndings into account going
forward and what regulatory interventions may
be necessary.
The OUR held its Staff Retreat on 2017 August 18 at Mystic Mountain in Ocho Rios, St. Ann.
OUR staff members listen keenly to a Quality Management Systems (QMS) presentation at the Staff Retreat on 2017 August 18.
18OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
For the review year, whether by way of direct
intervention or from the presence of the
Guaranteed Standards, consumers were able to
bene� t to the tune of over one hundred and
forty-four million dollars ($144 million) in credit
during the year.
Public Affairs
This year marked the denouement of our Parish
Connection series, a road show in collaboration
with the utilities providers that took us to rural
and under-served parishes to establish or re-
establish continuing consumer and stakeholder
dialogue for a two way � ow of information
to the OUR. It allowed the utilities to share
information on projects and development with
consumers on a planned and consistent basis.
The providers made strategic use of the series
of events which redounded to the consumers’
bene� t especially in terms of immediate contact.
By way of example, the telecommunications
companies, used the fora to educate users
about the safe and responsible usage of their
mobile phones and other products and services.
The companies reported as well that they
have developed more direct relationships with
customers who live in remote areas. The fora
also provided opportunities to highlight and
address the adverse effect on communities
of vandalism and theft of equipment and
trespasses on the networks and properties of
the utilities.
There was intense public education outreach
activity leading up to the introduction of ten
digit dialling and the additional area code ‘658’.
Designing consistent and centralised messages
and a focussed outreach and communications
programme was effected working in
collaboration with the service providers, the
Consumer Advisory Committee on Utilities
(CACU) and the Consumer Affairs Commission,
through the OUR-constituted Consumer
Awareness Taskforce.
Social media continues to be a viable and
increasingly important communication channel
through which we reach consumers and
stakeholders and we have included webinars
as another medium through which we reach
stakeholders and solicit feedback.
Director General Ansord E. Hewitt (right) participates in the ground-breaking for the construction of the JPS 24.5 megawatt energy-storage facility at its Hunts Bay power plant on 2018 March 2. The project is to be undertaken by Micro Grids and Distributed General for North America, ABB, and is scheduled for completion by April 2019, at a cost of US$21.6 million. When completed it is expected to be the largest hybrid storage system in the world. Pictured with him: (L-R) are Seiji Kawamura (Chairman of JPS), Steven Looney (Vice-President & General Manager, Micro Grids and Distributed Generation for North America ABB), Dr. the Hon. Andrew Wheatley (Minister of Science, Energy and Technology), and Emanuel DaRosa (CEO – JPS).
19OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
TELECOMMUNICATIONS SECTOR
The telecommunications sector, as always, had
its fair share of developments with a number of
projects brought to completion.
ICT Survey Findings
One of the two major ICT surveys on which
we reported last year was completed during
the year. The survey, funded jointly by the OUR
and the Universal Service Fund and undertaken
by STATIN and the Mona School of Business,
apart from providing data that the OUR will use
to ful�l its International Telecommunications
Union’s information requirements, also provides
us with information on penetration, usage,
affordability, etc. within the ICT market. This
information will be useful to inform policy
recommendations and regulatory interventions.
Resulting from this survey a paper is being
prepared to provide recommendations on likely
barriers to broadband usage. The other survey,
to assess the extent of market competition, is
still in the information gathering phase and
has unfortunately been bedevilled by delays
particularly resulting from slow responses to
data requests and defects with the information
eventually supplied.
Additional Area Code and Ten Digit Dialling
The OUR projects that within another few
years, Jamaica will have exhausted numbers
under the current ‘876’ area code. To ensure
that we can meet the demand for numbers,
we have received another area code, ‘658’.
The most immediate impact on the consumer,
will be the introduction of 10-digit dialling, in
2018 May 31. With this new development,
Jamaica will be the only English-speaking
country in the Caribbean with two area codes
and 10-digit dialling. As reported elsewhere,
the OUR undertook signi�cant public education
and public consultation on this development to
assure a smooth transition.
Quality of Service Rules
Unfortunately the recommended quality of
service rules for the ICT sector did not complete
the Of�ce of the Parliamentary Counsel’s
drafting process before the end of the year. We
are optimistic that they will come into effect in
2018/2019.
Fixed Cost Termination Charges
We were able to issue a determination notice
which saw a lowering of the cost for terminating
calls on �xed networks during the year, albeit,
only after extended litigation. This follows a
determination on mobile termination charges
some years ago. Notably, one of the projects
on the Of�ce work plan for the 2018/2019 and
going into 2019/2020 is a further review of
mobile termination charges.
Development of Infrastructure-Sharing Rules
Work on the long standing project to develop
infrastructure sharing rules, another step
towards increasing the potential and prospect
for competition in the sector and reducing
duplication of scarce resources, was completed
during the year. The draft rules were sent to the
Ministry responsible for telecommunications
which will submit them to the Of�ce of the
Parliamentary Counsel for completion and
promulgation.
In addition to these highlighted activities,
the OUR also continued work on other ICT
related matters including: developing rules to
address unfair contract terms and to provide
for pecuniary penalties for breaches of the
Telecommunications Act, drafting policy
recommendations to aid the convergence of
emergency services on one coherent platform,
to make provisions for equality of access to ICT
services for PWDs and educating stakeholders
on the critical importance of timely collection,
proper treatment and reporting of ICT data.
We have also taken note of, and have begun
to take steps to address a number of emerging
issues, notably:
Improving Transparency in the Billing of Telecommunications Services
There was an increase in inquiries and complaints from customers about billing
20OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
issues. The complaints were primarily about mobile credit/plan depletion in general, and in particular, overcharges relating to data usage. As part of its response the OUR is exploring regulatory initiatives to allow users to better understand the implications of roaming and data usage, helping them to manage their usage of mobile services and reduce bill shock which occurs when a consumer receives a higher than expected bill or sees their prepaid credit deplete faster than expected.
We also propose to assess the procedures being followed by service providers for metering and billing and the incidence of unexpectedly high/incorrect bills as well as how roaming calls are
billed, to prevent ‘bill shock’. So we will be:
• Raising consumer awareness about using mobile phones; and
• Providing greater consumer protection through the requirement for more transparent charging.
It is encouraging, that at least one mobile company reported that it has put in place measures, which resulted in a drastic reduction in the number of complaints received regarding call credit depletion.
Assessment of the Transition from Legacy Networks to IP Based Networks
The transition from legacy networks to IP
based networks, which has already begun, can
have a profound impact on consumers and
businesses. Although some consumers and
businesses will voluntarily choose to migrate
to new services, others may be forced to
migrate to new technologies so that traditional
network resources (such as copper networks
and switches) may be de-commissioned. The
migration also has technical and economic
implications for the regulation of the sector.
We intend, in the course of �scal 2018/2019
to give attention to some of the legal, policy,
and technical issues which are likely to arise
from the transition and implement the requisite
mechanisms to ensure that the public interest
is preserved.
ELECTRICITY
The electricity sector is on par with the ICT sector in terms of the speed of change and the diversity of issues. Lique�ed natural gas, renewable energy, energy storage, distributive generation, smart meters, smart street lights and smart grid, are local buzz words. Indeed, the sector is in the maelstrom of disruptive technology. During 2018/2019 the OUR continued to be at the forefront of these developments.
New natural gas generating plants
During the year, the OUR played a pivotal role in reviewing the technical and commercial proposals for the development of the South Jamaica Power Company’s 190 MW and the Jamalco 94 MW cogeneration plants, both of which are now at different stages of construction.
Inaugural Natural Gas Conference
Last October Jamaica hosted its inaugural Natural Gas Conference. This was a collaborative effort between in the OUR and the Petroleum Corporation of Jamaica. Although the well-attended conference was positioned primarily as a public education initiative, it also proved to be a valuable opportunity for stakeholders to weigh in on what a policy and regulatory framework might look like for a nascent gas sector. We are grateful to our stakeholders and our partners, for the �nancial and other support which made the conference a resounding
success.
Energy Storage
Jamaica’s forays into renewables are generating
a buzz around the globe. Over 80 MW was
added to the grid in 2016, and the lowest
tender price for a Jamaican solar project, for
which ground was broken in 2017, are among
the indicators of our success. As anticipated,
and as is being demonstrated, along with the
tremendous bene�ts offered by renewable
energy plants, there is also the problem of
intermittency which poses signi�cant grid
stability challenges.
It is therefore noteworthy that during the
course of the year, the OUR gave its non-
objection for the Grid Operator to proceed with
the installation of a 23.5 MW hybrid storage
project, the largest such hybrid storage facility
in the world, to correct the variability impacts
of existing renewable plants, and to facilitate
21OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
more renewable projects in the system. The
groundbreaking for this project took place in
early 2018, and we expect the project to come
on line by the second quarter of 2019.
I wish to underscore that the OUR’s facilitation
of this project is another demonstration of its
commitment to provide feasible and economic
solutions to bene�t consumers, while ensuring
the security and reliability of the nation’s energy
supply.
Jamaica Private Power Company PPA Renewal
Since 1993, the Government of Jamaica has
adopted the Independent Power Producer
model for the expansion of the electricity
sector generating system. The Power Purchase
Agreement (PPA) signed between the Jamaica
Private Power Company (JPPC) and JPS for the
sale and purchase of net energy output and the
dependable capacity for 20 years from the 60
MW Complex, represented one of these �rst
moves.
That this policy has come of age, is demonstrated
by the fact that in 2017, the OUR approved the
renewal of the JPPC PPA for a period starting
from 2018 January 7 to 2024 December 31.
This was done at a tariff level that will facilitate:
continuing operation of the plant over the
renewal period, reduction in direct costs to
consumers of J$250 million, and affording the
opportunity for JPPC’s shareholders to earn a
fair return over the period. I submit that the
culmination of the JPPC’s PPA renewal not only
demonstrates the maturity of the PPA process
in Jamaica but also the successful integration
of independent power in the electricity system.
This marks a milestone in the history of the
electricity sector.
Other matters addressed in the sector include
the promulgation of a new meter testing
protocol which incidentally now extends
to cover meters in the water and sewerage
sector; completion of the audit of the Electricity
Ef�ciency Improvement Fund (EEIF), one of
the results of which is the identi�cation up to
2017 of some US$17 million in tax bene�ts
to be returned to electricity customers; and
preparatory and vital lead up work to the 2019
Tariff review. The latter includes the conduct of
studies on return on equity, productivity and
demand forecasts.
WATER AND SEWERAGE
Although the level of activities in the water and
sewerage sector was low-keyed, progress was
made on a number of fronts. I remain cognisant
of the critical importance of the sector, the
challenges it poses and the opportunities for
ef�ciencies and the enhancement of both
producer and consumer welfare.
Activities of small private water providers
Tariff applications were processed and decisions
issued in response to applications from three
small private water and sewerage licensees
during the year - Can-Cara Development
Limited, which provides water to residents in
Meadows of Irwin in St. James, and western
Spanish Town in St. Catherine; Landmark
Developers Limited, which provides sewerage
service to customers in Three Hills St. Mary; and
Runaway Bay Water Company, for sale of bulk
water. The length of time taken to conclude
these reviews, the iterative information
gathering process and the results of consultation
within the service areas underscored the need
to establish a standardised process for handling
such applications.
Consequently, as previously indicated it is
intended to engage stakeholders in �scal
We continue to pursue a vigorous programme of training and knowledge transfer to ensure that the institution remains resilient, nimble and future ready.
22OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
2018/2019 by way of consultation regarding
the approach to tariff setting for this group of
providers. Notably, we took the opportunity
provided by these applications to secure greater
commitment to quality of service and reporting
standards.
K-Factor Fund
The long outstanding � nancial and operational
audit of the NWC’s use of the K-Factor Fund
was completed. The result of the audit was
most unsatisfactory and indicates an urgent
need to review and tighten the operations of this programme. This will be a major focus during the up-coming year. By the same token, I am also keen to see the results of ongoing efforts by NWC to arrest water losses under its most recent corporate area programme.
Up Coming NWC Tariff Review
The NWC is allowed to apply to the OUR for a reset of its tariffs and standards, every � ve years. The last approved tariff was for 2013-2018 which means that an application is due for submission in 2018. During the review period we begun discussion with NWC urging them to start working on the issues that are likely to be most problematic.
GENERAL ADMINISTRATION
With the support of the non-full-time members of the Of� ce I have embarked on a number of initiatives to strengthen the operational activities of the OUR and to continue to
enhance its capacity. In this regard, we continue to pursue a vigorous programme of training and knowledge transfer to ensure that the institution remains resilient, nimble and future ready. Indeed I have indicated to staff that the OUR will, seek to ‘recruit the best, do the best by those it employs and require the best from them’.
We also remain committed to maintaining and achieving greater levels of excellence in all spheres of our endeavours. In that regard I am also pleased to report that the OUR not only maintained International Organisation of Standards (ISO) 9001:2008 Quality Management System certi� cation through the annual surveillance audit in July 2017 but also successfully transitioned to the ISO 9001:2015 Quality Management System standard.
We are also exercising great diligence to ensure that the regulatory fees collected from entities are used to good effect and that there is proper accounting including ensuring that where there are surpluses in any year, it is appropriately used for relevant regulatory activity.
CONCLUSION
It is said that “Regulators do not predict the future, they enable it” and this quote succinctly captures the way I consider that the OUR ought to approach its responsibilities. So, even while we look back with some satisfaction at the achievements of 2017/2018 we must ensure that a large part of such re� ection is to
observe and draw from the lessons, experience and intuitional capacity gained with a view to meeting the challenges and expectations of 2018/2019 and beyond.
Once again I would like to express my profound gratitude to my colleague-members of the Of� ce, all very occupied persons in their own professional and business endeavors but who still manage to give unstintingly of their time, skills and intellects to enhance the OUR’s work. Equally, the staff has put in another year of intense work to move the work plan forward. I am eternally grateful to them and continue to relish the responsibility of leading an excellent team.
As always, the issues in the regulated sectors will continue to prove to be a mix of, the common, the disparate, the complex, and the novel. I am con� dent, however that the OUR, at the level of the Of� ce and the professional staff, with our rich history and institutional endowment, is well equipped to continue to discharge its mandate and contribute to Jamaica’s development. Our stakeholders can therefore continue to expect and demand the best from us. We will rise to the occasion every time.
Ansord E. Hewitt
Director General
23OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
SUMMARY OF ACHIEVEMENTS
Telecommunications Sector
Category FY April 2017 – March 2018 FY April 2016 – March 2017
Determination Notices • Cost Model for Fixed Termination Rates – The Decision on Rates
• Jamaican Common Short Code Scheme
• Number Portability Administration Fees, 2017
• Local toll-free numbering scheme
• Estimate of the Weighted Average Cost of Capital for Telecommunications Carriers
• Number Portability Administration Fees, 2016
Directives • Directive to Cable & Wireless Jamaica Limited to undertake remedial measures to mitigate service interruption issues, to comply with the Office of Utilities Regulation’s (OUR) requests for the submission of information and to respond to recommendations
• Directive to Columbus Communications Jamaica Limited to comply with the OUR's request for information to facilitate its assessment of competition in the supply of electronic communication services in Jamaica
• Directive to Cable & Wireless Jamaica Limited to comply with the OUR's request for Information to facilitate its assessment of competition in the supply of electronic communication services in Jamaica
• Directive to Digicel (Jamaica) Limited to comply with the OUR's request for information to facilitate its assessment of competition in the supply of electronic communication services in Jamaica
• Directive to Cable & Wireless Jamaica Limited (collectively trading as FLOW) to comply with the Office of Utilities Regulation’s (OUR) request for the submission of information on access to ‘lit fibre’ owned by Columbus Communications Jamaica Limited and Cable & Wireless Jamaica Limited.
• Directive to Cable & Wireless Jamaica Limited to comply with the OUR's request for the submission of information in relation to the consultancy "assessment of competition in the supply of electronic communication services”.
• Directive to Cable & Wireless Jamaica Limited to comply with the OUR’s request for the submission of information in relation to the telecommunications market information requirements
KEY: FY: Financial Year
24OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Telecommunications Sector
Category FY April 2017 – March 2018 FY April 2016 – March 2017
Quarterly Sector Reports • Telecommunications Market Information Report 2015 October – December
• Telecommunications Market Information Report 2016 January – March
• Telecommunications Market Information Report 2016 April – June
• Telecommunications Market Information Report 2016 July – September
• Telecommunications Market Information Report 2016 October – December
• Telecommunications Market Information Report 2017 January – March
• Telecommunications Market Information Report 2017 April - June
• Telecommunications Market Information Report 2017 July - September
• Telecommunications Market Information Report April - June 2015
• Telecommunications Market Information Report July – September 2015
Reconsiderations • Reconsideration of the Office’s Determination Notice: (2017/TEL/003/DET.001) “Cost Model for Fixed Termination Rates – The Decision on Rates – Public Version”
• None
25OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Telecommunications Sector
Category FY April 2017 – March 2018 FY April 2016 – March 2017
Responses • Infrastructure Sharing: OUR’s Comments on Responses to Notice of Proposed Rulemaking
• Quality of Service Standards and Consumer Protection Guidelines for the Telecommunications Sector: OUR’s Response to Comments on Notice of Proposed Rulemaking
• Resolution of Interconnection Disputes in the Telecommunications Sector: OUR’s Comments on Responses to Notice of Proposed Rulemaking
Approval Document • RIO 6 Approval• Approval of RIO 6 Revised Tariff
Schedule
• None
Addendum • Reconsideration of the Office’s Decision: Determination Notice “Cost Model for Fixed Termination Rates – The Decision on Rates” – Final Decision - Addendum 1
• Consultancy for the development of guidelines related to unfair contract terms and the assessment of customer contracts in the telecommunications sector
Consultation Document • None • Estimate of the Weighted Average Cost of Capital for Telecommunications Carriers
• Cost Model for Fixed Termination Rates – Draft Model
Recommendations • None • Transfer of Control of Operations of Columbus Communications Jamaica Limited et.al to Liberty Global plc
• General Consumer Code of Practice for the Telecommunications Industry
• Interim Cost for Access to Emergency Services
26OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Telecommunications Sector
Category FY April 2017 – March 2018 FY April 2016 – March 2017
Request for Proposals • None • Consultancy for the development of policy recommendations on enhanced access to emergency services in Jamaica
• Consultancy: For the Development of Guidelines Related to Unfair Contract Terms and the Assessment of Customer Contracts And For the Development of Pecuniary Penalty Regime for Offences against the Telecommunications Act and Regulations made under the Telecommunications Act
Notice of Proposed Rule Making • None • Infrastructure Sharing
Electricity Sector
Category FY April 2017 – March 2018 FY April 2016 – March 2017
Determination Notices • Jamaica Public Service Company Limited Annual Review 2017
• Jamaica Energy Partners Change in Law Claim
• Jamaica Public Service Company Limited Metering and Customer Information Systems Audit
• JPS's Grid-Scale Energy Storage Project: Business Case
• Jamaica Public Service Company Limited Annual Tariff Adjustment 2016
• Jamaica Public Service Company Limited Extraordinary Rate Review 2017
27OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Electricity Sector
Category FY April 2017 – March 2018 FY April 2016 – March 2017
Directives • None • Direction and information requirements to South Jamaica Power Company Limited in connection with its amended and restated power purchase agreement with the Jamaica Public Service Company Limited dated as of 2016 December 22
Public Notice • Net Billing Energy Prices (July, August, September & November)
• Net Billing Energy Prices (October & December)
• Net Billing Energy Prices (January) 2018
• Net Billing Energy Prices (February) 2018
• None
Report • To Investigate the Electricity System Total Shutdown on 2016 August 27 - Report of the Outage Review Team
• Report on Investigation of Jamaica Public Service Company Limited Major System Failure, Power System Islandwide and Widespread Outage 2016 April 17 at 6:59 p.m.
Technical Document • Jamaica Electricity Grid Book of Codes • None
Addendum • None • Addendum to Determination Notice - Wigton Windfarm Limited II Energy Payment Rate Determination
28OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Water and Sewerage SectorCategory FY April 2017 – March 2018 FY April 2016 – March 2017
Determination Notices • National Water Commission Annual Price Adjustment Mechanism and X-Factor Application
• Runaway Bay Water Company Limited (RBWC) - Bulk Water Rate to NWC
• Landmark Developers Limited Review of Rates 2017
• Can-Cara Development Limited: Water and Sewerage Rates
• Determination Notice - National Water Commission Mid- Tariff Review 2016
Directives • None • Directive to the National Water Commission to cease the application of the Late Payment Fee and the issuance of Multiple Bills in a Single Billing Cycle.
Request for Proposals • None • Consultancy Services for an Audit of the National Water Commission’s Billing and Metering System
Explanatory Document • None • Quality of Service Standards for the National Water Commission: Explanatory Document
Consultation Document • Proposal for Vulnerable Utility Customers to Opt-out of the Early Payment Incentive/Late Payment Fee programmes.
• None
Addendum • Directive to the National Water Commission to Cease the Application of the Late Payment Fee Aspect of the Payment Compliance Initiative and the Issuance of Multiple Bills in a Single Billing Cycle - Addendum
29OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
General RegulationCategory FY April 2017 – March 2018 FY April 2016 – March 2017
Notice of Proposed Rulemaking • Guidelines on the Resolution of Regulatory Disputes Between Licensees in Regulated Sectors
• None
Policy • Due Diligence Policy - Application for the Grant and Renewal of Licences.
• None
Rules • None • Meter Testing Administrative and Operational Protocol
Quarterly Performance Report • Quarterly Performance Report - 2017 January – March
• Quarterly Performance Report - 2017 April – June
• Quarterly Performance Report - 2017 October - December
• Quarterly Performance Report 2016 April – June
• Quarterly Performance Report - 2016 July – September
• Quarterly Performance Report - October to December 2016
30OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
THE EXECUTIVES
ANSORD E. HEWITTDirector General
MAURICE CHARVISDeputy Director General
HOPETON HERONDeputy Director General
SHANIQUE NUNESExecutive Assistant
DEPARTMENTALREPORTS
Consumer Affairs Offi cer, Shara Barnett (left), assists a consumer with registration at a Community Meeting at the OUR’s Parish Connections series in Trelawny on 2017 November 30.
31OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
DIANA CUMMINGSManager - Licensing & Regulatory Affairs
This department is responsible for the effective and ef� cient functioning of
the Of� ce, including its decision-making processes and its compliance with
internal and external procedures. The Secretary to the Of� ce, in consultation with
the Chairman and the Director General, sets the regulatory agenda and ensures
that matters before the Of� ce are dealt with expeditiously. The STTO is also
responsible for licence processing, the development of the Corporate Plan, and
the OUR’s external relations.
SECRETARY TO THE OFFICE (STTO)
AMBASSADOR PETER BLACK
Secretary to the Of� ce
CARLENE DUNBARLicensing Of� cer
THALIA MCPHERSONProject & Research Of� cer
32OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
CORPORATE BUSINESS PLAN
In accordance with the requirements of the Public Bodies Management and Accountability Act, the OUR’s Corporate Business Plan and budget were submitted to the Ministry of Finance and the Public Service as scheduled. The OUR endeavoured to complete activities within the timeframes outlined in the Plan. The achievements are highlighted in the various sector reports.
LICENCES
TELECOMMUNICATIONS SECTORThree service provider licences were issued in the telecommunications sector during the �scal year 2017/2018:
Company Licences Category Licences Codes New/Renewal
Telecomb Networks Limited Internet Service Provider ISP 1 (R)
S & B Communications Limited International Voice Services (Resale) IVSP 1 (R)
Internet Service Provider ISP 1 (R)
33OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
The Consumer and Public Affairs department has sought to ef� ciently administer
the consumer affairs regulatory function of the OUR and to effectively
monitor and evaluate the customer service performance of all regulated utilities.
In these capacities, the department develops and implements all approved public
education activities for the OUR, serves as the primary point of contact for the
general public, develops strategies and procedures for complaint resolution,
spearheads all mass public consultations and manages the public image of the
OUR.
CONSUMER AND PUBLIC AFFAIRS (CPA)
YVONNE NICHOLSONDirector, Consumer & Public Affairs
ELIZABETH BENNETT-MARSHPublic Education Specialist
COLLETTE GOODESpecialist, Consumer Affairs (Policy)
NAOMI WATKINSCoordinator, Consumer Affairs (Operations)
34OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
The period under review 2017, April 1 – 2018, March 31 saw the department sharpen its foci on our responsiveness to trends in consumer complaints. This has meant an increase in the number of Of�ce decisions/determinations redounding to the direct bene�t of consumers. Through the efforts of the Consumer Affairs Unit (CAU) and the compensatory mechanism of the Guaranteed Standards, some $144 million was credited to consumers. The department also continued the OUR’s engagement with consumers across Jamaica through our successful Parish Connection Series as well as our Stakeholder Engagement events to ramp up consumer awareness about ten-digit dialling and other regulatory initiatives.
CONSUMER AFFAIRS HIGHLIGHTS
Directives Issued to the National Water Commission (NWC)
The department was instrumental in effecting OUR Directives on 2017 March 31 for the NWC to cease the application of the Late Payment Fee (LPF) and desist from issuing multiple bills in a single billing period.
Allegations came to the OUR’s attention during the year that NWC had collected more than the $20 million monthly to which it was not entitled through late payment fees. NWC subsequently con�rmed that it was aware of the matter and that the issue/s which led to the
erroneous application of the fee were resolved. Nonetheless the OUR only approved resumption of the application of the LPF, effective 2017 July 1 after it was satis�ed of resolution and effective redress to customers.
The matter of the issuance of more than one bill in a single billing cycle was also addressed with the OUR directing that this should only be done on the basis of speci�c request for its approval.
Intervention in Digicel’s Decision to Implement a Prepaid Maintenance Fee
The department also led the OUR’s intervention when Digicel sought to impose a Prepaid Maintenance Fee (PMF) to its customers with a monthly spend of under J$50. The OUR’s primary basis for intervention was the apparent failure of Digicel to provide adequate noti�cation to its customers prior to the implementation of the PMF. In the end, Digicel did not proceed with the implementation of the PMF and provided rebates to all customers’ accounts to which the PMF had been applied.
Vulnerable customers (Persons with Disabilities and Pensioners) and the Early Payment Initiative/Late Payment Fee programme of the JPS and NWC
The department took the lead to open up a discussion with JPS and NWC about the imposition of the Late Payment Fee (LPF) aspect of the Early Payment Incentive/Late Payment
Fee (EPI/LPF) programme. This followed on our receipt of complaints from customers who disagreed with the programme on the basis that they felt that it was unfair, unreasonable and only served to bene�t the service providers. In its review of the complaints, the CAU recognized that vulnerable customers may be more signi�cantly impacted by the LPF aspect of the programme as it imposes an additional monthly charge that was not consumption-based. It was decided to consult with both service providers to explore the possibility of providing vulnerable customers with the choice to opt out of the EPI/LPF programme. By so doing, these vulnerable customers would not receive the EPI for early payment nor be charged the LPF. Consultation on this commenced towards the end of the �scal year.
Main Customer ConcernsAt 48% and 18% respectively, billing matters and service interruption continued to be the main reason persons contact the OUR. The nature of the billing contacts included: customers’ dispute of billed charges to their accounts, high consumption charges and concerns relating to estimated and retroactive billing. At 3% of total contacts, alleged breaches of the Guaranteed Standards, disconnection and equipment damage accounted for the next highest reasons for customer contact.
Consumer Appeals and ResolutionsThe CAU received three thousand eight hundred and seventy-six (3,876) contacts, one per cent less than the previous year. (Table 1).
35OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
36OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Of these contacts 49 (or 1%) were accepted for investigation under the Appeals Process, 618 (or 16%) were resolved with the OUR’s immediate intervention while the remaining 3,209 (or 83%) were referred to respective service providers for resolution.
Of the forty-nine new appeals received, 26 related to services provided by the JPS, 22 were for the NWC while the remaining one related to private small water provider DEML. Twenty-eight (28) appeals remained unresolved (Table 2) up to 2017 March 31 and these had been carried forward from 2016/2017 to the new reporting period, bringing the number of appeals before the OUR for the year to seventy-seven (77). Fifty-six (56), representing 73%, of the 77 appeals that were investigated
during the period were resolved. This resolution rate is eleven percentage points lower than the previous year. Of those resolved, 7% were in favour of the customer and 80% were resolved in the utilities’ favour. The remaining 13% included: matters for which a compromise was reached, was mutually resolved or the appeals were withdrawn by the customer.
In relation to the established 65 working days to complete investigation of customers’ appeals, of the 77 appeals reviewed, 61% were completed within the timeline and 19% completed outside of the timeline. The remaining 20% is shared equally between open appeals that would not have or have exceeded the closure timeline.
Dr. Christine Hendricks (left), Executive Director of the Jamaica Council for Persons with Disabilities, exchanges words with Collette Goode (right), Specialist – Consumer Affairs (Policy) at the Director General’s Annual Stakeholder’s Engagement Session held at the Spanish Court Hotel on 2018 March 28. This year saw attendance of representatives of the disabled community.
Table 1: Annual Contacts Managed by Consumer Affairs Of� cers (2013 – 2018)
Service Providers 2017/2018 2016/ 2017 2015/2016 2014/2015 2013/2014
JPS 1,364 1,285 927 991 1,167
NWC 965 1,074 852 698 811
C&WJ (FLOW) 520 525 654 402* 253 *
Columbus Communications (FLOW) 485 439 225
Digicel 395 281 129 165 146
Others 147 314 121 101 100
Total 3,876 3,918 2,908 2,357 2,477*Only to LIME contacts.
37OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Table 2: Appeals (2013 – 2018)
2017-2018 2016-2017 2015-2016 2014-2015 2013-2014
Appeals from previous periods 28 88 122 122 183
Appeals received during the
reporting period 49 95 88 146 102
Total appeals for reporting
period 77 183 210 268 285
Appeals resolved during
reporting period 56 153 122 146 154
Appeals resolution rate for
reporting period 73% 84% 58% 54% 54%
Of the 49 new appeals received, 43 were due to be closed by the end of the review period; in keeping with the established appeals timeline. Of the 43 appeals, 81% were completed within the established timeline; 9% completed outside of the timeline; 8% open and not completed within the timeline.
Public Consultations for Small Water and/or Sewerage Providers
The department organized tariff consultations for applications received from Can Cara Development Ltd. (CDL) and Landmark Developers Ltd. (LDL). The application from CDL was for an increase in rates of approximately 27% for water and 15% for sewerage for its customers in St. Catherine and Montego Bay. The application from LDL was for rates to be determined for sewerage service provided to Liberty Estates in St. Mary. The main issues raised by customers at the meetings related to: poor management of lift stations; service interruptions; disconnection of sewer mains; repairs, replacements and road restoration and customer service practices.
Figure 1
38OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Beverley Green, Consumer Affairs Of� cer/ Project Manager for OUR’s Mystery Shopping Programme outlines the rationale behind the project on 2018 March 8 to utility providers as they gathered for the presentation of the � ndings of the research. The mystery shopping exercise was conducted across twenty (28) stores operated by JPS, NWC, FLOW and Digicel.
Kim Lee, Head of Department – Sponsorship, Retail and TV Marketing at FLOW, raises a point on the � ndings that were presented from the OUR Mystery Shopping Programme.
CDL and LDL were directed to develop and document processes and procedures for each of the issues raised. The providers were to submit all documents within six (6) months of their respective Determination Notices which took effect in 2018 February.
The OUR will monitor to ensure that both providers comply with the commitments they have documented.
Mystery Shopping Survey
Market Research Services Ltd. was commissioned to conduct a mystery shopping survey of the major regulated utility providers. The objectives were, inter alia to provide information on the in-store customer experience; ascertain the major areas of satisfaction and dissatisfaction with customer service and determine the level of satisfaction with the quality of customer service offered by the providers. The � ndings of the survey indicated that none of the utility service providers are delivering an above average in-store customer experience and that there was a 30% customer satisfaction gap.
Telecommunications provider FLOW topped the overall scores with 71%, with JPS following closely at 70%. Digicel and NWC attained 69% and 67% respectively.
Resulting from the � ndings of the survey, the OUR will consult with the service providers on implementing the following recommendations:• Conduct at least one training
exercise annually speci� c to customer service delivery. Additionally, service providers will be asked to provide updates on customer service training activities undertaken or to be conducted at quarterly meetings;
• Develop/review internal performance standards for measuring customer service delivery; and,
• Make their Terms and Conditions of Service readily accessible to customers via various channels.
Credits & Compensation
Utility companies paid out over one hundred and forty-four million dollars ($144 million) to consumers, either resulting from direct OUR’s intervention or as compensation for breaches of the Guaranteed Standards. With respect to the Guaranteed Standards, JPS committed a total of 68,930 breaches which attracted potential compensation of approximately $140.1 million which was all paid out through automatic compensation. The NWC committed a total of 2,341 breaches which attracted potential compensation of approximately $7.5 million. Actual payments amounted to approximately $3.72 million, representing 50% of total
39OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
JODIAN COULTMANConsumer Affairs Of� cer
BEVERLEY GREENConsumer Affairs Of� cer
Public Education Specialist, Elizabeth Bennett Marsh, poses with students from the St. Andrew High School for Girls who attended the Kingston Schools’ Connections on 2018 February 21.
potential amounts. The 50% not paid out re� ects the fact that the required claim forms were not submitted. Just over one million dollars was secured for utility customers resulting from investigations of customers’ appeals. Of the sum secured, NWC accounted for 61% while the JPS accounted for 37%. The remaining 2% was shared equally between Digicel and C&WJ-FLOW.
PUBLIC AFFAIRS HIGHLIGHTS
Public affairs activities were centred around outreach engagements, public education on Jamaica’s new area code and the introduction of 10-digit dialling come 2018 May 31, and ensuring timely responses to queries from the media and utility customers. The public was also kept abreast of the work of the OUR
through regular news releases; weekly radio programmes, website, and social media pages.
Parish Connections
The OUR concluded its Parish Connections outreach series in 2018 February, with events in St. James, St. Ann, Trelawny and Kingston & St. Andrew. Started in 2015 March, the series aimed to facilitate an interactive communications channel and to re-establish continuing utility consumer and stakeholder dialogue for a two way � ow of information between utility customers and the OUR. It also allowed utility companies to share information on projects and development of issues with consumers on a planned and consistent basis. Activities undertaken include community meetings, student engagements, and expos. An innovative feature of the programme was
that the Consumer Affairs Commission (CAC) and the major utility providers joined with the OUR to make presentations to students, residents and business interests in various communities, and to � eld questions, as part of the engagement process. Thousands of consumers have been reached as the OUR engaged utility customers about their rights and responsibilities, providing guidance and advice and addressing concerns about their service.
The feedback from customers at these events has been invaluable to the utility companies as the face-to-face interaction allowed them to hear � rst-hand customer concerns. The service providers have indicated that the series was good for customer education – with the objective voice of the OUR helping customers to appreciate their responsibilities as well as those of the utility companies.
40OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
OUR staff members are always happy to share memorabilia with consumers when they travel on the road. Above Liana Haffenden (Administrative Assistant) as she hands a gift to a consumer in Trelawny in December 2017.
Ilsa DuVerney, Founder/ CEO of Caribbean Centre for Organisation Development Excellence Limited (CARI-CODE), conducts a workshop at OUR’s inaugural Symposium on Utilities Customer Service and Quality of Service Improvement (QoS) held 2017 October 31 at the Jamaica Pegasus Hotel.
Members of the audience at the Jamaica Natural Gas Conference held 2017 October 4-6 in Kingston at the Jamaica Pegasus Hotel.
One telecommunications company reported that especially in rural parishes, they were able to provide better signal strength and service reliability to new and emerging communities based on feedback and recommendations from customers who offered more reliable information as to population density and growing demand for data over voice services. They also reported that they developed more direct relationships with customers who lived in remote areas where there is frequent vandalism and theft of equipment at cell sites.
Quality of Service Symposium
Customer service issues and the management of appeals are among the signi�cant tasks of the OUR. During the year OUR hosted a Quality of Service Symposium with all the major, as well
as some small utility providers, the �rst such activity.
One of the main objectives of the symposium was to assist with the improvement in the quality of customer service and get inputs for the development of a Codes of Practice for complaints handling and customer service. The event was well supported by representatives of the major and small utility companies who manage customer service portfolios.
Natural Gas Conference
The department was involved in the planning and execution of Jamaica’s �rst ever Natural Gas Conference 2017 October 4-6 organized with the Petroleum Corporation of Jamaica (PCJ). The inaugural conference was well attended by
local and overseas companies who were keen to learn about business opportunities available in the gas industry in Jamaica. There were also a wide range of presentations and discussions surrounding the development of the natural gas sector. The conference culminated with a tour of the Bogue power plant and the New Fortress storage and regasi�cation sites in Montego Bay, St. James.
Area Code and 10-Digit Dialling
In order to ensure a smooth transition to ten digit dialling and the adoption of the new area code, ‘658’, a Consumer and Awareness Taskforce (CATF), chaired by Director, CPA and including telecommunications operators as well as CAC and the Consumer Advisory Committee on Utilities (CACU), was formed. The CATF
41OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Figure 4
Figure 3
Figure 2©
actively embarked on media and outreach events involving the business community in Kingston, St. James, and Manchester, as well as with representatives of Government Ministries and agencies. The OUR worked with the two major telecommunications companies to ensure that their customers are fully apprised of the changes to expect and be prepared to offer assistance to ensure a smooth transition.
Social Media
As the OUR continued to increase its reach via social media, we added an Instagram account enabling us to provide updates to stakeholders on this platform as well as Facebook, Twitter, and LinkedIn. Facebook and Twitter however remains the most popular social media by which stakeholders engage the OUR.
Statistics obtained from the OUR’s page for the 2017 April 1 – 2018 March 31 period revealed that the monthly average reach was 22,913. Our reach peaked at over 111,000 in 2017 August.
The OUR’s Twitter page attained 20,462 monthly average viewership, peaking at over 21,000 in 2017 August. Twitter followers increased by 30.3%.
The OUR’s LinkedIn account continues to register a steady increase in the number of connections, increasing by 56% between 2017 April 1 and 2018 March 31.
Online Consumer Report
The OUR continues to update stakeholders on its latest projects and decisions, through its bi-monthly electronic newsletter, the Online Consumer Report (OCR). The OCR is distributed via email to customers in the OUR’s public education database.
Mass Media
The OUR continues to have a regular presence in the media to keep stakeholders updated on its work with the main channel used being radio. The weekly � ve-minute feature Inside the OUR continues to be aired on RJR 94 FM and IRIE FM
OURIC (Of� ce of Utilities Regulation Information Centre)
OURIC is the only specialised library of its kind in the region, boasting a wide collection of materials pertaining to the utility sectors. It also contains historical and current materials produced by the OUR, including documents on its major decisions since its inception in 1997. In the upcoming year, OURIC will expand its Online Public Access Catalogue (OPAC) through which members of the public can view the available catalogue of materials. There will also be a renewed thrust to inform secondary and tertiary educational institutions about the OURIC catalogue and how these resources can assist in research for projects and theses.
42OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
GORDON BROWNCoordinator, Public Affairs
SHARA BARNETTConsumer Affairs Of� cer
JADE-ANNE JAMESConsumer Affairs Of� cer
OUTLOOK
The OUR will engage in other activities to further strengthen our efforts to protect the interest of consumers, namely: the completion of consultations towards ensuring equivalence for utility consumers within the disabled community and the establishment of standards for call centres for NWC and JPS. We will also continue our public education campaign on 10-digit dialling.
A live radio programme, ‘Call the OUR’, to be aired on RJR 94 FM’s Hotline programme will begin in 2018 April. This half-hour programme will facilitate interaction with the public, as members of the OUR’s Consumer Affairs Unit will � eld calls regarding services provided by the utility companies regulated by the OUR. We will re-design the OUR’s website, a vital
component in the regulator’s corporate communications and we will be hosting several meetings across the island as part of public consultation on the NWC Tariff Review application.
An anti-theft radio and print media campaign ‘Do The Right Thing’ will be launched in 2018 April to shed light on the growing problem of
theft, which has signi� cantly affected the water, electricity and telecommunications sectors in Jamaica.
We will be implementing measures to further strengthen our presence on social media amidst the growing use of these platforms by utility customers.
LIANA HAFFENDEN
Administrative Assistant
The department develops and implements all approved public education activities for the OUR, serves as the primary point of contact for the general public, develops strategies and procedures for complaint resolution, spearheads all mass public consultations and manages the public image of the OUR.
Regulatory issues addressed during 2017/2018 were wide ranging and
challenging across all sectors.
The principal activities for the electricity sector included:
• The extension of Jamaica Private Power Company’s (JPPC) Power Purchase
Agreement (PPA) which will see it selling electricity to the grid for another
seven (7) years;
• Approval for the installation of a 24.5MW Grid-Scale Energy Storage (ES)
facility by JPS;
REGULATION, POLICY, MONITORING AND
ENFORCEMENT (RPME)
CEDRIC WILSONDirector, RPME
EVONA CHANNERManager - Regulation & Policy: ICT
COURTNEY FRANCISManager - Engineering & Technical Analysis
PETER JOHNSONManager - Monitoring & Enforcement
WINSTON ROBOTHAMManager - Regulation & Policy: Electricity, Water
& Sewerage
43OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
• Approval of re-powering of JPS gas turbine
(GT11) plant;
• Updating and expansion of the Meter
testing administrative and operational
Protocol for the electricity and water sectors
in Jamaica;
• Audit of the Electricity Ef�ciency
Improvement Fund (EEIF);
• Monitoring the implementation of Smart
LED Streetlight Programme;
• JPS Annual Tariff Adjustment 2017; and
• Preparation for the 2019 rate review.
For the telecommunication sector, the major
initiatives included:
• Completion of ICT Usage and Adoption
Survey;
• Continued work on development of models
to determine economic cost of �xed and
mobile termination;
• Work in relation to the assessment of
competition in the supply of electronic
communication services;
• Advancing the work on the Development
of Unfair Contract Terms Guidelines and
a Pecuniary Penalty Regime under the
Telecommunications Act;
• Development of Infrastructure-Sharing
Rules;
• Examination of the equivalence in access
and choice for persons with disabilities;
• Development of common short codes;
• Area Code Relief planning and
implementation;
• Policy recommendations on enhanced
access to emergency services; and
• The hosting of an ICT Indicators Workshop.
Regulatory activities and initiatives in the water/
sewerage sector included:
• Review and issuing a decision on Runaway
Bay Water Company bulk water rate tariff
application;
• The issuance of Can-Cara Development
Limited Water and Sewerage Rate
Determination Notice;
• The completion of Landmark Developers
Limited �rst Tariff Determination Notice on
sewerage rates;
• Review of NWC’s J$24 billion bond-debt
re�nancing proposal;
• Review of NWC’s proposed Public Private
Partnership arrangement to fund the Rio
Cobre water treatment plant;
• Review and approval of the two private
water service providers and NWC’s Annual
Price Adjustment Mechanisms (ANPAM);
and
• Audits of the K-factor account.
44OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
SECTOR DETAILS
ELECTRICITY
Extension of JPPC Power Purchase Agreement (PPA)
On 1994 October 10 Jamaica Private Power
Company’s and JPS entered into a PPA for the
sale and purchase of net energy output and
the dependable capacity to JPS for twenty (20)
years (ending 2018 January) from a 60 MW
slow speed diesel power plant. The output
from this plant amounted to about 430 GWh of
electrical energy annually, approximately 10%
of total energy supplied to the JPS grid in 2016
and 7.5% of the system � rm net generating
capacity.
In keeping with the terms of its � rst PPA, JPPC
had indicated from 2012 February its intention
to seek an extension. On 2017 February 7,
they formally submitted their proposal entitled,
“PPA Extension Proposal, OUR Information
Requirement, February 2017”.The OUR
evaluated the proposal to determine the
feasibility of extension, the level of tariff and the
duration of the PPA. At the end of negotiations
the agreement was renewed on the OUR’s
approval for 2018 January 7 - 2024 December
31 based on lower tariff levels.
Approval for the Installation of 24.5 MW Grid-Scale Energy Storage (ES) facility
In 2017 April, JPS submitted to the OUR for its
review and non-objection, the JPS’ Grid-Scale
Energy Storage Project Business Case Proposal,
which sets out JPS’ intention to implement an
energy storage (ES) project.
The operability of the Jamaican electricity system
is more and more being affected by increased
penetration of intermittent generation,
decreasing levels of inertia, inadequacy of
ancillary service resources and other system
operating constraints. These issues and defects,
have in some instances had undesirable effects
including unscheduled supply interruptions
to customers. Changing demand and supply
patterns, response limitations of existing
generation facilities and projected increases in
variable renewable energy (VRE) generation,
(mainly wind and solar) in energy supply mix
going forward, will likely exacerbate the
situation if it is not urgently addressed. An
ES facility on the grid entails the deployment
of a fast responding, highly accurate energy
storage system that can react automatically
to frequency deviations and provide spinning
reserve support to the power system.
The OUR therefore welcomed JPS’ initiative.
JPS presented several proposals, but the ES
project proposal approved is designed around
a 24.5 MW grid-scale hybrid energy storage
system (HESS). This HESS con� guration is
comprised of a 21.5MW/16.6MWh Lithium Ion
(Li-ion) battery storage and 3MW of low-speed
� ywheels, to be installed at the JPS Hunts Bay
45OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
sub-station and interconnected to the system via
a 69kV/24kV, 25/33MVA step-up transformer.
Based on the proposal, the ES project should
deliver three crucial services to the system,
namely frequency regulation; spinning reserve
support, and low voltage ride through (LVRT)
capability. The project completion date was
set initially set for 2018 December but JPS
has sought and received an extension to 2019
March.
Approval for the Repowering of GT11
In 2017 February JPS alerted the OUR to the
fact that it was faced with an operational risk
having discovered a number of cracks on the
Old Harbour Unit 2 (OH#2) turbine rotor during
the last major overhaul in 2016. In its efforts
to manage the risk associated with a potential
failure of OH Unit #2, JPS proposed two options:
• Option A: To extend the life of the OH Unit
#2 by effecting repairs to the known defect
on the turbine; and
• Option B: To install bridge capacity of 40
MW to cover the projected generation
shortfall that may result from the forced
outage of OH Unit #2 until the planned
190 MW CCGT plant is commissioned.
Following a more detailed inspection in 2017
April, JPS revealed that the initial � ndings
regarding OH Unit #2 may have overstated the
extent of cracks. This implied a downgrading
of the potential operational risks. Subsequently,
JPS posited that the repair and return to service
of Bogue GT#11 (gas turbine unit located at
Bogue Power Station) was a superior approach
to the previous options proposed, since it would
be less expensive and would effectively address
the risk.
The Of� ce evaluated the Bogue GT#11
repowering option and concluded that, in the
context of the revised risk assessment, it was
indeed the better choice. The assessment was
based on the OUR’s simulations of the plant’s
behaviour within the framework of the overall
system network. The capital cost associated
would be approximately US$13.5M – US$14.7M
and the project had a planned completion date
of 2018 March.
Upgrade and Expansion of the Meter Testing Protocol for the Electricity and Water Sectors
As was the case in 2005 when the electricity
meter testing protocol for Jamaica was
formalized by the development of the
document– “The Meter Testing Administrative
and Operational Protocol for the Electricity
and Water Sectors in Jamaica”, the OUR in
collaboration with the Bureau of Standards
Jamaica (BSJ) through a consultative process
with stakeholders, updated expanded and
modernised the protocol. Initially, the scope
of the review of the Electricity Meter Testing
Protocol, 2005 was limited to electricity revenue
meters. However, during the process, the
decision was taken to incorporate provisions for
the administration and testing of water meters.
The OUR is empowered to, among other
things, take necessary measures to protect the
interest of consumers in relation to the supply
of a prescribed utility service. This contemplates
prescribing the measurement parameters and
the minimum standards of quality and accuracy,
and providing for the inspection and testing of
any equipment used in connection with the
prescribed utility services in Jamaica.
The new Meter Testing Protocol, 2017 was
developed in an open, transparent and
collaborative process incorporating international
best practices and prudent utility practice. It is
designed to create an appropriate and stable
framework for the veri� cation and testing of
existing and future utility revenue meters used
in the Jamaican electricity and water sectors. It
was published in the Jamaica Gazette on 2017
October 13 and became effective on 2017
October 17.
Audit of the Electricity Ef� ciency Improvement Fund (EEIF)
The EEIF approved in the OUR 2009-2014
Determination Notice and further approved for
continuation by the Of� ce in its 2014 – 2019
Determination Notice was set to undergo an
46OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
audit. The primary aim of the EEIF was to provide
a � nancial mechanism through which loss
reduction strategies may receive supplemental
� nancing to the capital expenditures directly
related to the implementation of the Advanced
Metering Infrastructure ("AMI") and other
approved loss reduction and revenue assurance
technologies.
In 2017 the OUR engaged Lummus International
Consultants Inc. to carry out the exercise which
was completed 2017 August 30.
The main � ndings were that:
a) The programme did not achieve its desired
effect of signi� cantly reducing non-technical
losses;
b) There were no clear measures of performance
established for the EEIF;
c) JPS was an early adopter of Residential AMI
technology and it encountered signi� cant
challenges with the equipment;
d) Residential AMI penetration was insuf� cient
to achieve the loss target set by JPS;
e) JPS had not credited back to the EEIF any tax
bene� ts or interest. Consequently at the end
of 2016 JPS owed the fund approximately
US$17.4M;
f) Fund was not ring-fenced to ensure the
achievement of its objectives; and
g) Opportunities for a joint OUR/JPS
collaboration were not fully utilized.
Given the � ndings of the audit the Of� ce took
the decision in the JPS Annual Review 2017 &
Extraordinary Rate Review Determination
Notice to terminate the EEIF. It was also
stipulated in the determination that JPS would
be required to repay its liabilities to the EEIF.
Smart LED Streetlight Programme
Arising from an agreement between the
government of Jamaica and JPS, and pursuant to
the Electricity Licence, 2016, JPS has embarked
on a Smart LED Streetlight Programme (SSP).
This programme will see the replacement of the
existing stock of primarily High Pressure Sodium
(HPS) and mercury vapour streetlights with
more energy ef� cient Light Emitting Diode (LED)
luminaires. In addition, the LED streetlights will
be based on a smart grid infrastructure designed
in line with international best practices and this
is expected to contribute to the modernisation
of the electricity grid. Expected bene� ts to be
derived from the Smart Streetlight Programme
include:
47OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
GARFIELD BRYANSenior Utility Analyst
SASHANA MILLER Senior Regulatory Analyst
MARSHA MINOTTSenior Utility Analyst
1New is in reference only to Rate 70 customers. These are being transferred from rate 40 and rate 50 classes and they are customers whose peak demand at a single location is at, or above, 2MVA. The 10% average reduction is the comparison of the rates they were paying in rate classes 40 and 50 to the rate they are now enjoying in rate class 70.
• A more affordable street light service that
will result in savings to the GOJ;
• Scope for further energy savings associated
with the � ne-tuning of the smart technology
that can facilitate the dimming of lights;
• A reliable streetlight service based on the
communication features of the smart
technology, and
• Scope for a control centre that facilitates
the effective monitoring and management
of the street light system.
The SSP was designed to see the roll-out and
replacement of 105,000 streetlights over 2017
– 2019/20. The programme is expected to cost
approximately US$38.9M. In 2017, 36,400 LED
streetlights were installed by JPS at a cost of
almost US$12.0M.
Consistent with a proposal from the Minister of
Energy, Science and Technology (MSET) and the
Electricity Licence, 2016, the OUR ruled in the
JPS Annual Review 2017 & Extraordinary
Rate Review Determination Notice that a
System Bene� t Fund (SBF) should be establish
to � nance the capital expenditure associated
with the SSP. Initially, the SBF is to be based
on an annual in� ow of US$5M over the period
2017/2018 and will be � nanced by way of JPS’
liability to the EEIF which was terminated by the
OUR in 2017 September. The OUR continues
to monitor the roll-out of the SSP to ensure its
ef� cient and timely implementation.
JPS Annual Tariff Adjustment: 2017-2018
In 2017 May JPS submitted its application to the
OUR for the annual review of Non-Fuel Based
Revenue, and a request for an extraordinary
rate review, in its document.
While the annual review application addressed
the elements captured in the performance-based
rate mechanism of tariff adjustment formula,
the extraordinary rate review component of the
application sought a J$973.4 million increase
in the company’s revenue requirement for the
recovery of returns on the Current Portion Of
Long Term Debt (CPLTD). JPS posited that the
changes in its licence which came into effect
in 2016 July paved the way for this recovery. In
its claim, JPS proposes the recovery of J$336.7
million in respect of unrecovered CPLTD returns
in 2016 and another J$636.7 million for 2017.
In response to JPS’ application, the Of� ce by
Determination Notice (2017/ELE/006DET.003)
issued on 2017, August 31 determined that:
a) J$336.7 million of the Extraordinary Review
claim pertaining to unrecovered CPLTD
returns in 2016 could not be accepted
because of the retrospective;
b) J$636.7 million in respect of the
Extraordinary Review claim pertaining to
the 2017 CPLTD was valid since it accords
with the forward-looking approach; and
c) The average tariff (inclusive of the 2017
CPLTD adjustment) would be reduced by
1.8%.
The average bill impact across all rate classes
were:
• Typical Rate 10 customer = -1.6% (Decrease)
• Typical Rate 20 customer = -1.6% (Decrease)
• Typical Rate 40 customer = 2.0% (Decrease)
• Typical Rate 50 customer = -2.0% (Decrease)
• Typical Rate 70 customer = -10.0% (Decrease)
- *New1
In addition to the adjustment to JPS’ non-fuel
tariff, the Of� ce determined that on the fuel
side the generating heat rate target was to be
lowered from 11, 620 kJ/kWh to 11, 450 kJ/
kWh. This change in the heat rate target calls
for greater ef� ciency on the part of JPS in its
generation of electricity.
2019 Rate Review Preparations
Unlike all previous rate reviews, the 2019
exercise will be based on a revenue cap rather
than a price cap methodology. This change in
48OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
the tariff methodology is one of the cardinal
features of the JPS Electricity Licence, 2016.
For both the regulator and the regulated,
therefore, the 2019 � ve (5) year rate review will
be uncharted territory.
In this context, the OUR embarked on activities
aimed at studying critical elements of the tariff
and building internal capacity. From 2018
October – 2018 February, the OUR with the
support of funds from the MSET/World Bank
and the CDB embarked on three (3) studies
intended to inform the 2019 rate review
process:
1. The Rate of Return (ROE) on Equity
2. The Demand Forecast Model
3. The Productivity target methodology
In addition, the OUR with sponsorship from
the CDB, USAID-CARCEP and the Canadian
High Commission hosted two (2) workshops
that covered topics such as the business plan
framework in the electricity sector, accounts
separation, distributed generation, electricity
vehicles and energy storage technologies.
The � rst was held in 2017 September and the
second, which had participants from across the
Caribbean, was held in 2018 February.
Electricity System Performance Indicators
JPS reported a customer base of six hundred and
forty thousand, � ve hundred and eighty nine
(640,589) including residential, commercial and
industrial consumers at the end of 2017. Of
this number 89.35% were said to be residential
customers.
The highest peak demand registered on the system during the year was 666.70 MW. Correspondingly, annual system net generation was 4,360.57 GWh, translating to an average annual system load factor of approximately 75%. Annual electricity sales recorded was 3,205.45 GWh, representing a growth rate of approximately 0.86%, when compared to 2016.
System energy losses computed on a 12-month running average basis up to the end of December 2017 accounted for approximately 26.45% of net system generation. According to JPS’ system loss spectrum, an estimated 8.6% is considered to be of a technical nature while the remainder is attributed to non-technical energy losses.
Similar to the performance recorded for 2016,
49OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
NAKESHA ALLENAnalyst - Telecommunications
FAY SAMUELSAnalyst - Telecommunications
GORDON SWABYTelecommunications Engineer
there has been signs of improvement in the annual system net generation for 2017. With a growth rate of approximately 2.22% over that which was recorded for 2016, this performance continues a trend beginning in 2014 for this indicator. Annual electricity sales performed credibly well in 2017 and the 12-month rolling average for system losses indicates a slight improvement over that which was recorded for 2016 (Table 1).
With regard to system ef� ciency, average system heat rate continued its downward trend in 2017, recording its minimum at 8,435 kJ/kWh and a year’s average of 9,089 kJ/kWh. Increased electricity energy from renewable plants, and a full year’s operation of the Bogue Combine Cycle (BCC) plant (which was recently recon� gured to operate on natural gas (NG)) are a few of the contributing factors that have in� uenced this performance.JPS’ thermal annual heat rate average also bene� ted from the performances of the BCC, with a reported average of 11, 331 kJ/kWh, re� ecting an improved performance compared to 2016.
As oil prices increased steadily in the global markets for 2017, we have observed its effects on the monthly Fuel & IPP charges billed to the electricity customers. Following a year which recorded the lowest monthly Fuel & IPP charge within the last decade, the 2017 average monthly Fuel & IPP charge of 14.28 US cents/kWh, represents an increase of more than 43% of the average recorded in 2016.
JPS’ customer base has a growth rate of 1.62% between 2017 January and December. A signi� cant portion of that increase was attributed the Rate 10 customer class.
As shown in Table 2 and Figure 1, the monthly system net generation and electricity sales experienced a slight variation over 2017 April to 2018 March with maximum energy production of 394,047 MWh recorded for 2017 July. Similarly, electricity sales replicated a similar behaviour, and therefore in 2017 July, 289,336 MWh was recorded as the highest electricity sales over the said period. This is a consistent trend over the year, where July usually records the highest level of electricity sales and net generation, and 2017, July’s net generation performance was the highest ever registered on the system.
Table 2: System Performance Indicators for the Period 2017 April – 2018 March
Mth-YrNet Gen (MWh)
Sales (MWh)
Peak JPS Customer
Count
Avg. SystemHeat Rate(kJ/kWh)
JPS Thermal Heat Rate (kJ/kWh)
Fuel & IPP Charge
(Usc/kWh)
Short-Run Avoided
Cost (USc/kWh)
Apr-17 354,797 260,880 641.3 633,876 8,907 11,081 12.83 8.19
May-17 368,875 271,185 644.4 635,499 8,750 11,134 13.09 8.01
Jun-17 369,169 271,494 656.1 636,496 8,435 11,227 13.08 7.80
Jul-17 394,047 289,336 665.9 637,592 9,175 11,475 12.69 8.51
Aug-17 388,263 285,192 654.6 638,408 9,380 12,109 14.13 9.40
Sep-17 372,823 274,330 666.7 639,947 9,569 11,628 15.17 9.47
Oct-17 370,159 273,022 660.3 640,855 8,959 11,281 14.88 9.26
Nov-17 353,501 260,032 634.5 641,963 9,110 11,191 16.12 9.66
Dec-17 359,975 264,754 635.8 642,946 9,008 11,360 16.34 10.24
Jan-18 354,119 259,666 617.6 643,481 8,945 11,208 15.98 9.45
Feb-18 317,473 233,259 609.6 644,969 8,979 11,472 17.63 10.12
Mar-18 357,673 262,893 626.4 646,803 9,280 11,079 14.70 10.83
JPS Customer Base as at 2017 December
RATE 10 RATE 20 RATE 40 RATE 50 RATE 60 RATE 70 OTHER TOTAL 572,337 65,799 1,814 139 475 23 2 640,589
Source: JPS’ annual Data Set
Table1: Annual System Performance Data 2009-2017
YearNo. of
Customers
Net Gen
(GWh)
Sales
(GWh)
Peak
Demand
(MW)
System
Losses
(%)
Avg. System
Heat Rate
(kJ/kWh)
Avg. Fuel &
IPP Charge
(US cents/
kWh)
2009 584,207 4,213.98 3,203.88 644.4 23.98 10,167 14.688
2010 570,830 4,137.35 3,187.49 638.3 22.95 10,183 17.814
2011 575,786 4,136.88 3,215.99 617.7 22.26 10,111 24.474
2012 595,977 4,135.92 3,133.97 635.8 24.22 9,965 25.040
2013 606,654 4,141.64 3,069.69 625.6 25.87 9,884 24.472
2014 594,196 4,112.13 3,016.12 624.6 26.65 9,624 22.742
2015 599,530 4,209.32 3,071.35 640.0 27.03 9,641 12.262
2016 628,966 4,343.81 3,177.96 655.8 26.84 9,567 9.937
2017 642,946 4,360.57 3,205.45 666.7 26.45 9,089 14.284
50OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
System peak demand for the 12-month period showed signi� cant improvements as well, recording the highest monthly peak demand of 666.7 MW, in the month of 2017 September. As indicated in Table 1 the annual system peak demand has signi� cantly grown over the last four years and 2017 performance signi� es the highest it has ever been. Notably, � gures in Table 2, indicates that four (4) of the other months, in the period, registered peak demand greater than 650 MWs.
Over the reporting period, the monthly system losses as a percentage of system net generation showed signs of stability following a similar trend to that which was observed for the last reporting period. As illustrated by Figure 2, there were no signi� cant variation, given that the monthly system losses over the period ranged between 26.24% and 26.67%.
As it relates to the system losses target, the effective losses target went down during the reported period as a result of JPS’ performance against the respective losses targets that were determined in the last annual tariff review. In accordance with the relevant provisions of the Electricity Licence 2016, system losses are now broken out into three categories:
a) Technical losses;
b) The aspect of non-technical losses that are within the control of JPS; and
c) The aspect of non-technical losses that are not totally within the control of JPS.
Table 3 presents JPS’ performance against the targets that were set in the last tariff annual determination.
System loss is no longer applicable as a fuel ef� ciency mechanism, but its application still has an impact on JPS’ annual revenue target. Exhibit 1 of the Electricity Licence 2016, determines how these targets are simulated against JPS’ performance as well as how such results are applied to JPS’ revenue target.
As shown in Figure 3, the system heat rate performed noticeably well over the reporting period (2017 April – 2018 March), averaging 9,041 kJ/kWh which represents a 3.05% reduction when compared to the previous period. JPS’ thermal heat rate, which forms part of the effective fuel rate adjustment mechanism, performed fairly well against the determined targets that were applicable during the reporting period. JPS’ thermal heat rate out-performed the targets nine (9) out of the twelve (12) months within the period. A major
Figure 1: Monthly System Net Generation, Sales and Peak Demand (2017 April – 2018 March)
Figure 2: Actual System Losses versus Target – 2017 April to 2018 March
Table 3: JPS’ Performance against the Respective Targets
System Losses: Actual and Target
Component Symbol2017-2018
Target Actual
Technical Losses (TL) Ya 8.00% 8.60%
JPS Non-technical Losses (Direct)- JNTL Yb 3.30% 6.63%
General Non-technical Losses (Partial) - GNTL Yc 9.70% 11.22%
Responsibility Factor RF 20% 20%
Figure 3: Heat Rate Performance - April 2016 to March 2017
51OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
force outage on one of the units at the BCC facility and a scheduled planned outage at the Rockfort station, were two of the major reasons JPS did not meet its targets during the reporting period.
The average JPS’ thermal heat rate was 11,354 kJ/kWh; this is 0.23% worse off, than the average performance reported for the previous period. Their overall performance however was quite encouraging, as they successfully performed under the determined heat rate target for majority of the period.
The OUR’s 2014-2019 JPS Tariff Determination Notice, determined that the heat rate ef� ciency mechanism captured in the fuel rate pass through mechanism, should only consider setting a target for JPS thermal units. According to the relevant sections, under Schedule 3 of the Electricity Licence 2016, JPS is entitled to an annual tariff review where targets and other relevant parameters are reassessed and further determined by the Of� ce. This normally takes place between May and September each year within a tariff period (2014-2019). As Table 4 depicts, 2017 April to 2017 August, the heat rate target was 11,620 kJ/kWh which was determined by the Of� ce in JPS 2016-2017 Annual Tariff Review Determination Notice.
The remaining months within this reporting period, illustrate a target of 11,450 kJ/kWh, as was determined by the Of� ce in JPS 2017-2018 Annual Tariff Review Determination Notice.
Fuel and IPP charge recorded a gradual increase from 2017 July. The movement in the monthly
Fuel & IPP charge is attributed to variations in monthly fuel prices and electricity sale volumes. However, the Fuel & IPP charge is largely in� uenced by the events in the international oil market, which dictate the movement of the world’s oil prices. Notably, the spike recorded for 2018 February was largely attributed to the fall off in electricity sales as well as the addition of some IPP surcharge.
Similar to the Fuel & IPP charge, the Short-Run Avoided Cost (SAC), the generation tariff used for billing the energy supplied to the grid by net billing customers also exhibited an increasing trend over the same period. The movement in the monthly SAC is attributed to variations in monthly fuel prices as well as Net Energy Output (NEO) from the participating facilities relative to the total system net generation. As with Fuel and IPP charges this is similarly affected by movements in global oil market.
Energy Supply Mix
Petroleum-based fuels were still the predominant input energy sources used in the production of electricity supplied to the grid in 2017. However, there has been encouraging signs that Jamaica’s energy mix is slowly becoming more diversi� ed. With the introduction of Natural Gas (NG) and increased renewable capacity, petroleum-based fuels’ contribution to the energy mix was limited to approximately 70%. NG accounted for approximately 19% while the remainder was primarily attributed to renewable energy resources.
Table 4: Monthly Heat Rate Performance over the Period
Month
Avg. System
Heat Rate
(kJ/kWh)
Avg. JPS Thermal
Heat Rate
(kJ/kWh)
Heat Rate
Target
(kJ/kWh)
Apr-17 8,907 11,081 11620
May-17 8,750 11,134 11620
Jun-17 8,435 11,227 11620
Jul-17 9,175 11,475 11620
Aug-17 9,380 12,109 11620
Sep-17 9,569 11,628 11450
Oct-17 8,959 11,281 11450
Nov-17 9,110 11,191 11450
Dec-17 9,008 11,360 11450
Jan-18 8,945 11,208 11450
Feb-18 8,979 11,472 11450
Mar-18 9,280 11,079 11450
Figure 4: The Movement in Fuel & IPP Charge and Short-Run Avoided Cost – 2017 April to 2018 March
52OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
The � rst full year of operation was observed for both the re-con� gured BCC plant and the 80.3 MW of renewables commissioned in 2016. Their impact was quite signi� cant, as seen in Figure 5. The annual net generation from renewable energy sources accounted for approximately 11.18% of annual system net generation. The greatest contribution came from wind, hydro and the newly constructed utility solar facility in the amount of 6.72%, 3.45% and 0.96% respectively. (Figure 5)
Table 5: Annual Net Generation by Fuel Type
Net Generation by Fuel Type - GWh
Year HFO ADO LNG Hydro WindSolar +
OtherTotal
2009 3,013.65 1,001.22 140.07 58.57 0.47 4,213.98
2010 2,963.72 968.75 151.15 53.73 0.00 4,137.35
2011 2,902.92 990.13 149.53 93.79 0.52 4,136.89
2012 2,934.52 942.40 148.45 109.71 0.84 4,135.92
2013 3,181.69 719.13 120.31 119.77 0.74 4,141.64
2014 3,001.69 854.12 133.30 121.57 1.44 4,112.13
2015 3,082.59 870.93 125.10 128.94 1.75 4,209.32
2016 3,232.49 639.83 131.19 114.93 211.14 *14.66 4,343.81
2017 2,960.57 90.44 820.47 150.39 292.98 43.88 4,359.12
*Content Solar, the country’s � rst utility scale solar facility started operation in 2016
Figure 5: 2017 System Net Generation Apportioned by Fuel Type
53OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
TELECOMMUNICATIONS SECTOR
ICT Usage and Adoption Survey
The OUR has the responsibility to collate the
of� cial statistics on the telecommunications
sector to, inter alia, inform government policy
and to provide international organisations such
as the International Telecommunications Union
with national ICT data. The OUR is therefore
required to undertake or commission periodic
surveys. In March 2016, the OUR commissioned
the Statistical Institute of Jamaica and the
University of the West Indies to conduct an ICT
Use and Adoption Survey for which � eldwork
commenced in late 2016. Perhaps somewhat
contrary to expectations, the results of the
survey concluded in late 2017 revealed that
affordability was not the top reason for non-
adoption and non-usage of the internet by
households and individuals.
The top three responses given by households
for not having internet access were:
1. “Do not need the internet”;
2. “Lack of con� dence, knowledge or skills to
use the internet”; and
3. “High cost of the internet service”.
In the case of non-use of the internet by
individuals, the top three responses for not
using the internet services were:
1. “I do not know how to use the internet”;
2. “I do not know how to use the computing
device to access the internet”; and
3. “Do not need the internet (not useful, not
interested)”
Cost Models for Termination Rates:
Pursuant to the Telecommunications Act, the
OUR also has responsibility to ensure that the
price levied for interconnection by dominant
carriers, with the exception of interconnection
charges for wholesale termination services, is
cost re� ective. This price should be set between
the total long run incremental cost of providing
the service and the stand alone cost of providing
the service. Further, interconnection charges for
wholesale termination services charges should
be calculated on the basis of a forward looking
long run incremental cost, where the relevant
increment is the wholesale termination service
and which includes only avoidable costs.
1. Fixed Termination Rates
During the 2016/2017 � scal year, a draft
� xed LRIC Model was developed and
consultations conducted with stakeholders.
On 2017 June 7, the OUR issued the
Determination Notice on Fixed Termination
Rates. According to the notice, the
termination rates determined by the model
would be subject to a two-step glide path
where the � rst reduction would take effect
as of 2017 July 1, and the second as of
2018 January 1. This resulted in a number
of appeals by C&WJ � rst for reconsideration
by the OUR, then to the Tribunal and
concurrently to the Supreme Court. These
are detailed elsewhere in this report under
litigation matters.
2. Update of the Cost Model for Mobile Termination Rate
The OUR began the process of updating the
cost model used for estimating the mobile
termination rate charged by operators.
The current model was completed in
2013 and had resulted in the setting of
a mobile termination rate of J$1.10. The
update process will be consultative with
stakeholder engagement occurring during
the consultancy. At the end of the review
period the OUR selected a consultant
from a competitive bidding process and
commenced negotiations with a view to
completing a signi� cant portion of the
update to the model in the 2018/2019
period.
Assessment of Competition in the Supply of Electronic Communication Services
During 2016/2017 the OUR embarked on a
complete assessment of the telecommunications
sector to determine if there has been any
change in the markets which were previously
de� ned and whether additional markets now
54OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
ANDREW LEWISEngineer
ANDRE LINDSAYEngineer
CURTIS ROBINSONSpecialist Consultant - Numbering & ICT Network
exist. The assessment also intended to indicate
which operators, if any, are to be classi� ed as
dominant in their respective markets. During
the review period, the OUR completed the data
collection portion of the project. Consultation
informed by the market assessment results are
scheduled to be conducted in 2018/2019.
Development of Unfair Contract Terms Guidelines and a Pecuniary Penalty Regime Under the Telecommunications Act
There have been concerns that some contract
terms for telecommunications facilities and
services may be skewed in favour of carriers
and service providers, and that they create
barriers that unfairly prevent consumers from
terminating services and switching operators,
such as in the case of excessive early termination
charges for retail contracts. The OUR therefore
believes that it is timely to review customer
contracts for telecommunications services and
facilities to ensure that they remain reasonable
and fair to both operators and consumers.
Such review is in keeping with the OUR’s
powers under the Telecommunications Act to
examine customer contracts and direct their
modi� cation where terms are deemed to be
unfair or unreasonable.
The OUR is also committed to taking action
to encourage and enforce compliance with
provisions of the Telecommunications Act, in
order to, among other things:
• Maintain and promote competition and
remedy market failure, and
• Protect the interests and safety of
consumers.
The Telecommunications Act provides the OUR
with several enforcement mechanisms. One
such mechanism is a � xed penalty process
by which the OUR may offer a person, who
it believes has committed an offence under
the Act, the opportunity to discharge its
liability through the payment of a pecuniary
penalty (� ne). Currently, the regime is not
fully established as the � xed penalty offences
and their associated � nes have not yet been
prescribed. The OUR therefore intends to
submit recommendations to the Ministry with
responsibility for telecommunications on this
after public consultation.
The consultancy to inform these initiatives have
been combined and a consultant was selected
during the 2016/2017 period to undertake
both. The consultant was engaged to, inter alia:
1) undertake a comprehensive assessment of
55OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
contracts used by telecommunications licensees
in the supply of facilities and speci� ed services
to determine whether there are any unfair
or unreasonable contract terms; 2) develop
guidelines that will assist the industry in
formulating service and facilities contracts that
are deemed fair and reasonable; 3) conduct
a general assessment and determination of
what terms and conditions are reasonable
for inclusion in customer contracts; and 4)
identify and recommend offences under the
Telecommunications Act that should be the
subject of the � xed penalty regime and their
associated � nes.
During the review period there were delays in
the data collection and consultation phases of
the projects. The project is therefore expected
to be concluded during the next � nancial year.
Development of Infrastructure-Sharing Rules
Section 29A of the Telecommunications Act
provides the Of� ce with the authority to
promulgate rules mandating infrastructure
sharing following consultation with the
responsible Minister. The rationale for such
rules is to avoid the duplication of investment.
It is the OUR’s view that the optimum
utilisation of resources can reduce the cost of
investment which will bene� t consumers of
telecommunications services.
On 2017 March 30 the OUR issued the Notice of
Proposed Rule Making (NPRM) on Infrastructure-
Sharing Rules Document. Following a robust
consultation process the OUR prepared the
draft rules which were also submitted to MSET
in 2018 February.
Equivalence in Access and Choice for Persons with Disabilities
One of the objectives of the Telecommunications
Act is the promotion of “the interests of
customers, purchasers and other users
(including, in particular, persons who are
disabled or elderly) in respect of the quality
and variety of telecommunications services and
equipment supplied.”
The OUR is of the view that ensuring the
provision of services for consumers with
disabilities is important to ensure that all
Jamaicans can bene� t from new ICT services
and fully participate in the ful� lment of Vision
2030. In this regard, improved access to
telecommunications services will allow persons
with disabilities to participate fully in community
life and become better integrated in the social
and economic life of the society. The aim of the
project is to assess the degree to which access
and choice for end-users with disabilities are
equivalent to other persons in the society, and
identify measures to address the de� ciencies
identi� ed.
A draft consultation document was under
development at the end of the period with a
public consultation exercise scheduled for the
2018/2019 period.
Development of Common Short Codes
The OUR developed supplementary rules and
a code of practice for the administration and
use of common short codes. Further work was
also carried out on the development of the
numbering scheme to ensure its applicability
to the impending mobile money services. The
Common Short Code Determination Notice
was published on 2017 September 5.
Given the pending move to 10 digit dialling
on 2018 May 31, it was decided that the
implementation of the Common Short Code
Regime should be deferred until after the
implementation of 10-digit dialling.
Area Code Relief Planning and Implementation
The numbering capacity of the ‘876’ area code
which currently serves Jamaica is approaching
exhaustion and the OUR developed a plan to
facilitate the introduction of an additional area
code.
The OUR also applied to the North American
Numbering Plan Administration (NANPA),
an agency of the United States Federal
Communications Commission, and received
an additional area code for Jamaica. On 2017
August 25, the NANPA published the planning
letter on its website, to notify internationally
56OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
the assignment of area code '658' to Jamaica.
Further, arising out of the work of the joint
OUR and industry stakeholders area code Relief
Planning Committee and subsidiary taskforces,
2018 May 31, was established as the date
for the implementation of ten digit dialling
for Jamaica. In addition, a permissive dialling
period, from 2018 May 31 to 2018 October 30,
was established.
On 2017 August 28, the OUR issued a local
public notice informing that Jamaica had
obtained an additional area code and that the
implementation of the code would necessitate
the introduction of mandatory ten-digit dialling,
that is, dialling using the 3-digit area code plus
the seven-digit telephone number, for all local
calls in Jamaica. During the review period,
the OUR worked with the service providers
to ensure network readiness and adequate
customer education programmes before the
May 31 implementation date.
Other Telecommunications Initiatives
Policy Recommendations on Enhanced Access to Emergency Services
The OUR embarked on a project to make policy
recommendations to the responsible Minister
regarding enhanced access to emergency
services in Jamaica (and with the use of relevant
state-of-the-art communications technologies).
Customarily, Cable & Wireless Jamaica (t/a
FLOW) provides an emergency operator service
to assist callers to reach the Fire Brigade, the
Police and an ambulance service, separately
or jointly, depending on the nature of the
emergency. FLOW, however, has indicated
its intention to discontinue this service but has
continued, its provision through funding from
the Universal Service Fund. This is expected
to continue until new arrangements are put in
place by the Ministry.
In the meantime the Ministry responsible for
telecommunications has directed the OUR to
develop and submit policy recommendations
on enhanced access to emergency services.
Accordingly, the OUR in 2017 October, through
a competitive bidding process, engaged the
services of Winbourne Consulting, LLC, to work
on the project. The consultant was required
to conduct an overall review of emergency
service access arrangements in Jamaica and
57OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
ASTON STEPHENSSpecialist Consultant - Transmission Planning
VALENTINE FAGANSpecialist Consultant - Power Systems
SHONNA-KAYE SAPPLETONProject Coordinator/ Executive Assistant
propose technically, economically and operationally feasible alternative means
of accommodating the end-to-end process of call initiation, handling, and
forwarding to emergency service providers.
The consultant, by way of on-site visits and meetings with key stakeholders
performed an initial analysis of the Jamaican situation and submitted a draft
Emergency Communications Legislative and regulatory policy discussion
document which was reviewed by the OUR. Following further consultation
with stakeholders in 2018/2019 and the receipt of the � nal report from the
consultant, the OUR will present its recommendations to the Ministry.
ICT Indicators Workshop
On 2018 March 27-28, the OUR in collaboration with the MSET held an information and communication technology (ICT) Indicators Workshop. The objective was to sensitize stakeholders involved in producing statistics and indicators on ICTs, in particular those used to calculate the ICT Development Index (IDI) about their importance and use. The IDI is published annually by the International Telecommunications Union (ITU) and is used to track, monitor and compare developments in ICT between countries and over time. Jamaica’s ranking for 2017 was 98th out of 176 countries. The country’s ranking on this index has implications for investments as investors take account of the index when making decisions about where to invest. It is therefore essential that the data which is used to calculate ICT indicators for domestic and international reporting is accurately captured and in a timely manner. The workshop was conducted by an ITU expert and examined, among other things, the de� nition and compilation of ICT indicators as well as national coordination mechanisms
for the production of ICT statistics.
Update on Important Telecommunications Sector Indicators
Fixed Line Service
Fixed line subscriptions stood at 297,027 at the end of December 2017,
representing a 4.25% decline when compared to the previous period. The
overall decline is a re� ection of marginal decreases in subscriptions for both
residential and business � xed line service.
Table 6: Fixed Line Subscription (‘000) & Penetration Rates (2008-2017)
YEARSUBSCRIPTIONS
PENETRATIONTOTAL RESIDENTIAL BUSINESS
2008 316.60 225.80 90.80 11.80%
2009 302.50 214.70 87.80 11.20%
2010 284.30 203.30 81.00 10.50%
2011 267.60 189.10 78.50 9.90%
2012 253.14 175.92 77.23 9.52%
2013 250.34 174.86 75.48 9.23%
2014 253.50 180.10 73.40 9.31%
2015 252.84 181.04 71.80 9.28%
2016 310.21 234.99 75.22 11.39%
2017 297.03 225.49 71.54 10.91%
Table 7: Mobile Subscriptions (‘000) & Penetration Rates (2008-2017)
Year Subscriptions Prepaid Post-paid Penetration %
2008 2,723.30 2,639.10 84.20 101.20%
2009 2,956.10 2,858.10 98.00 109.50%
2010 3,181.90 3,049.00 133.00 117.80%
2011 2,945.40 2,825.70 119.70 108.60%
2012 2,714.94 2,563.63 151.30 100.11%
2013 2,846.20 2,696.41 149.79 104.95%
2014 3,005.49 2,851.09 154.40 110.36%
2015 3,137.21 2,970.78 166.42 115.20%
2016 3,267.34 3,085.09 182.26 119.98%
2017 3,091.22 2,904.17 187.05 113.51%
58OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Mobile Service
Mobile service subscriptions totalled approximately 3.1 million as at
December 2017, having declined by 5.39% relative to the previous
period when subscriptions stood at approximately 3.3 million. While
pre-paid subscriptions declined marginally by 5.86%, post-paid
subscriptions increased by 2.63% when compared with the 2016
period.
Internet Service
Fixed broadband subscriptions stood at 200,909 as at December 2017,
representing a 4.6% increase over the previous year when it stood
at 192,074. As at December 2017, mobile broadband subscriptions
totalled 1,412,217 representing 88% of overall internet subscriptions
of 1,613,126.
Table 8: Distribution of Internet Subscription (‘000) & Penetration Rates (2008-2017)
SUBSCRIPTIONS
PENETRATIONYEAR TOTAL
FIXED
NARROWBAND
FIXED
BROADBAND
MOBILE
BROADBAND
2008 104.22 3.08 97.73 3.90%
2009 114.60 2.22 112.30 4.26%
2010 118.21 1.42 116.77 4.39%
2011 118.27 0 118.27 4.37%
2012 124.17 1.12 123.05 4.58%
2013 998.10 0.98 140.82 856.31 36.80%
2014 1,384.61 0.97 156.04 1,227.60 50.84%
2015 1,670.28 0.96 163.96 1,505.36 61.33%
2016 1,781.40 192.07 1,589.33 65.41%
2017 1,613.13 200.91 1,412.22 59.24%
59OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Director, Regulation, Policy, Monitoring and Enforcement, Cedric Wilson gives an address at a Productivity Workshop on “Emerging Regulatory Issues” on 2018 February 6-7. This workshop was in collaboration with the Caribbean Development Bank (CDB) and the United States Agency for International Development Caribbean Clean Energy Program (USAID - CARCEP). The workshop explored the issues of productivity targets of solar technology, as well as the implications of energy storage technologies for the grid.
WATER AND SEWERAGE
Runaway Bay Water Company Limited Bulk Water Rate Determination Notice
In 2016 Runaway Bay Water Company Limited (RBWCL) submitted a tariff application seeking a non-objection decision for a 45% rate increase to its potable bulk water rate that is being charged to the NWC. RBWCL stated that if the proposed 45% increase is approved, bulk water price would be increased to $50.00 per cubic meter. RBWCL argued that the requested increase would place the company in a position to attain an annual pro� t margin of $4M or 10%. It took a number of iterations and substantive request for information and clari� cation before the OUR was able to conclude its analysis of the application.
Consistent, with the procedures outlined in RBWCL’s 2004 licence, the OUR applied the rate of return methodology to analyse the company’s request. Resulting from its analysis the OUR approved an increase in the volumetric rate of bulk water sold to NWC from $34.39/M3 to $38.71/M3 . The OUR also determined that � xed monthly service charge at $10,196.84 for a 6” meter and $6,693.50 for a 4” meter would remain unchanged. The determination took effect on 2018 February 1.
Can-Cara Development Limited Water and Sewerage Rate Determination Notice
On 2017 May 15, Can-Cara Development Limited (CDL) applied for a non-objection to an increase of approximately 27% in water
rates and 15% in sewerage rates on the basis that the proposed rates were lower than those approved for the NWC. CDL indicated that it had not received an increase in its rates since 2014 March. The company further pointed out that it has been experiencing dif� culties maintaining � nancial viability but if its requested rates are approved, it would be able to cover its operating costs and be placed in a position to � nance planned capital improvements.
In keeping with its current practice to grant a no-objection since the proposed rates were lower than those of the NWC the OUR granted the request and the rates became effective on 2018 February 1. The OUR also took the opportunity of the application to engage with both CDL and its customers on measures to improve quality of service and reduce customer complaints.
Landmark Developers Limited Sewerage Rates Determination Notice
In 2011, Landmark Developers Limited (LDL) received a licence to operate as a sewage treatment company. On 2017 May 19, LDL applied to the OUR for the introduction of sewerage rates and charges to its prospective customers of Liberty Estate, in St. Mary. In addition to its base rates and charges, LDL requested that a monthly Price Adjustment Mechanism (PAM) be included in its tariff structure.
The OUR issued its determination on the rates approved for LDL on 2018 January 17. The Of� ce determined that LDL’s average tariff should
60OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
be $3,103.22M3 per month, connection fee, reconnection fee, and the PAM were approved as a part of the tariff structure. The OUR took note of the quality of service issues raised by customers served by LDL, and stipulated in its decision a number of quality of service measures that the company should implement.
NWC J$24 Billion Bond-Debt Re� nancing Proposal
In 2017 March, the OUR was asked to consider and indicate its non-objection to the NWC proposal to secure a portion of three (3) Bond issues totalling J$24 billion from National Commercial Bank Capital Markets (NCBCM) with the K-Factor Fund. NWC’s proposal was to use K-Factor in� ows to secure J$12.51 billion of the total amount of which J$9.51 billion would be used to re� nance existing USD denoted K-Factor loans while the additional J$3 billion would be used to fund other K-Factor capital works.
In making its case, the NWC argued that the capacity of the K-Factor to � nance the loans tied to the Fund had been negatively impacted
by the sustained depreciation of the Jamaican currency as well as the relatively high interest rates on existing loans when compared to the rates that can now be secured in the market. In light of this, the NWC considers that there was merit to re-� nancing some of its existing K-Factor loans. As at 2017 April 30 the NWC’s US$ denominated long term debt amounted to US$275.8M (i.e. J$33.4B).
The NWC proposed to use three different bonds of varying maturity to re� nance the US$257.8M of the debts identi� ed. The indicative terms of the three (3) bonds were:
• J$10B at 10.25% - 10 years• J$2B at 11.40% - 20 years• J$12B at 13.35% - 40 years
The OUR concluded on the basis of its analysis that the projected cash � ows suggested that the bonds would be of bene� t to the K-Factor Fund in terms of improved availability of funds to � nance projects given the risks associated with the depreciation of the domestic currency against its US counterpart. Additionally, the effort by the NWC to secure this bond was in
keeping with the OUR’s previously expressed view that the company ought to seek loans to fund projects initially and utilize the K-Factor � ows to repay such loans.
In light of this the Of� ce issued a non-objection to NWC using K-Factor proceeds up to 2032 December 31 to:
1) Secure bonds in the amount equivalent to that required to fully settle the USD denoted K Factor loans equivalent to J$9.5B;
2) Secure bonds for an additional J$3 billion to fund previously approved K-Factor projects; and
3) Establish the requisite Debt Service Reserve Account with NCBCM that would allow NWC to make payments on the aforementioned bonds as they become due.
The Of� ce also indicated that its non-objection was based on ful� lments of a number of conditions that the NWC should insist on in � nalizing the re� nancing deal.
Table 9: NWC’s Water Production & Consumption
2016/2017 & 2017/2018
Details 2016/2017 2017/2018
Production (000’MG) 70,014.02 71,522.16
Consumption 19,682.76 20,477.39
Non-Revenue Water 70.73% 73.35%
Connections 475,575 493,470
Table 10: Small Private Water Sector Production & Consumption 2016/2017 & 2017/2018
Details Production M3 Consumption M3
Runaway Bay Water Company Limited 2,358,795 2,208,843
Can-Cara Development Limited 2,358,795 N/A
Dynamic Environmental Management Limited 694,607 412,205
61OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
NWC Proposed PPP Arrangement to fund Rio Cobre Water Treatment Plant
The Of� ce was asked to give its no objection to a proposal by the NWC to build a 15 million gallon per day (MGD) Water Treatment Plant (WTP) at Rio Cobre. The project is premised on a 20-year PPP arrangement. NWC’s PPP proposal is structured around a Build Own Operate Transfer (BOOT) plan which involves the construction of the plant over a 2-year period, followed by an 18-year operation by the private partners, after which ownership of the WTP is to be transferred to the NWC. Based on the proposed PPP construct, NWC would buy the output of the plant from the private sector partners under a Water Purchase Agreement (WPA) and retail it to its customers.
Under the proposed PPP, Vinci Construction Grands Projects (VCGP) and Sagicor would be equity partners with the former responsible for 30% of the project’s equity and Sagicor accounting for the other 70%. The construction and operation of the plant will be done through a Special Purpose Vehicle (SPV) controlled by VCGP. The debt component is to be arranged by SIJL through multiple lenders. The development of the plant is projected to cost J$7.254 billion and its � nancing is to be based on 20% equity and 80% debt. The OUR’s analysis revealed that the project would face pro� tability challenges after its implementation unless the NWC signi� cantly reduced its non-revenue water.
Notwithstanding, the Of� ce provided its non-objection to the project on the grounds that:
• The project is one of national signi� cance and has the potential to address the severe drought that affects the Kingston and St. Andrew;
• The project is poised to meet growing residential and commercial water demand in south eastern St. Catherine; and
• The greatest obstacle to the project being a success is the NWC’s capacity to reduce Non Revenue Water (NRW) but the current NRW Reduction Programme suggests that the company has a good chance of achieving the targets set if it maintains a steady focus.
The no-objection was attached to several conditions including a re-negotiation of the risk allocation in keeping with the fact that NWC has no equity stake in the venture.
NWC’s Annual Price Adjustment Mechanism (ANPAM) and X-Factor Application
The NWC submitted an Annual Price Adjustment Mechanism (ANPAM) application to the OUR for 2017/2018, its application also included a request that its X-Factor variable (ef� ciency factor) be maintained at 5.5%.
The OUR reviewed NWC’s application and determined its ANPAM rate to be 6.27%. This increase was attributed to changes in underline base values for the exchange rate, consumer price index and electricity per kWh. The X-Factor was increased from 5.5% to 6.20% in keeping with the NRW criterion established in NWC’s Mid-Tariff Determination Notice.
Annual Price Adjustment Mechanism for Small Providers
The Price Adjustment Mechanism (PAM) is an indexation applied to the base rates as well as charges for water and sewerage services in order to preserve the real price for the company providing its services. Dynamic Environmental Management Limited (DEML) and Runaway Bay Water Company Limited were the two small private providers of water and sewerage services that applied for the adjustment during the period. Adjustments were made to DEML’s and RBWCL’s base rates via annual PAM to the degree of 12.11% and 6.27% respectively.
Potable Water Statistics NWC
Water production in the review year improved marginally. NWC reported that the increase in the level of rainfall helped it to consistently supply water to the majority of its customers. Consumption and number of connections/customers also increased. Table 9 shows some key potable water statistics for the NWC for the years 2016/2017 and 2017/2018.
As a part of its 2013 tariff approval, the OUR established that one key operational performance target that the NWC should address is the level of deterioration of its NRW. The NWC has taken the initiative to improve its NRW levels and has entered into a Public Private Partnership with Miya International to reduce its levels of NRW. The NRW reduction programme is still ongoing and the OUR is optimistic that the desired level of NRW will be achieved in the long run.
62OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Small Private Potable Water Statistics
Private sector involvement in the water sector continues to thrive. As a result of this the OUR believes that these providers are adding value to the sector and therefore requires that these providers supply the necessary information needed to capture their impact on the sector. Table 10 shows production and consumption data for three main players in the small private water sector in 2017.
K-Factor
In its 2008 Determination, the Of� ce approved a K-Factor to fund a capital intensive programme of ef� ciency improvement inclusive of mains replacement and other NRW projects. The programme was to reverse the effects of years of under and inadequate capital funding in critical areas of the NWC’s operation and to put the company on the path of increased ef� ciency.
The K-Factor would be linked to the X-Factor since it was expected that the strategic use of the K-Factor Fund would lead to an improvement in ef� ciency. The existing approved K-and X-Factors represent 16% and 5.5% of the company’s billed revenues respectively.
NWC is required to put funds equivalent to a portion of the billed amount for the K-Factor termed the Deemed K-Factor Billing amount into the fund within 45 days after billing.
The objectives of the K-Factor are to: • Fund capital intensive programmes of
ef� ciency improvement inclusive of mains replacement, and other NRW activities.
• Fund capital rehabilitation programmes that will not yield any signi� cant increase
in revenues for the NWC, but is required to comply with a speci� c regulatory direction; and
• Incorporate the expansion of the collection network for wastewater so as to better utilise the Soapberry Wastewater Treatment Plant.
The K-Factor regime is scheduled to remain in place until 2032 December 31. The OUR is required to approve each project to be funded by the K-Factor prior to its execution and monitor the roll out of the programme.
Management and Operational Audit of NWC’s K-Factor Programme
As part of its oversight responsibility for the K-Factor the OUR determined that an audit should be undertaken. The audit commenced in August 2017 and was completed 2017 December.
The main � ndings of the audit were:
a) Over the period 2008 to 2017 the K-Factor programme saw in� ows of J$23.6B into the fund.
b) Approximately J$36.3B was spent on K-Factor projects for the period April 2008 to March 2017.
c) The K-Factor out� ows over the audited period were allocated as follows:
a. NRW Reduction : 88% or J$32B was spent on 73 projects
b. Sewer & Waste Water Treatment Plants: 5% or J$1.714B was spent on 6 projects. This was to comply with NEPA quality standards.
c. Sewerage Service in Kingston & St. Andrew (KSA): 7% or J$2.5B was spent on 28 projects to improve the availability of sewerage services in the KSA. This led to increased � ows to the Soapberry Treatment plant which met that objective.
Based on the outcome of the audit, the OUR intends to address the areas of de� ciency over the coming � scal year.
K-Factor Fund Operations (2017 – 2018)
The K-Factor programme saw in� ows and out� ows of the 2017-2018 � nancial year of roughly the same magnitude. (See Table 11) The total in� ows for the period was J$3.56B representing a 19% increase over the previous period, while total out� ows was J$3.59B, an increase of 15% over the previous year.
Table 11: K-Factor In� ows and Out� ows – April 2017 to March 2018
PERIOD2017 2018
TOTALAPR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
INFLOWS (J$M)
DEEMED K-Factor BILLING
285.13 280.63 309.65 288.07 305.02 299.63 304.97 297.52 279.17 302.45 297.85 308.53 3,558.62
OUTFLOWS (J$M)
K-Factor
OUTFLOWS531.02 33.84 743.71 42.71 34.99 326.35 405.05 71.62 458.16 505.46 82.80 350.52 3,586.23
63OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
64OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
The department advised on a number of regulatory and administrative
matters ensuring that the OUR observed due process, complied with all legal
requirements in discharging its regulatory functions, and maintained an orderly
and ef� cient regulatory environment.
LEGISLATIVE AND REGULATORY REFORM
In relation to its advisory functions, the OUR provided advice and recommendations
to the Ministry of Science, Energy and Technology (MSET) on various sector
speci� c matters. Notably, we provided further comments on the licensing and the
pecuniary penalty regimes under the Electricity Act. The OUR reviewed the revised
Information and Communications Technology Policy and Draft Legislation, the
objective of which is to provide a comprehensive framework for the ICT sector.
The OUR reviewed the proposed policy for Petroleum (Downstream Activities) Act,
the objective of which is to provide a comprehensive framework for the regulation
of the natural gas sector and the OUR with the jurisdiction to regulate same.
LEGAL
CHERYL LEWISGeneral Counsel
CHENÉE RILEYDeputy General Counsel
LITIGATION MATTERS
From 2017 April to 2018 March, our legal
of�cers managed eleven litigation matters,
nine of which were carried over from previous
periods. The matters are comprised as follows:
two matters before the Telecommunications
Appeal Tribunal, one of which interim relief
was also sought in the Supreme Court; two
matters before the Electricity Appeal Tribunal;
one matter pending the establishment of a
competent tribunal to adjudicate the appeal;
three matters before the Supreme Court, one
of which transitioned to the Court of Appeal
and is awaiting a date for Case Management;
one matter before the Judicial Committee
of the Privy Council, which was disposed of
and costs pursued; one matter before the
Access to Information Appeal Tribunal; one
matter in which the satisfaction of judgment is
proceeding and another in which the collection
of costs awarded is being pursued. Some of the
matters are highlighted as follows:
TELECOMMUNICATIONS SECTOR
Telecommunications Appeal Tribunal & Supreme Court
• Appeal by C&WJ against the
implementation period prescribed for rates
in Determination Notice dated 2017 June
7 – “Cost Model for Fixed Termination
Rates – The Decision on Rates – Public
Version”, Document No. 2017/TEL/004/
DET.002. The OUR determined the new
rates to be charged for �xed termination
services, and prescribed a two tiered
implementation of the rates with the �rst
step down scheduled for 2017 July 1 and
the second step down scheduled for 2018
January 1.
On 2017 June 21, C&WJ sought a
reconsideration of the OUR’s decision
pursuant to section 60(4) of the
Telecommunications Act and the OUR
stayed its decision until the issuance
of its decision. After a review of the
reconsideration request and consultation
with the industry, the OUR issued its
�nal decision on 2017 September
8, “Reconsideration of the Of�ce’s
Decision: Determination Notice (2017/
TEL/003/DET.001) “Cost Model for Fixed
Termination Rates – The Decision on Rates
– Public Version”, Document No. 2017/
TEL/007/RCN.002, con�rming its previous
determination except that the �rst step
down in the glide path was �xed for 2017
October 1 and the second step down,
2018 April 1.
On 2017 September 19, C&WJ �led an
appeal of the reconsideration decision with
the Tribunal. In the absence of a constituted
Tribunal, on 2017 September 28, C&WJ
Limited �led a Notice of Application for
court orders in the Supreme Court seeking
leave to apply for judicial review of the
OUR’s reconsideration decision and an
injunction to stay the decision pending
judicial review of the matter. The matter
was heard by Mr. Justice Kirk Anderson
on 2017 October 5 and he delivered his
decision on 2017 October 31. The learned
judge denied C&WJ’s application for leave
to apply for judicial review and an interim
injunction of the OUR’s Reconsideration
Decision with respect to the glide path.
The denial was on the basis that C&WJ had
an alternative remedy to judicial review
to address its concerns with the OUR’s
decision i.e. via an appeal to the newly
constituted Tribunal. C&WJ’s application
for leave to appeal the Judge’s decision
was also denied.
Consequently, C&WJ relisted the matter
for hearing before the newly constituted
Tribunal, which had come into effect
on 2017 October 3. The Tribunal heard
C&WJ’s appeal on 2018 February 26 and
delivered its judgment on 2018 March
28. The Tribunal dismissed the appeal and
upheld the OUR’s decision regarding the
implementation of new �xed termination
rates.
65OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
WAYNE MCGREGORSenior Legal Counsel
NICOLE MORGANLegal Counsel
FRANCINE BROWN-THOMASAdministrative Assistant
ELECTRICITY SECTOR
Electricity Appeal Tribunal
• An appeal against OUR’s Determination
Notice dated 2015 January 7, “Jamaica
Public Service Company Limited Tariff
Review for the Period 2014-2019:
Determination Notice”, Document No.
2014/ELE/008/DET 004 (Appeal No. 1)
and an appeal against the OUR’s Directive
dated 2015 February 13, “Directive to
Jamaica Public Service Company Limited
for the Repayment of Foreign Exchange
Adjustment Charges on Fuel supplied by
PetroJam Limited during the period March
2013 to December 2013”, Document No.
2015/ELE/002/DIR.001 (Appeal No. 2) were
still before the Tribunal at the end of the
review period. JPS appealed a number of
the OUR’s determinations regarding the
tariff to be charged by JPS during the 2014
– 2019 rate period, and the directive to
JPS to repay to customers certain foreign
exchange adjustment charges taken during
the period 2013 March to 2013 December.
Pursuant to directions of the Tribunal,
Appeals No 1 and 2 will be heard together.
The hearing, which was set for 2016
October 3-14, was further adjourned for
a date to be agreed in 2017 September.
In 2017 March, the OUR requested JPS
to indicate the grounds of appeal that it
intended to pursue. By letter dated 2017
August 24, JPS withdrew certain grounds
and indicated its intention to proceed
with the remaining grounds. Due to the
expiration of the term of the members
of the Tribunal in 2017 September (the
Tribunal has since been reconstituted),
no date for hearing was set and no steps
have been taken by JPS to have the matter
relisted for hearing.
Supreme Court
• The OUR, on 2014 June 17, � led an
application for leave to apply for judicial
review and declarations of the court in
relation to the Contractor General’s Report
entitled “Report of Special Investigation –
Right to Supply 360 Megawatts of Power
to the National Grid- Of� ce of Utilities
Regulation, Ministry of Science, Technology,
Energy and Mining” in which, certain
statements and conclusions criticising
the procurement process undertaken by
66OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
the OUR and the inclusion of certain bidders in
the process were made. Following the hearing in
2014 November and December and the ruling of
Mr. Justice Fraser on 2016 February 26, dismissing
the OUR’s application for leave to apply for judicial
review, the OUR � led a Fixed Date Claim seeking
various declarations of the Court regarding the
Contractor General’s Report. The hearing dates
which were set for 2017 October 3-6 and 9-11 were
vacated and a new trial date for hearing was set for
the week commencing 2018 April 30. The matter
was settled as between the parties subsequent to
the end of the review period.
Judicial Committee of the Privy Council
• Appeal against OUR’s Determination Notice dated
2010 March 2 “Jamaica Public Service Company
Limited Z-Factor Claim for Reclassi� cation
Compensation”, Document No. Ele 2010/1:Det/1,
in which the OUR did not allow a $4,273 million
claim by JPS under the Z-Factor provision of the
JPS Licence. The Court of Appeal, on 2015 March
13, upheld the decisions of the All-Island Electricity
Appeal Tribunal and the Supreme Court which were
in favour of the OUR. JPS was granted leave to
appeal to the Privy Council on 2015 November 2.
The matter was heard before the Privy Council on 2017
June 7 and judgment delivered on 2017 July 6. The
Privy Council dismissed JPS’ appeal and awarded
to the OUR, the costs of litigating the matter in
the Privy Council and Court of Appeal. JPS agreed
the OUR’s Privy Council costs and payment was
received by the OUR. The OUR’s Attorneys-at-Law
are pursuing the Court of Appeal costs.
TRANSPORTATION SECTOR
• The OUR had initiated an action in the Supreme
Court to recover over $22M in outstanding
regulatory fees plus interest from the Jamaica
Urban Transit Company Limited (JUTC). On 2015
November 12, judgment was entered in favour of
the OUR in the amount of $16M including costs and
interest. JUTC initially paid $6M of the judgment
debt. As of 2017 September, JUTC, pursuant to
a payment agreement to settle the outstanding
balance of $10M, has been making payments by
way of monthly instalments.
67OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-201867
For the year 2017/2018, the Information Technology and Risk department
continued its effort to support the regulatory mandate of the organisation by
seeking to improve the information technology infrastructure and risk management
framework. As with everywhere else, there has become a greater dependence
on information technology to improve the ef� ciency and effectiveness of the
work being performed. To facilitate this the ITR has maintained its obligation to
ensure that the organisation always has state-of-the-art information technology
equipment and infrastructure in place.
Highlights of the work of the ITR department for the � scal year are:
a. The continual concern for the year was the high incidents of cybersecurity
attacks on both the public and private information systems infrastructure.
Tools have been acquired to ensure better and more in-depth analysis and
reporting to improve our vigilance and ability to be proactive. The OUR’s
network was minimally impacted with no recorded downtime of our services
arising from any such event.
b. The continued maintenance and enhancements of in-house developed
systems was conducted throughout the year. These included the
improvement in the reports, data retrieval and creation of interface and
INFORMATION TECHNOLOGY & RISK
(ITR)
LEIGHTON HAMILTONDirector, Information Technology & Risk
OTIS ANDERSONManager - Solution Development & Risk
68OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
analysis tools such as Microsoft Excel.
c. There was also the replacement of
obsolete equipment such as laptops,
printers and servers to ensure that
the work of the organisation was not
hindered by outdated technology.
d. There was also the continued efforts to
build the internal capacity of staff through
the use of computer-based training which
limited the need for them to be out of
of� ce which was a saving to the OUR.
The department will also continue with
the planned upgrading of the hardware
and software of our systems as well as the
implementation of new technologies and
systems to improve the information provided to
all of the OUR stakeholders.
Quality Management System (QMS)
The OUR has maintained its International
Organisation of Standards (ISO) 9001:2008
Quality Management System certi� cation
through the annual surveillance audit in July
2017. In March 2018, we transitioned to
the ISO 9001:2015 Quality Management
System standard to ensure that we maintained
our international certi� cation and that the
organisation continues to demonstrate to all
our stakeholders our emphasis on delivering
measurable quality service to Jamaica.
The activities undertaken during the year
included inter alia:
1. A process audit to determine measures
to improve the ef� ciency of the OUR and
stakeholder experience with the OUR.
2. The execution of the QMS Management
Review and approval was performed for
all the core processes of the organisation.
In 2017/2018 the OUR will ensure the
maintenance of the certi� cation, along with the
execution of internal process audits.
Enterprise Risk Management (ERM)
The OUR is now certi� ed against the ISO
9001:2015 standard which is based on a
risk based approach to management which
enhanced the integration of the Enterprise
Risk Management System (ERM) into the OUR’s
operations.
This year’s risk register was generated on a
quarterly basis and presented to the Audit
Committee of the Of� ce for review and
oversight. For the quarter ending March 31,
JUDENE CHANNERGraphic Of� cer/ Help Desk Coordinator
MARVIN DOMVILLESolution Developer
ANDREW WILLIAMSInformation Security Of� cer
69OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
2018, 6% of all risk was identi� ed as high with the majority (88%)
identi� ed as being medium as shown.
For 2018/2019 � scal year the ERM will be immersed in the operations
of the OUR through the ISO 9001:2015 Quality Management System
standard which forces the use of a risk based approach to management.
70OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
On 2018 March 27 and 28, the OUR in collaboration with the Ministry of Science, Energy and Technology organized a two-day ICT Indicators Workshop at Hotel Four Seasons. The objective of the workshop was to sensitise stakeholders in producing statistics and indicators on ICTs, in particular those used to calculate the ICT Development Index (IDI). The workshop was aimed at strengthening Jamaica’s capacity to produce high quality and harmonised telecommunications/ICT statistics and indicators. Senior Regulatory Analyst, Marsha Minott (right), engages Mr. Inigo Herguera, ITU Expert from the International Telecommunications Union (ITU) in conversation. Mr. Herguera conducted part of the training.
The 2017/2018 � nancial year was a very special one for the OUR and by
extension the Administration and Human Resource (HR) department. The
OUR’s celebration of its 20th anniversary, meant that some members of the
Administration and HR department were recognised for providing 20 years of
unbroken support to the organisation. Throughout the celebratory year, the
department continued to play an integral role in contributing to the mandate
of the organisation by providing the requisite support services to its internal
customers. We remained keen on honouring our obligations to external
stakeholders, through the execution of our functions.
ADMINISTRATION AND HUMAN RESOURCE
ROHAN MCCALLADirector, Administration and Human Resource (Acting)
NOVA BARNETTSenior Procurement/ Purchasing Of� cer
INGRID BROWN-CRIPPSPersonnel/ Administration Of� cer
LYNDON ADLAMManager - Records & Information Management (Acting)
71OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
72OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
At a macro level, the department remains
responsible for providing services such
as HR (recruitment and selection, on-
boarding, recognition and reward, retention,
accommodation, performance management,
compensation, health and wellness, employee
engagement and enablement, training and
development, succession management,
separation management); procurement of
goods, general, and consultancy services;
general administration; and records and
information management.
The department adopted the following mission
statement to help guide the delivery of our
functions:
“In support of the OUR’s vision, mission,
core values, and value propositions, the
Administration and Human Resource
Department will work with other
departments to recruit, recognise, develop,
and reward our most valuable resource –
our PEOPLE.”
Over the reporting period, we actively
spearheaded a number of recruitment,
selection, and on-boarding activities for
staff. We were intentional in ensuring that
new members of staff and those who were
promoted were oriented to the organisation’s
Quality Management System (QMS). The
department was instrumental in the internal
movements and separation management of
staff members. At the end of 2018 March,
the staff complement was sixty-four (64) plus
� ve (5) specialist consultants, on � xed-term
contracts. During the � nancial year, two
Consumer Affairs Of� cers were appointed in
the Consumer and Public Affairs department.
The Coordinator OURIC/Information Of� cer, in
that department, resigned in 2017 December.
The Manager Regulation and Policy – Electricity,
Water, and Sewerage in the Regulation, Policy,
Monitoring, and Enforcement department also
resigned in 2017 April and a new manager was
appointed in 2017 August. A new Financial
Controller joined the organisation in 2017
November, following the departure of the
of� cer who previously held that position. The
Internal Auditor was promoted to the position
of Chief Internal Auditor in 2018 February. The
Manager – Solutions Development, Support,
and Risk resigned from the organisation in
2017 September. The Director, Administration
and HR, retired at the end of 2017 December.
The Manager, Records and Information
Management, in the Administration and
HR department, was appointed to act in
VENETIA COOKERecords & Information Management Of� cer
MELISSA BEADLEAdministrative Assistant
KADINE WILLIAMSRecords & Information Management Of� cer
73OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
the position of Director, Administration and
HR in 2018 January. The Senior Records
and Information Management Of� cer was
appointed to act as Manager, Records and
Information Management in 2018 January.
As part of the organisation’s intention to
continually engage members of staff, a
one-day retreat was held in 2017 August. An
important part of the day’s activities was the re-
orientation of staff to the organisation’s Quality
Management System and an explanation of
the transition from the 9001:2008 to the
9001:2015 Standards. Staff also participated
in team-building exercises, which assisted the
continued spirit of oneness and family.
The department was also an integral part of the
planning and execution of the 20th Anniversary
Long Services Awards in December. Of the � ve
recipients for long service awards for 20 years,
four were from the Administration and HR
department.
The department also played a key role in leading
a change in the performance management cycle
and began an initiative to review and improve
the process. The department played an integral
role in facilitating local and international training
and development initiatives for staff, as well
as for members of the Of� ce. As part of our
aim to improve customer satisfaction, through
continual improvement, the department
began planning for research, which would
examine and explore the levels of employee
satisfaction and engagement among members
of staff. Employee health and wellness remains
of paramount importance and as such we
continued to ensure that staff had different
options to maintain their health. During the
year, staff participated in the 2018 Sigma 5K
Corporate Run.
With respect to our corporate social
responsibility, members of staff contributed
cash and kind to the Labour Day project at the
Bel� eld Basic School in Bel� eld, St. Mary.
The department also continued to ensure that
the required physical amenities were available
for staff in order for them to comfortably carry
out their functions and to serve our customers.
ROLANDO JOHNSONRecords Clerk
LORRAINE BAKERTelephone Operator/ Receptionist
OUR staff participated in the Sigma run on 2018 February 18.
KENARDO CAMPBELLClerical Assistant
We continued to ensure the prudent
management and maintenance of its � xed
assets and capitalise on the QSM to improve the
systems and processes.
PROCUREMENT OF GOODS, GENERAL, AND CONSULTANCY SERVICES The objectives of the Procurement Unit is
to ensure that procurement activities are
carried out with due consideration for the key
principles of the government’s procurement
policy. These principles include: ensuring value
for money, economy, ef� ciency, equity, fairness,
transparency, and reliability in the use of the
organisation's resources while adhering to the
procurement procedures, as outlined in the
Government of Jamaica Handbook of Public
Sector Procurement Procedures.
The Procurement Unit remained watchful in
ensuring that all procurement was conducted
in accordance with prescribed guidelines/
procedures. This meant ensuring that
the organisation was fully compliant with
the Government of Jamaica Procurement
Procedures. This vigilance was evident in the
timely submission of the Quarterly Contract
Awards (QCA) Reports to the then Integrity
Commission. During the period, fourteen (14)
contracts were awarded; seven (7) consultancy
services and seven (7) goods and services.
RECORDS AND INFORMATION MANAGEMENT (RIM) UNITThe RIM Unit continued to make a signi� cant
contribution to the operations of the OUR by
facilitating the management of documents,
records, and information in the possession,
custody, and control of the OUR. The Unit
continued to play a critical role in the QMS
by helping to guide the revision and approval
process for documented information that
is linked to core and mandatory processes.
During 2017/2018, the RIM Unit also continued
to maintain responsibility for the control
of documented information such as forms,
templates, policies, procedures, guidelines, and
manuals. In addition to managing active and
semi-active records and documents, the Unit
was also deliberate in its management and
maintenance of inactive records. As part of its
work, the Unit also identi� ed and sought to
preserve records that would form an important
part of the institutional memory of the OUR.
JOAN BAILEY-BANTONOf� ce Attendant
GRANVILLE MCKOYSecurity Of� cer/ Driver
SHIRLEY STEWARTDriver/ Messenger
74OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
The department directs the � nancial management functions of the OUR,
ensuring effective planning and utilisation of � nancial resources in an accurate
and timely manner.
The main functions of the Finance department include:• Developing and reviewing the accounting system, procedures and
internal controls;• Preparing monthly and annual � nancial statements;• Managing the OUR’s investment portfolio;• Preparing analytic reports to assist the decision-making processes of the
Of� ce;
DUHANEY SMITHFinancial Controller
DESLYN NWUDEBudget Of� cer
LAVERNE SMALLAccountant
RENAE GAYLESenior Accounting Clerk
FINANCE
75OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
• Determining annual regulatory fees chargeable to each utility sector;
• Ensuring compliance with statutory requirements and in particular, the provisions of the Public Bodies Management and Accountability (PBMA) Act. The Financial Administration and Audit (FAA) Act, Income Tax Act, and the Government’s Procurement Guidelines;
• Assisting with the negotiations for the group health and general insurance; and
• Providing administrative support for the group pension plan
As is evident from the � nancials which are a part of this report the department has ensured that the � nancial affairs of the OUR were kept in good order during the course of the year.
SHAVOUY DRAKEAccounting Clerk
SHENNEL-ANN REYNOLDSAccounting Clerk
BEVERLEY ROBINSONAdministrative Assistant
76OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
77OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
The Internal Audit Unit is responsible for providing an independent and
objective appraisal of the OUR’s operations. The Unit’s aim is to foster
improved effective internal controls and corporate governance using a systematic,
disciplined approach and best practices. Our independence is maintained by
reporting directly to the Of� ce’s Audit Committee.
For the 2017/2018 � nancial year, Internal Audit assisted the OUR to maintain its
certi� cation to the Quality Management System ISO 9001:2008 and aided in the
transition process to ISO 9001:2015. The OUR has the distinction of being one
of the few regulatory bodies world-wide which has attained this international
accreditation.
Internal Audit remained committed to helping the organisation achieve its overall
goals and continued to support it by providing value-added solutions through
audits and advisory services. Process audits are a requirement under the quality
management system, as such, the Unit has the responsibility to schedule, plan
and execute these audits according to the 9001 Standard. Operational audits
were planned and executed with input from the Director General and the Of� ce’s
Audit Committee.
During the review period, there were four (4) externally conducted audits under
the quality management system as follows: surveillance, transition and two (2) on
the internal audit process.
INTERNAL AUDIT
HOPE JAMESChief Internal Auditor
K. ANTONIO MULLINGSInternal Auditor
With a complement of two (2) auditors, the Internal Audit Unit completed
audit assignments as follows:
Table 1
Types of Assignments Planned 2017/2018 Achieved 2017/2018
Operational 16 5
Process 2 2
Special Activities 0 19
Total 18 26
Table 2
Process AuditsPercentage
ImplementedOperational
AuditsPercentage
Implemented
Total � ndings 2017/2018 8753%
5430%
Implemented during 2017/2018 46 16
Total � ndings from previous years brought forward into 2017/2018
48
69%
40
33%Previous years � ndings implemented during 2017/2018
33 13
With the support of the Director General and
the Of� ce’s Audit Committee, corrective actions
implemented in the 2017/2018 year increased
by just under 50% over the previous year. This
resulted in clearer procedures, improved operations
and increased alliance with best standards and
international practices.
The Director General and members of the Of� ce’s
Audit Committee reviewed audit � ndings.
Table 3
Findings Generated & Implemented
2016/2017 2017/2018Percentage Increase/Decrease
Operational 27 16 -41%
Process 15 46 207%
Total 42 62 48%
Figure 1
Figure 2
78OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
PRODUCTIVITY OF INTERNAL AUDIT
Table 4 shows that there were increases in the number of assignments completed by Internal Audit for the 2017/2018 reporting period when compared with 2016/2017.
Table 4
Types of Assignments
Completed 2016/2017
Completed 2017/2018
PercentageIncrease
Operational 4 5 25%
Process 1 2 100%
Special Reviews 6 19 217%
Total 11 26 136%
Available audit hours spent as follows:In order to remain relevant, auditors continued their professional development through relevant internal and external sources.
Internal Audit Unit plans for the 2018/2019 year includes: • Operational Audits 22• Process Audits 2• Special Activities Executed as requested by the Director General
and the Audit Committee
The priority of the Unit for the 2018/2019 � nancial year will be to help the OUR maintain the transition to the 2015 Standard of the ISO 9001 Quality Management System, while continuing to provide an independent assessment of the operations and necessary advisory services to all functions.
79OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Figure 3
Figure 4
CONSUMER ADVISORY COMMITTEE ON
UTILITIES (CACU)
YASMIN CHONGChairperson
From left, the members of the CACU are Carolyn Ferguson,
Wayne Grant, Kadian Birch, Stephen Wedderburn, Yasmin Chong
(Chairperson) and Erwin Burton. Missing: Paul Goldson.
Over the reporting period, the seventeen-year-old Consumer Advisory
Committee on Utilities (CACU) remained steadfast in its mandate to
ensure and safeguard utility consumers’ rights thereby making certain that utility
customers’ views, opinions and issues are heard throughout the utility policy
and regulatory decision-making process. Constructive representation continued
in order to manage the numerous and evolving challenges of the utility sector.
However, despite the delays and challenges I am pleased to report that some
progress was made in the interest of all stakeholders and more signi� cantly for
consumers. Safe, reliable and affordable utility services are pivotal to economic
growth and it is therefore imperative that we maintain engagement with industry
players, to realize a smart, ef� cient and intelligent utility infrastructure and
regulatory environment.
In the electricity sector, the focus was on the annual tariff adjustment � ling by JPS within the context of the new revenue cap in addition to the construction of JPS’ 190 MW gas-� red plant, the construction of the Eight Rivers 37 MW solar farm in Westmoreland, guaranteed and overall standards, customer service issues and complaints received directly from consumers and public education initiatives.
80OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Water and sewerage also received its fair share of attention, with the review and evaluation of the NWC’s mid-term tariff review, the review of small providers’ rates and regulatory rules, the implementation of upgrades and improvement projects, the customer service issues and billing complaints. The highlights from the telecommunications sector focused on regulatory rule-making determinations for the introduction of a long-run incremental cost structure and infrastructure sharing and the CACU’s successful lobbying efforts to force the implementation of 10-digit dialling and the introduction of a new area code for Jamaica in 2018.
The CACU continued its active engagement with local media and attendance at several community engagements in residential communities and business organisations. The Committee’s Instagram page will be revamped during the 2018/2019 �nancial year and although late, the Facebook and Twitter pages will go live in the second quarter of 2018/2019. Training for the CACU membership remained a priority and two (2) members bene�tted from training activities locally and overseas through the Committee’s membership in the National Association of State Utilities Consumer Advocates (NASUCA), workshops hosted by the OUR and other regulated utilities, participation in webinars as well as at the Public Utilities Research Centre (PURC) at the University of Florida (UF). The Committee also welcomed one new member to strengthen its technical capacity needed for the work programme and
to respond to the expected tariff reviews in 2018 and 2019.
For the 2018/2019 regulatory year, the CACU will commence a study on the impact of non-technical losses on the mobile/landline, water and electricity markets. To complement the losses initiative, plans are being put in place for a CACU-led score-card on Jamaica’s energy, telecommunications and water and sewerage infrastructure. The Committee will continue to support the OUR and the Consumer Affairs Commission (CAC) consumer education and empowerment programmes, complete and present its �nding on industry losses/theft, be responsive to regulatory consultations and notices of proposed rule-making, make representation for the introduction of service standards for the telecommunications sector and provide input to the consultative process for the upcoming tariff reviews for the JPS and NWC.
Throughout the new regulatory year, the CACU is committed to continuing the tireless stakeholder efforts and engagement on behalf of all utilities stakeholders across Jamaica. Another hectic year of hard work is expected with partner organisations and I take this opportunity to encourage all consumers to participate and support the advocacy effort, especially during the upcoming tariff review processes.
We remain resolute in our promise to contribute to the development of a modern, ef�cient
and affordable utility sector and to ensuring the widest possible and active stakeholder participation, as we work towards achieving the national goal of making Jamaica the best in class utility infrastructure market globally and the preferred place to live, work, raise families and conduct business.
81OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
20TH ANNIVERSARYCELEBRATIONSOn 2017 December 9, the OUR held its 20th Anniversary Long Service Awards. Staff members, their families and OUR Stakeholders were in attendance for the night. Twenty (20) year awardees (from left): Maurice Charvis, Venetia Cooke, Carolyn Young, Ingrid Brown-Cripps and Shirley Stewart.
82OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
1
2
3
4
5
LONG SERVICE AWARDS
1 Ten to fourteen year awardees: (seated
from left) Beverley Green, Carlene Dunbar,
Beverley Robinson, Sashana Miller, Lorraine
Baker and Renae Gayle. (Standing from
left): Cedric Wilson, Jodian Coultman,
Shanique Nunes, Andrew Williams, Collette
Goode, Francine Brown-Thomas, Wayne
McGregor, Kishana Munroe and Otis
Anderson.
2 Five to nine year awardees (from left):
Winston Robotham, Hope James, Andre
Lindsay, Cheryl Lewis, Leighton Hamilton,
Chenée Riley, Peter Johnson, Elizabeth
Bennett-Marsh and Hopeton Heron.
3 Jeremy C. Taylor, Senior Deputy Director
of Public Prosecutions, Office of the Director
of Public Prosecutions, addressing OUR staff
members.
4 Director General Ansord Hewitt (centre),
introduces his lovely wife to Chairman,
Joseph Matalon.
5 Twenty year veteran and Personnel/
Administration Officer, Ingrid Brown-
Cripps receives her award.
6 Chairman of the the Organisation of
Caribbean Utility Regulators (OOCUR),
Clayton Blackman (left) engages in
conversation with FLOW’s Kayon Wallace,
Ambassador Peter Black and Joseph
Matalon. 6
83 ANNUAL REPORT 2017-2018OFFICE OF UTILITIES REGULATION 83
LONG SERVICE AWARDS
7 Director General Ansord E. Hewitt, former
DG J. Paul Morgan and retired President of
Airports Authority of Jamaica, Earl Richards,
engage in dialogue at the 20th Anniversary
Long Service Awards.
8 Mrs. Carolyn Young is recognised as OUR’s
longest serving employee. She was the first
employee, serving the organisation since its
inception.
9 v Singer/ Songwriter Etana serenades Manager
of Monitoring & Enforcement, Peter Johnson.
10 Fifteen to nineteen year awardees: Nova
Barnett and Ansord E. Hewitt.
11 Chairman, Joseph Matalon (left) speaks
with Office members Yasmin Chong and Noel
daCosta.
7
10
9
8
11
84OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-201884
1 Members of the OUR family attend the 20th
Anniversary Church Service held in 2017 April 21 at
the Boulevard Baptist Church.
2 Manager – Engineering & Technical Analysis,
Courtney Francis, addresses the audience at a
productivity workshop on “Emerging Regulatory
Issues” held in collaboration with the Caribbean
Development Bank (CDB) and the United States
Agency for International Development Caribbean
Clean Energy Programme (USAID – CARCEP) on 2018
February 6-7 at the Spanish Court Hotel.
3 Member of the Office, Yasmin Chong poses a
question at the presentation of findings for OUR’s
Mystery Shopping exercise carried out in 2017 July
and August at branches of the four (4) major utility
companies in Jamaica.
4 Sponsors, University of Technology demonstrate
to students how to crimp cables at the OUR’s Girls in
ICT event held in April 2017.
5 Telecommunications Engineer, Gordon Swaby
addresses Government ministries and agencies at an
NPA Sensitisation session in Kingston on 2017 July
25.
2
1
CORPORATEHIGHLIGHTS
4
3 5
85OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
6 Everyone is all smiles for the OUR’s Girls in ICT
Day 2017. Director, Consumer & Public Affairs,
Yvonne Nicholson (back left) poses with some
students and their teacher eager for the day
ahead. Girls in ICT Day was celebrated on 2017
April 27 at the Jamaica Pegasus.
7 Ambassador Peter Black has a conversation
with students from Immaculate Conception High
School who attended the Natural Gas Conference
because of their interest in becoming engineers. (L-
R) – Jhenelle Christie, Sharmalee Wright, Kianna
Freeman and Gabrielle Gayle.
8 Some members of the Planning Committee
of the Jamaica Natural Gas Conference from the
OUR and the Petroleum Corporation of Jamaica
(PCJ). (L-R backrow) Demi-Ann Griffiths (Intern,
PCJ), Ashlyn Malcom (Group Internal Auditor, PCJ),
Hopeton Heron (Deputy Director General, OUR),
Yvonne Nicholson (Director, Consumer & Public
Affairs, OUR), Ambassador Peter Black (Secretary
to the Office, OUR), (L-R front row) Ansord
Hewitt (Director General, OUR), Shalene Davis
(Administrative Assistant, PCJ), Camille Taylor
(Manger, Corporate Affairs & Communications,
PCJ), Thalia McPherson (Project & Research Officer,
OUR), Winston Watson (Group General Manager,
PCJ) and Brian Richardson (Manager, Oil & Gas,
PCJ).
9 Regulatory Engineer, Andre Lindsay, presents
on “Distributed Energy Resources” at the Annual
Engineers’ Week Conference, hosted by the Jamaica
Institute of Engineers on 2017 September 18.
10 Director General, Ansord Hewitt and OUR
Electricity Consultant, Valentine Fagan exchange
words with Oliver Clarke, Chairman of the RJR/
Gleaner Group at the ground breaking of the Eight
Rivers Solar Plant which is the largest in the Caribbean
in Paradise Park, Westmoreland on 2017 December
13.
6
9
8
7
10
8686 ANNUAL REPORT 2017-2018OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
A student from St. Georges’ College asks a question of the utility providers at our final Schools’ Connections held at Ardenne High School on 2018 February 21.
Gordon Brown, Public Affairs Coordinators discusses some of the concerns of our consumers with a Flow representative.
Manager, Regulation and Policy ‐ICT, Evona Channer (left), discusses potential implications of the workshop with Cecil McCain, Director, Post and Telecommunications at Ministry of Science, Energy and Technology (centre) and Mr. Sylvester Cadette (left), ITU Programme Officer for the Caribbean Region at the ICT Indicators Workshop at Hotel Four Seasons on 2018 March 27‐28 organized jointly by the OUR and MSET.
11
12
14
15
13
11 Telecommunications consultant, Curtis Robinson,
presents to stakeholders at the Jamaica Pegasus Hotel
on 2017 July 25 as a part of sensitisation efforts for the
additional area code, '658', for Jamaica.
12 OUR’s Parish Connections Series continued in
St. James, St. Ann, Trelawny and closed in Kingston.
Parish Connections have been the signature
outreach event where the OUR travelled across the
island bringing consumers in direct contact with
utility providers. OUR staff members are always
happy to share memorabilia with consumers when
they travel. Jade-Anne James, Consumer Affairs
Officer, (right) poses as she gives a consumer a token
in St. Ann in August 2017
13 Nicole Morgan, Legal Counsel, chats with a
customer about the role of the OUR at a consumers’
Expo in St. Ann on 2017 September 21.
14 A student from St. Georges’ College asks a
question of the utility providers at our final Schools’
Connections at Ardenne High School on 2018
February 21.
15 Gordon Brown, Public Affairs Coordinator
discusses some of the concerns of our consumers
with a Flow representative.
16 Manager, Regulation and Policy - ICT, Evona
Channer (left), discusses potential implications of
the workshop with Cecil McCain, Director, Post and
Telecommunications at Ministry of Science, Energy
and Technology (MSET) (centre) and Sylvester
Cadette, ITU Programme Officer for the Caribbean
Region at the ICT Indicators Workshop on 2018
March 27-28 organized jointly by the OUR and
MSET.
16
87 ANNUAL REPORT 2017-2018OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
88OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
ORGANISATIONAL CHART
Committees of the Of�ce
1. Audit & Conduct
2. Finance & Budget
3. HR & Compensation
4. Legal Af�ars
5. Technical
THE OFFICE6 Non-Executive Members
& Director General (ex of�cio)
THE EXECUTIVESDirector General - 269035
Deputy Director General - 269036Deputy Director General - 269037
Executive Assistant269038
Chief InternalAuditor302705
Internal Auditor305927
General Counsel269061
Deputy General Counsel269065
AdministrativeAssistant269063
Senior Legal Counsel269064
Legal Counsel302712
SPECIALIST CONSULTANTS
1. Power System2. Regulatory Economist3. Transmission Planning4. Numbering & ICT Networks
Project Coordinator/
Executive Assistant269079
Director- Regulations, Policy,
Monitoring & Enforcement
269082
Director- Information
Technology & Risk269086
Director- Administration/Human Resource
269040
Manager- Solution Development
& Risk269087
Manager- System & Security
269089
SolutionDeveloper
302713
Graphic Officer/Help Desk
Coordinator305926
IT SecurityOfficer269088
Admin. Assistant269041
Secretary to The Of�ce269078
Financial Controller269055
DirectorConsumer & Public Affairs
269048
Admin. Assistant269049
Licensing Officer305925
Accountant269056
Budget Officer269058
SeniorAccounting Clerk
302711
Accounting/Data Entry Clerk
269057
Coordinator- Consumer Affairs
(Operations)269051
Consumer AffairsOfficers (4)
269053269054269052302708
Specialist- Consumer Affairs
(Policy)269050
Public EducationSpecialist302709
Coordinator- OURIC/Information
Officer302710
Coordinator- Public Affairs
269059
Manager- Regulatory &
Licensing Affairs269080
Project/Research Officer
269081
Manager- Records & Info. Mgt.
302709
Senior Records & Information Mgt. Officer
305928
Records & Info.Mgt. Officers (2)
305929-30
Records Clerk305931
Security Officer/Driver302707
Personnel/Admin. Officer
269042
Procurement/Purchasing Officer
269043
AssistantProcurement Officer
305932
Driver/Messenger
269044
TelephoneOperator/
Receptionist269045
Office Attendant269046
Clerical Assistant269047
Manager- Regulations &
Policy - ICT269085
Manager- Engineering &
Technical Analysis269077
Manager- Monitoring & Enforcement
269071
Manager- Regulation &
Policy - Electricity, Water & Sewerage
269066
Analysts- Telecoms (2)
269069269070
Telecoms Engineer269072
Engineers (2)302717302716
UtilityAnalysts (2)
302714302715
Analysts- Water & Electricity
(2)302718269073
89OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
Position of Senior Executive Year Basic Salary$
Gratuity$
Travelling/ Deemed Motor Vehicle
Allowance$
Pension Benefits
$
Other Allowances
$
Non-cash benefits
$
Total
Director General 2017/2018 12,113,491 3,028,373 140,000 None 90,000 427,557 15,799,420.04
Deputy Director General (Telecommunications) 2017/2018 11,743,685 2,935,921 140,000 None 90,000 389,951 15,299,557
Deputy Director General (Electricity & Water) 2017/2018 11,113,536 2,778,384 140,000 None 90,000 494,130 14,616,050
General Counsel 2017/2018 9,034,864 None 1,341,624 700,181 120,000 305,927 11,502,596.04
Director - Regulation, Policy, Monitoring & Enforcement
2017/2018 7,907,667 1,976,917 1,341,624 None 90,000 408,207 11,724,414
Director - Administration & Human Resource1 2017/2018 5,157,828 None 1,341,624 428,100 90,000 218,088 7,235,640
Director - Administration & Human Resource2 2017/2018 1,270,528 317,632 1,341,624 None 90,000 18,140 3,037,924
Director - Consumer and Public Affairs 2017/2018 7,070,763 None 1,341,624 547,968 90,000 504,228 9,554,583
Director - Information Technology & Risk 2017/2018 8,469,457 2,117,364 1,341,624 None 90,000 554,873 12,573,318
Secretary to the Office 2017/2018 8,470,190 2,117,548 1,341,624 None 90,000 - 12,019,362
Financial Controller3 2017/2018 4,011,644
1,002,911 1,341,624 None 90,000 250,782 6,696,961
Financial Controller4 2017/2018 3,529,244 882,311 1,341,624 None 90,000 174,760 6,017,939
1 Tenure Apr. 2017 to Dec. 20172 Tenure 2018 January - March3 Tenure 2017 April - October4 Tenure 2017 November - 2018 March
SENIOR MANAGEMENT COMPENSATION
90OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
FINANCIALSTATEMENTSIndependent Auditors' Report to the Members 91FINANCIAL STATEMENTS
Statement of Comprehensive Income 93Statement of Financial Position 93Statement of Changes to Reserve 94Statement of Cash Flows 94Notes to the Financial Statements 95
91OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
92OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
93OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018
OFFICE OF UTILITIES REGULATIONFINANCIAL STATEMENTS 2017/2018
Page 4 OFFICE OF UTILITIES REGULATION
STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH 2018
(Restated) Note 2018 2017 $’000 $’000 REVENUE 6 721,636 717,054* Other operating income 7 9,988 6,068 731,624 723,122* Administrative and other expenses 8 (715,201) (746,021) 16,423 ( 22,899) Interest income 19,486 18,254 NET SURPLUS/(DEFICIT) 35,909 ( 4,645) OTHER COMPREHENSIVE INCOME: Items that will not be reclassified to statement of income – Remeasurement (loss)/gain of the defined benefit obligation ( 51,514) 6,983 Remeasurement loss of the pension plan assets ( 16,999) ( 9,780) ( 68,513) ( 2,797) TOTAL COMPREHENSIVE INCOME ( 32,604) ( 7,442)* * Restated
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OFFICE OF UTILITIES REGULATION FINANCIAL STATEMENTS 2017/2018
Page 6 OFFICE OF UTILITIES REGULATION
STATEMENT OF CHANGES IN RESERVES
YEAR ENDED 31 MARCH 2018
Retirement Retained Benefit Reserve Earnings Total $’000 $’000 $’000 BALANCE AT 1 APRIL 2016 (As previously stated) 74,312 479,844 554,156 Prior year adjustment (note 24) - (113,850) (113,850) BALANCE AT 1 APRIL 2016 (Restated) 74,312 365,994 440,306 TOTAL COMPREHENSIVE INCOME Net deficit - ( 4,645) ( 4,645) Other comprehensive income ( 2,797) - ( 2,797) ( 2,797) ( 4,645) ( 7,442) TRANSFER BETWEEN RESERVES Transfer to retirement benefit reserve 12,709 ( 12,709) - . 9,912 ( 17,354) ( 7,442) BALANCE AT 31 MARCH 2017 (Restated) 84,224 348,640 432,864 TOTAL COMPREHENSIVE INCOME Net surplus - 35,909 35,909 Other comprehensive income (68,513) - ( 68,513) (68,513) 35,909 ( 32,604) TRANSFER BETWEEN RESERVES Transfer to retirement benefit reserve 15,085 ( 15,085) - . (53,428) 20,824 ( 32,604) BALANCE AT 31 MARCH 2018 30,796 369,464 400,260
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STATEMENT OF CASH FLOWS
YEAR ENDED 31 MARCH 2018
(Restated) 2018 2017 $’000 $’000 CASH FLOWS FROM OPERATING ACTIVITIES: Net surplus/(deficit) 35,909 ( 4,645)* Items not affecting cash resources: Depreciation 20,401 17,377 Retirement benefit expense 853 3,213 Interest income ( 19,486) ( 18,254) Exchange loss/(gain) on foreign balances 2,239 ( 1,933) Deferred income 18,786 23,600* Movement in bad debt provision ( 13,997) ( 13,100)
Gain on disposal of property, plant and equipment ( 118) ( 4,135). 44,587 2,123 Changes in operating assets and liabilities: Receivables ( 43,292) 40,134 Payables 28,976 ( 49,086) Taxation recoverable ( 4,714) ( 4,579) Retirement benefit contributions paid ( 15,938) ( 15,922) Cash provided by/(used in) operating activities 9,619 ( 27,330) CASH FLOWS FROM INVESTING ACTIVITIES: Interest received 18,945 18,497 Proceeds from disposal of property, plant and equipment 118 4,135 Purchase of property, plant and equipment ( 27,769) ( 32,466) Short term investments ( 41,960) ( 46,462) Cash used in investing activities ( 50,666) ( 56,296) DECREASE IN CASH AND CASH EQUIVALENTS ( 41,047) ( 83,626) Exchange (loss)/gain on foreign cash balances ( 1,398) 1,933 Cash and cash equivalents at beginning of year 423,121 504,814 CASH AND CASH EQUIVALENTS AT END OF YEAR (note 16) 380,676 423,121 * Restated
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31 MARCH 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(a) Basis of preparation (cont’d) The preparation of financial statements in conformity with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the organization’s accounting policies. Although these estimates are based on management’s best knowledge of current events and action, actual results could differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4.
New, revised and amended standards and interpretations that became effective during the year Certain new standards, interpretations and amendments to existing standards have been published that became effective during the current financial year. The organization has assessed the relevance of all such new standards, interpretations and amendments and has concluded that there are no new standards, interpretations and amendments which are immediately relevant to its operations. New standards, amendments and interpretations not yet effective and not early adopted
The following new standards, amendments and interpretations, which are not yet effective and have not been adopted early in these financial statements, will or may have an effect on the organization’s future financial statements:
IFRS 9, 'Financial Instruments', (effective for accounting periods beginning on or after 1 January 2018). The standard addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the existing guidance in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidance on the classification and measurement of financial assets and liabilities, including a new expected credit loss model for calculating impairment of financial assets and the new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39. Although the permissible measurement bases for financial assets – amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL) - are similar to IAS 39, the criteria for classification into the appropriate measurement category are significantly different. IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (ECL) model, which means that a loss event will no longer need to occur before an impairment allowance is recognised.
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NOTES TO THE FINANCIAL STATEMENTS
31 MARCH 2018
1. IDENTIFICATION AND PRINCIPAL ACTIVITY: (a) The Office of Utilities Regulation (OUR) was established by the Office of
Utilities Regulation Act 1995, which has since been amended by the Office of Utilities Regulation (Amendment) Act, 2000 and 2015. The registered office of the organization is 36 Trafalgar Road, Kingston 10.
(b) The main activity of the organization is regulating the provision of utility services
throughout Jamaica in the following sectors:
Electricity Telecommunications Water and sewage
This includes receiving and processing all applications for licenses to provide utility services as defined under the Act, set rates where applicable and to monitor the operations of such utilities, ensuring that consumers are provided with adequate levels of service, that the needs of the community are met and that the environment is protected.
(c) The OUR is exempt from income tax pursuant to section 12 (b) of the Income Tax Act.
The organization is designated a tax withholding entity under the General Consumption Tax Act.
2. REPORTING CURRENCY:
Items included in the financial statements of the organization are measured using the currency of the primary economic environment in which the organization operates (‘the functional currency’). These financial statements are presented in Jamaican dollars, which is considered the organization’s functional and presentation currency.
3. SIGNIFICANT ACCOUNTING POLICIES:
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
(a) Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), and have been prepared under the historical cost convention. They are also prepared in accordance with the requirements of the Office of Utilities Regulation Act.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(a) Basis of preparation (cont’d) New standards, amendments and interpretations not yet effective and not early adopted (cont’d)
IFRS 9, 'Financial Instruments', (effective for accounting periods beginning on or after 1 January 2018) (cont’d)
There is a ‘three stage’ approach which is based on the change in credit quality of financial assets since initial recognition. In practice, the new rules mean that entities have to record an immediate loss equal to the 12-month ECL on initial recognition of financial assets that are credit impaired (or lifetime ECL for trade receivables). Where there has been a significant increase in credit risk, impairment is measured using lifetime ECL rather than 12-month ECL. The model includes operational simplifications for lease and trade receivables.
IFRS 15, 'Revenue from Contracts with Customers', (effective for accounting periods beginning on or after 1 January 2018). The standard deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity's contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction Contracts' and related interpretations.
IFRS 16, 'Leases', (effective for accounting periods beginning on or after 1 January 2019). The new standard eliminates the classification by a lessee of leases as either operating or finance. Instead all leases are treated in a similar way to finance leases in accordance with IAS 17. Leases are now recorded in the statement of financial position by recognizing a liability for the present value of its obligation to make future lease payments with an asset (comprised of the amount of the lease liability plus certain other amounts) either being disclosed separately in the statement of financial position (within right-of-use assets) or together with property, plant and equipment. The most significant effect of the new requirements will be an increase in recognized lease assets and financial liabilities. An optional exemption exists for short term and low-value leases. The accounting by lessors will not significantly change.
The organization is assessing the impact that these standards and amendments to standards will have on the financial statements when they are adopted.
(b) Foreign currency translation
Foreign currency transactions are accounted for at the exchange rates prevailing at the dates of the transactions. Monetary items denominated in foreign currency are translated to Jamaican dollars using the closing rate as at the reporting date.
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NOTES TO THE FINANCIAL STATEMENTS
31 MARCH 2018
3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(b) Foreign currency translation (cont’d)
Exchange differences arising from the settlement of transactions at rates different from those at the dates of the transactions and unrealized foreign exchange differences on unsettled foreign currency monetary assets and liabilities are recognized in the statement of comprehensive income.
(c) Property, plant and equipment
Items of property, plant and equipment are recorded at historical or deemed cost, less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the organization and the cost of the item can be measured reliably. All repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Depreciation is calculated on the straight line basis at such rates as will write off the carrying value of the assets over the period of their expected useful lives. Annual rates of property, plant and equipment are as follows: Leasehold improvements 10% Furniture and fixtures 10% Office machinery and equipment 10% Motor vehicles 20% Computer equipment 33 1/3% Gains and losses on disposals of property, plant and equipment are determined by reference to their carrying amounts and are taken into account in determining profit or loss.
(d) Impairment of non-current assets
Property, plant and equipment and other non-current assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the greater of an asset’s net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level for which, there are separately identified cash flows. Non financial assets that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
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31 MARCH 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(e) Financial instruments (cont’d)
Financial assets (cont’d) (ii) Recognition and Measurement
Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the organization commits to purchase or sell the asset. Financial assets are initially recognized at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the organization has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets are subsequently carried at fair value, with fair value gains or losses being recorded in other comprehensive income. Loans and receivables are subsequently carried at amortised cost using the effective interest method, less provision for impairment.
Effective interest method
The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees on points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts), through the expected life of the financial asset, or where appropriate, a shorter period.
The organization assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired.
For loans and receivables impairment provisions are recognized when there is objective evidence that the organization will not collect all of the amounts due under the terms receivable. The amount of the provision is the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables which are reported net, such provisions are recorded in a separate allowance account with the loss being recognized in the statement of comprehensive income. On confirmation that the trade receivable is uncollectible, it is written off against the associated allowance. Subsequent recoveries of amounts previously written off are credited to the statement of comprehensive income.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(e) Financial instruments
A financial instrument is any contract that gives rise to both a financial asset in one entity and a financial liability or equity in another entity.
Financial assets (i) Classification
The organization classifies its financial assets in the following categories: loans and receivables and available-for-sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to customers (e.g. trade receivables) but also incorporate other types of contractual monetary asset.
The organization’s loans and receivables comprise trade and other receivables and cash and cash equivalents. They are included in current assets, except for maturities greater than 12 months after the reporting date. These are classified as non-current assets.
Cash and cash equivalents are carried in the statement of financial position at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash at bank and in hand and short term deposits with original maturity of three months or less.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the financial asset within 12 months of the reporting date. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale.
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31 MARCH 2018 3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(e) Financial instruments (cont’d)
Financial liabilities
The organization’s financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost using the effective interest method. At the reporting date, the following items were classified as financial liabilities: non-current liability and payables.
(f) Borrowings
Borrowings are recognized initially at the value of proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Any difference between proceeds, net of transaction costs, and the redemption value is recognized in the statement of comprehensive income over the period of the borrowings.
(g) Employee benefits Defined contribution plans
The organization operates a defined benefit plan, the assets of which are generally held in a separate trustee-administered fund. A defined benefit plan is a pension plan that defines an amount of pension benefit to be provided, usually as a function of one or more factors such as age, years of service or compensation. The plan is generally funded through payments to a trustee-administered fund, determined by periodic actuarial calculations.
The asset or liability recognised in the statement of financial position in respect of the defined benefit pension plan is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets, together with adjustments for past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. Actuarial gains and losses arising from Experience Adjustments and changes in actuarial assumptions are charged or credited to other comprehensive income in the period in which they arise. Other Other employee benefits that are expected to be settled wholly within 12 months after the end of the reporting period are presented as current liabilities.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(g) Employee benefits (cont’d)
Other (cont’d) A provision is made for the estimated liability for untaken vacation leave as a result of services rendered by employees up to the end of the reporting period.
(h) Provisions
Provisions are recognized when the organization has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognized for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as interest expense.
(i) Leases
Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the statement of comprehensive income on a straight line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which the termination takes place.
(j) Revenue recognition Regulatory fees are recognized in the statement of comprehensive income on an accrual basis. Regulatory fees are measured at the fair value of the consideration receivable.
Interest income is recognized for all interest bearing instruments on an accrual basis unless collectability is doubtful.
Deferred income Deferred income is recognized in the statement of comprehensive income as income earmarked, based on the organization’s approved budget, for specified projects that have either not commenced or have been delayed after commencement and which, after management’s review, will not be completed within the financial year for which completion was projected (note 24).
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4. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES (CONT’D): (b) Key sources of estimation uncertainty (cont’d)
(i) Retirement benefit obligations
The cost of these benefits and the present value of the future obligations depend on a number of factors that are determined by actuaries using a number of assumptions. The assumptions used in determining the net periodic cost or income for retirement benefits include the expected long-term rate of return on the relevant plan assets and the discount rate. Any changes in these assumptions will impact the net periodic cost or income recorded for retirement benefits and may affect planned funding of the pension plan. The expected return on plan assets assumption is determined on a uniform basis, considering long-term historical returns, asset allocation and future estimates of long-term investment returns. The organization determines the appropriate discount rate at the end of each year, which represents the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the retirement benefit obligations. In determining the appropriate discount rate, the organization considered interest rate of high-quality Government of Jamaica bonds that are denominated in the currency in which the benefits will be paid, and have terms to maturity approximating the terms of the related obligations. Other key assumptions for the retirement benefits are based on current market conditions.
(ii) Depreciable assets
Estimates of the useful life and the residual value of property, plant and equipment are required in order to apply an adequate rate of transferring the economic benefits embodied in these assets in the relevant periods. The organization applies a variety of methods in an effort to arrive at these estimates from which actual results may vary. Actual variations in estimated useful lives and residual values are reflected in the statement of comprehensive income through impairment or adjusted depreciation provisions.
5. FINANCIAL RISK MANAGEMENT:
The organization is exposed through its operations to the following financial risks:
- Credit risk - Fair value or cash flow interest rate risk - Foreign exchange risk - Other market price, and - Liquidity risk
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3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D):
(k) Grants The organization receives the following types of grants: (i) Revenue grants
Revenue grant which covers operating expenses is recognized as income in the statement of comprehensive income over the period necessary to match it with the related cost for which it is intended to compensate. Any unspent portion will be written back to income.
(ii) Capital grants
Capital grant is received for the exclusive purpose to aid in the acquisition of property, plant and equipment. Capital grant is recognized as deferred income initially and upon acquisition of property, plant and equipment is written off to the statement of comprehensive income as income on a systematic basis which coincides with the estimated useful lives of the related assets and which is consistent with the depreciation policy. Any unspent portion will be written back to income.
4. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES:
Judgements and estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. (a) Critical judgements in applying the organization’s accounting policies
In the process of applying the organization’s accounting policies, management has not made any judgements that it believes would cause a significant impact on the amounts recognized in the financial statements.
(b) Key sources of estimation uncertainty
The organization makes certain estimates and assumptions regarding the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
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5. FINANCIAL RISK MANAGEMENT (CONT’D):
The organization is exposed to risks that arise from its use of financial instruments. This note describes the organization’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the organization’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. (a) Principal financial instruments
The principal financial instruments used by the organization, from which financial instrument risk arises, are as follows:
- Receivables - Cash and cash equivalents - Short term investments - Long term receivable - Payables - Non-current liability
(b) Financial instruments by category
Financial assets Loans and receivables Available-for-sale 2018 2017 2018 2017 $’000 $’000 $’000 $’000
Short term investments - - 106,736 65,617 Cash and cash equivalents 380,676 423,121 - - Receivables (excluding non-financial assets of $23,288 (2017- $29,348) 129,793 62,641 - - Long term receivable 4,909 8,171 - -
Total financial assets 515,378 493,933 106,736 65,617
Financial liabilities Financial liabilities at amortised cost 2018 2017 $’000 $’000
Payables (excluding non-financial payables of $94,218 (2017 - $82,631) 57,782 40,393 Non-current liability 64,367 64,367 Total financial liabilities 122,149 104,760
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5. FINANCIAL RISK MANAGEMENT (CONT’D):
(c) Financial instruments not measured at fair value
The fair values of financial instruments that are not traded in an active market and those that are traded in an active market for which there are no quoted market prices are deemed to be/determined as follows:
(i) The carrying values less any impairment provision of financial assets and
liabilities with a maturity of less than one year are estimated to approximate their fair values due to the short term nature and maturity of these instruments. These financial assets and liabilities are short term investments, cash and cash equivalents, trade receivables and payables.
(ii) The carrying value of the advances from the Government of Jamaica approximates its fair value as determined by the terms and conditions and repayment dates in the agreement (note 23).
(d) Financial risk factors
The Office has overall responsibility for the determination of the organization’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the organization’s finance function. The Office receives monthly reports from the Financial Controller through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The organization’s internal auditors also review the risk management policies and processes and report their findings to the Audit Committee.
The Office has established committees/departments for managing and monitoring risks, as follows:
Finance Department
The Finance Department is responsible for managing the organization’s assets and liabilities and the overall financial structure. It is also primarily responsible for managing the cash flow and liquidity risks of the organization. The department ensures compliance with statutory requirements and in particular, the provisions of the Public Bodies Management and Accountability Act (PBMA), the Financial Administration and Audit Act (FAA), Income Tax Act, and the Government’s Procurement guidelines.
Enterprise Risk Management Team The Audit Committee of the Office provides oversight to the operations of the Enterprise Risk Management Team which provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, credit risk, interest rate risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
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5. FINANCIAL RISK MANAGEMENT (CONT’D):
(d) Financial risk factors (cont’d)
(i) Market risk (cont’d) Currency risk (cont’d) Foreign currency sensitivity The following table indicates the sensitivity of net surplus to changes in foreign exchange rates. The change in currency rate below represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis represents outstanding foreign currency denominated short term investments, cash and cash equivalents, other receivables and payables balances and adjusts their translation at the year-end for 4% (2017 – 6%) depreciation and a 2% (2017 – 1%) appreciation of the Jamaican dollar against the US dollar. The changes below would have no impact on other components of reserves.
Effect on Effect on % Change in Net surplus % Change in Net surplus Currency Rate 31 March Currency Rate 31 March 2018 2018 2017 2017 $’000 $’000 Currency:
USD -4 3,206 -6 5,037 USD +2 (1,603) +1 ( 839)
Price risk Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. As the organization does not have a significant exposure, market price fluctuations are not expected to have a material effect on the net results. Cash flow and fair value interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Floating rate instruments expose the organization to cash flow interest rate risk, whereas fixed rate instruments expose the organization to fair value interest rate risk.
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5. FINANCIAL RISK MANAGEMENT (CONT’D):
(d) Financial risk factors (cont’d)
The Office has established committees/departments for managing and monitoring risks, as follows (cont’d):
Audit Committee
The Audit Committee oversees how management monitors compliance with the organization’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risk faced by the organization. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes periodic reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
The overall objective of the Office is to set policies that seek to reduce risk as far as possible without unduly affecting the organization’s flexibility. Further details regarding these policies are set out below:
(i) Market risk
Market risk arises from the organization's use of interest bearing, tradable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk). Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises from US dollar short term investments, cash and cash equivalents, other receivables and payables. The organization manages this risk by ensuring that the net exposure in foreign assets and liabilities is kept to an acceptable level by monitoring currency positions. The organization further manages this risk by maximizing foreign currency earnings and holding net foreign currency assets. Concentration of currency risk The organization is exposed to foreign currency risk in respect of US dollars as follows:
2018 2018 2017 2017 J$’000 US$’000 J$’000 US$’000 Short term investments 46,900 376 - -
Cash and cash equivalents 45,736 367 84,221 659 Other receivables - - 137 1 Payables (12,482) (101) ( 408) ( 3)
80,154 642 83,950 657
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5. FINANCIAL RISK MANAGEMENT (CONT’D):
(d) Financial risk factors (cont’d) (i) Market risk (cont’d)
Cash flow and fair value interest rate risk (cont’d) Short term investments and cash and cash equivalents are the only interest bearing assets within the organization. The organization’s short term investments and cash and cash equivalents are due to mature within 12 months and 3 months of the reporting date respectively. Interest rate sensitivity There is no significant exposure to interest rate risk on short term investments, as these deposits have a short term to maturity and are constantly reinvested at current market rates.
(ii) Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Credit risk arises from short term investments, trade and other receivables and cash and cash equivalents. Trade receivables The organization is a regulatory body and its customer base consists of entities falling within the utility sectors. The organization has policies in place to ensure that these entities are legitimate and have a strong financial base. The organization manages its credit risk by screening its licensees and putting in place procedures geared towards recovery of amounts owed. The organization establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade receivables. The organization’s average credit period is 30 days. Allowances for impaired trade receivables are recognized based on an estimate of amounts that would be irrecoverable which is determined by past default experience and expected receipts. Cash and cash equivalents Cash transactions are limited to high credit quality financial institutions. The organization has policies that limit the amount of credit exposure to any one financial institution.
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5. FINANCIAL RISK MANAGEMENT (CONT’D):
(d) Financial risk factors (cont’d)
(ii) Credit risk (cont’d)
Maximum exposure to credit risk The maximum exposure to credit risk is equal to the carrying amount of trade and other receivables, short term investments and cash and cash equivalents in the statement of financial position. The aging of trade receivables is:
2018 2017 $’000 $’000
0 – 30 days 68,942 5,466 31 – 60 days 15,684 13,809 61 – 90 days 7,377 13,561 91 days and over 32,115 39,498
124,118 72,334
Trade receivables that are past due but not impaired As at 31 March 2018, trade receivables of $50,543,000 (2017 - $48,238,000) were past due but not impaired. These relate to independent regulated entities for whom there is no recent history of default. Trade receivables that are past due and impaired As of 31 March 2018, the organization had trade receivables of $4,633,000 (2017 - $18,630,000) that were impaired. The amount of the provision was $4,633,000 (2017 - $18,630,000). These receivables were aged over 90 days. Movements on the provision for impairment of trade receivables are as follows:
2018 2017 $’000 $’000
At 1 April 18,630 31,730 Provision for receivables impairment 3,783 7,821 Bad debts recovered, previously provided for ( 300) - Receivables written off during the year as uncollectible (17,480) (20,921) At 31 March 4,633 18,630
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5. FINANCIAL RISK MANAGEMENT (CONT’D):
(d) Financial risk factors (cont’d)
(iii) Liquidity risk (cont’d) Liquidity risk management process The organization’s liquidity risk management process, as carried out within the organization and monitored by the Finance Department, includes: (i) Monitoring future cash flows and liquidity on a daily basis. (ii) Maintaining a portfolio of short term deposit balances that can easily
be liquidated as protection against any unforeseen interruption to cash flow.
(iii) Maintaining committed lines of credit. (iv) Optimizing cash returns on investments. Cash flows of financial liabilities The maturity profile of the organization’s financial liabilities, based on contractual undiscounted payments, is as follows:
Within 1 1 to 2 2 to 5 Year Years Years Total
$’000 $’000 $’000 $’000 31 March 2018 Payables 45,300 - - 45,300 Long term liability 51,810 12,557 - 64,367 Total financial liabilities (contractual maturity dates) 97,110 12,557 - 109,667
Within 1 1 to 2 2 to 5 Year Years Years Total
$’000 $’000 $’000 $’000 31 March 2017 Payables 40,393 - - 40,393 Long term liability - - 64,367 64,367 Total financial liabilities (contractual maturity dates) 40,393 - 64,367 104,760
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5. FINANCIAL RISK MANAGEMENT (CONT’D):
(d) Financial risk factors (cont’d)
(ii) Credit risk (cont’d) Trade receivables that are past due and impaired (cont’d) The creation and release of provision for impaired receivables have been included in expenses in the statement of comprehensive income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. Impairment estimates have been adjusted based on actual collection patterns. Concentration of risk – trade receivables
The following table summarizes the organization’s credit exposure for trade receivables at their carrying amounts, as categorized by the utility sector:
2018 2017 $’000 $’000
Telecommunications 24,914 20,915 Electricity 28,157 56 Water 64,399 47,005 Other 6,648 4,358 124,118 72,334 Less: Provision for credit losses ( 4,633) (18,630)
119,485 53,704 (iii) Liquidity risk Liquidity risk is the risk that the organization will be unable to meet its
payment obligations associated with its financial liabilities when they fall due. Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, and the availability of funding through an adequate amount of committed credit facilities.
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6. REVENUE: (Restated) 2018 2017 $’000 $’000 Regulatory fees 740,302 738,366 Processing fees 120 2,288 740,422 740,654 Less: deferred income ( 18,786) ( 23,600) 721,636 717,054 The following are the major contributors to revenue: 2018 2017 % % Telecommunications sector 40 43 Electricity sector 42 41 Water sector 18 16 7. OTHER OPERATING INCOME: 2018 2017 $’000 $’000 Foreign exchange (loss)/gain ( 1,712) 1,933 Gain on disposal of property, plant and equipment 118 4,135 Other income 11,582 - . 9,988 6,068
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8. EXPENSES BY NATURE: Total direct and administrative expenses: 2018 2017 $’000 $’000
Staff costs (note 9) 495,459 482,219 Office members’ remuneration 9,350 11,750 Telephone 15,010 15,087 Foreign travel 15,691 9,602 Audit fee 1,020 1,216 Motor vehicle expenses 3,816 3,766 Legal and professional fees 58,790 70,527 Bad debts written off 3,783 7,821 Public relations 14,659 31,969 Customer expenses 4,671 5,014 Subscriptions 22,807 29,125 Office rental 25,146 25,574 Repairs and maintenance 6,469 6,854 Advertising and promotion 7,382 3,530 Stationery, printing and postage 1,973 2,011 Office and general expenses 9,177 10,561 OOCUR conference ( 500) 12,018 Gas conference 97 - Depreciation 20,401 17,377
715,201 746,021 9. STAFF COSTS: 2018 2017 $’000 $’000 Salaries, wages and statutory contributions 379,754 360,543 Pension (note 11) 853 3,213 Group life insurance 3,542 4,192 Health insurance 22,464 19,878 Staff training 36,194 40,058 Staff welfare 22,780 20,663 Travelling and subsistence 28,166 31,649 Other staff costs 1,706 2,023 495,459 482,219 The number of persons employed by the organization at the end of the year was 69 (2017 – 72).
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11. POST EMPLOYMENT BENEFIT ASSETS: 2018 2017 $’000 $’000
The amounts recognized in the statement of financial position are determined as follows: Present value of funded obligations (250,593) (206,441) Fair value of plan assets 281,389 290,665 Assets in the statement of financial position 30,796 84,224 The organization operates in a defined benefit plan, which is open to all permanent employees and administered for the Office of Utilities Regulation by Guardian Life Limited. Retirement benefits are based on the average annual earnings in the last three years to retirement, and death benefits on members’ accumulated contributions. The plan is valued annually by independent actuaries, Eckler Consultants + Actuaries, using the Projected Unit Credit Method. The latest actuarial valuation was carried out as at 31 March 2018. The movement in the present value of funded obligations over the year is as follows:
2018 2017
$’000 $’000
Balance at beginning of year 206,441 189,735 Current service cost 8,105 6,880 Interest cost 20,238 16,903 234,784 213,518 Remeasurements – Loss from change in financial assumptions 59,108 2,011 Experience gains ( 7,594) ( 8,994) 286,298 206,535 Members’ contributions 13,510 14,034 Benefits paid ( 49,215) ( 14,128) Balance at the end of the year 250,593 206,441
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10. PROPERTY, PLANT AND EQUIPMENT: Leasehold Furniture Office Computer & Motor Improvements & Fixtures Equipment Accessories Vehicles Total $’000 $’000 $’000 $’000 $’000 $’000 At cost - 1 April 2016 13,519 12,476 16,733 67,593 24,795 135,116 Additions - 3,046 387 3,367 25,666 32,466 Disposal - - - - ( 11,887) ( 11,887) 31 March 2017 13,519 15,522 17,120 70,960 38,574 155,695 Additions - 259 1,099 26,411 - 27,769 Disposal - - - ( 288) - ( 288) 31 March 2018 13,519 15,781 18,219 97,083 38,574 183,176 Depreciation - 1 April 2016 10,057 9,732 7,804 55,054 17,512 100,159 Charge for the year 982 729 1,337 10,279 4,050 17,377 Eliminated on disposal - - - - (11,887) ( 11,887) 31 March 2017 11,039 10,461 9,141 65,333 9,675 105,649 Charge for the year 964 843 1,412 10,504 6,678 20,401 Eliminated on disposal - - - ( 288) - ( 288) 31 March 2018 12,003 11,304 10,553 75,549 16,353 125,762 Net Book Value - 31 March 2018 1,516 4,477 7,666 21,534 22,221 57,414 31 March 2017 2,480 5,061 7,979 5,627 28,899 50,046
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11. POST EMPLOYMENT BENEFIT ASSETS (CONT’D):
The movement in the fair value of the plan assets during the year is as follows:
2018 2017 $’000 $’000
Balance at beginning of year 290,665 264,047 Interest income 28,809 24,192 Remeasurements – Return on plan assets, excluding amounts included in interest income ( 16,999) ( 9,780) Members’ contributions 13,510 14,034 Employer’s contributions 15,938 15,922 Benefits paid ( 49,215) ( 14,128) Administrative fees ( 1,319) ( 3,622) Balance at end of year 281,389 290,665
The amounts recognized in the statement of comprehensive income are as follows:
2018 2017 $’000 $’000
Current service cost 8,105 6,880 Interest cost on obligations 20,238 16,903 Interest income on plan assets (28,809) (24,192) Administrative fees 1,319 3,622 Total included in staff costs 853 3,213
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11. POST EMPLOYMENT BENEFIT ASSETS (CONT’D):
The distribution of the plan assets was as follows:
2018 2017 % %
Deposit Administration Fund - Equities 13.11 10.61 JA$ bonds 66.09 69.91
US$ bonds 7.73 8.04 Short-term deposits 4.31 1.97 Cash and cash equivalents 4.99 6.15 Real estate 3.77 3.32 100 100
The expected return on plan assets was determined by considering the expected returns available on the assets underlying the current investment portfolio. Expected yields on fixed interest investments are based on gross redemption yields as at the end of the reporting period. Expected returns on equity and property investments reflect long-term real rates of return experienced in the respective markets.
Expected contributions to the post employment plan for the year ending 31 March 2019 is $15,800,000 (2018 actual - $15,938,000). The actual return on the plan assets was negative $10,491,000 (2017 – positive $10,789,000).
The principal actuarial assumptions used were as follows: 2018 2017 % p.a. % p.a.
Discount rate 7.5 9.5 Inflation rate 5.5 6.5 Future salary increases 4.5 6.5
Post-employment mortality for active members as well as mortality for pensioners and deferred pensioners is based on the 1994 Group Annuity Mortality Tables (GAM 94), projected to the measurement date, using Society of Actuaries Scale AA.
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13. RECEIVABLES: 2018 2017 $’000 $’000 Trade receivables 124,118 72,334 Provision for doubtful debts ( 4,633) (18,630) 119,485 53,704 Due from employees 1,600 3,662 Deposits 13,560 10,984 Prepayments 12,519 18,263 Other 5,917 5,376 153,081 91,989 14. TAXATION RECOVERABLE:
This balance represents withholding tax arising on short term investments and cash and cash equivalents.
15. SHORT TERM INVESTMENTS:
This represents securities purchased under resale agreements with original maturities greater than 90 days but less than one (1) year. The weighted average interest rate on short term investments denominated in Jamaican dollars and United States dollars was 5.16% and 2.10%, respectively (2017 - 5.81% and nil, respectively). These investments mature within twelve months (2017 – four months).
16. CASH AND CASH EQUIVALENTS:
For the purpose of the cash flow statement, cash and cash equivalents comprise short term deposits, cash at bank and cash in hand as follows:
2018 2017 $’000 $’000 Short term deposits 327,511 346,976 Cash at bank 52,995 75,994 Cash in hand 170 151 380,676 423,121
The weighted average interest rate on short term deposits denominated in Jamaican dollars and United States dollars was 3.53% and 1.35%, respectively (2017 - 5.81% and 1.75%, respectively) and these deposits mature within three months (2017 – three months). There are no non-cash transactions included in the statement of cash flows.
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11. POST EMPLOYMENT BENEFIT ASSETS (CONT’D):
The in-service specimen rates (number of occurrences per 1,000 members) are as follows: Males Females __________________________________________________________________________________ Withdrawals Ill-health Deaths in Withdrawals Ill-health Deaths in Age from service retirements service from service retirements service 20 - - 0.320 - - 0.193 25 - - 0.519 - - 0.207 30 - - 0.710 - - 0.276 35 - - 0.755 - - 0.367 40 - - 0.884 - - 0.493 45 - - 1.153 - - 0.661 50 - - 1.668 - - 0.946 55 - - 2.792 - - 1.892 60 - - 5.416 - - 3.936 The five-year trend for the fair value of plan assets, the defined benefit obligation, the surplus
in the plan and the five-year experience adjustments for plan assets and liabilities is as follows:
2018 2017 2016 2015 2014 $’000 $’000 $’000 $’000 $’000 Fair value of plan assets 281,389 290,665 264,047 240,824 206,454 Defined benefit obligation (250,593) (206,441) (189,735) (166,514) (142,556)
Surplus 30,796 84,224 74,312 74,310 63,898
Experience adjustments: Gain/(loss) -
Arising on plan assets ( 16,999) ( 9,780) ( 9,788) ( 6,099) ( 8,913) Arising on plan liabilities 7,594 8,994 1,897 3,434 1,792
12. LONG TERM RECEIVABLE:
This represents outstanding regulatory fees for the period 2007 – 2010 from the Jamaica Urban Transit Company Limited (JUTC).
On 29 September 2015 the organization was awarded a successful judgement by the Supreme Court in the amount of $16,000,000. As at 31 March 2018, JUTC owed $8,699,000 (2017 - $10,000,000). An agreement between the organization and JUTC was signed on 7 June 2017 where the amount due is repayable over thirty-six (36) months and attracts interest at 5% per annum.
The current portion of $3,790,000 (2017 - $ 1,829,000) is included in receivables.
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31 MARCH 2018 17. ADVANCES FROM THE GOVERNMENT OF JAMAICA: 2018 2017 $’000 $’000 At 31 March 64,367 64,367 Less current portion (51,810) - . 12,557 64,367
The amounts represent advances from the Government of Jamaica. The advances were to fund the start-up costs of the Office of Utilities Regulation. There is an agreement between the organization and the Government of Jamaica dated 28 April 2018 outlining the repayment of the advances (note 23).
18. PAYABLES: 2018 2017 $’000 $’000 Refundable bonds 408 408 Accrued vacation pay 35,141 32,022 Gratuity payable 29,085 35,539 Accounts payable 29,117 12,635 Other accruals 58,249 42,420 152,000 123,024 19. DEFERRED INCOME: 2018 2017 $’000 $’000 At 1 April 137,450 113,850 Project income deferred 34,374 23,600 Transferred to revenue ( 15,588) - . At 31 March 156,236 137,450 20. RELATED PARTY TRANSACTIONS AND BALANCES:
(a) Transactions between the organization and its related parties
Regulatory fees - During the year, the organization billed regulatory fees of $127,397,000 and $312,217,000 (2017 - $111,112,000 and $302,573,000) to the National Water Commission and the Jamaican Public Service Company Limited, respectively.
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20. RELATED PARTY TRANSACTIONS AND BALANCES (CONT’D):
(b) Key management compensation 2018 2017 $’000 $’000
Salaries and other short term employee benefits 121,960 114,267 Payroll taxes – Employer’s portion 6,099 4,956 Pension 1,311 2,321 129,370 121,544 Office members’ emoluments - Fees 9,350 11,750. Management remuneration (included above) 22,395 22,876 31,745 34,626
(c) Year-end balances arising from transactions with related parties 2018 2017 $’000 $’000
Due from – National Water Commission 53,226 40,560 Jamaica Public Service Company Limited 26,018 - Jamaica Urban Transit Company Limited – Long term 4,909 8,171
- Short term 3,790 1,829 87,943 50,560
21. LEASE COMMITMENTS: Future lease payments under operating leases at 31 March 2018 were as follows: Minimum Lease Present Value of Payments Minimum Lease Payments 2018 2017 2018 2017 $’000 $’000 $’000 $’000 No later than one year 24,122 24,122 20,102 20,102 Later than one year 30,153 54,276 20,753 34,045 54,275 78,398 40,855 54,147
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22. LITIGATIONS (CONT’D):
(c) Supreme Court Civil Appeal No. 122 of 2012 & Claim No. 2011 HCV 05614
Dennis Meadows, Betty Ann Blaine & Cyrus Rousseau v the Attorney General of Jamaica, Jamaica Public Service Company Limited & Office of Utilities Regulation
The claimants filed suit against the Attorney General of Jamaica (AG), Jamaica Public Service Company Limited (JPS) and the OUR challenging the legality of the JPS’s All-Island Electric Licence, 2001 (Licence). The claimants argued that the exclusivity of the Licence granted to JPS is void, as it is outside the scope of section 3 of the Electric Lighting Act and/or it is an unlawful fetter of the Minister's discretion. The claimants also contended that the OUR acted unlawfully in making a recommendation for the grant of the licence. In the Supreme Court, judgment was granted in part, in favour of the claimants declaring that the Licence was valid but the condition upon which it was granted, that is exclusively, was not. Judgment was also granted in favour of the OUR. The Supreme Court judgment was appealed by JPS and counter-appealed by the claimants. The Court of Appeal, reversed the Supreme Court ruling against JPS and the AG, upheld the ruling relative to the OUR and refused to overturn the award of costs to the OUR. On the hearing of an application for leave to appeal to the Privy Council filed by the claimants, the Court of Appeal with respect to the OUR refused leave and in relation to JPS and the AG, granted leave to appeal accordingly.
The OUR has pursued the recovery of its costs awarded in the Supreme Court and is awaiting the signed Amended Default Costs Certificate in the sum of $3,838,162.95. In relation to the costs awarded in the Court of Appeal, the OUR obtained a Default Costs Certificate in the sum of $5,032,800.00 which was served on the Respondents' Attorney in November 2015.
Status after 31 March 2018:
The OUR’s attorneys continue to follow up with the Supreme Court Registrar for the Amended Default Costs Certificate. The OUR will take the steps necessary to recover all the costs awarded to it.
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22. LITIGATIONS: The following is the legal report from the organization’s attorneys.
(a) RIO-5
Cable & Wireless Jamaica Limited appealed to the Telecommunications Appeal Tribunal against the decision of the OUR dated 19 March 2007 in respect of the Reconsideration Decision on Assessment of RIO 5 and Tariff Schedule RIO-5A ("Indirect Access"). The appeal which was listed for hearing on 27 May 2013 was adjourned to facilitate the parties trying to resolve the matter on their own.
Status after 31 March 2018:
No change in status. The OUR intends to ascertain from Cable & Wireless Jamaica Limited whether it will withdraw the appeal or seek to have it relisted for hearing.
(b) Claim No. 2011 HCV 01117
The Office of Utilities Regulation v Jamaica Urban Transit Company Limited
The OUR filed suit against the Jamaica Urban Transit Company Limited (JUTC) to recover the sum of Twenty-Two Million, Four Hundred and Sixty-Nine Thousand One Hundred and Thirty Dollars ($22,469,130.00) being monies due and owing for outstanding regulatory fees. On 28 September 2015 judgment was entered in the Supreme Court in favour of the OUR in the sum of Sixteen Million Dollars ($16,000,000.00) inclusive of interest and costs. JUTC made payments towards settling the judgment debt in the sum of Six Million Dollars ($6,000,000.00). The OUR requested a status report on payments from JUTC.
On 15 June 2017, the OUR received confirmation of an agreement reached between the OUR and JUTC for the repayment of the outstanding balance of $10M. Pursuant to the agreement, JUTC is to settle the outstanding $10M judgment debt by way of monthly instalments paid over thirty-six (36) months at an interest rate amortized over the said period with payments commencing September 2017. On 13 March 2018, the OUR received the 5th instalment on the payment of the judgment debt in the amount of $299,709.00. JUTC was behind on payments of instalments for February and March 2018.
Status after 31 March 2018:
On 25 April 2018, the OUR received the 6th instalment on the payment of the judgment debt in the amount of $299,709.00. JUTC was behind on payments of instalments for March and April 2018.
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22. LITIGATIONS (CONT’D):
(d) Claim No. 2014 HCV 02345
OUR v Computers & More Limited
The OUR filed a claim against Computers & More Limited (Defendant) for the recovery of the sum of One Million Six Hundred and Fourteen Thousand Dollars ($1,614,000.00) together with the interest for breach of contract, whereby the Defendant agreed to supply twenty (20) Microsoft Surface Pro Tablets and twenty (20) Targus USB 2.0 Docking Stations with Video. A Defence and Counterclaim was filed by Computers & More Limited in which it contends that the Claimant was aware that although the agreement stated that the goods would be delivered within fifteen (15) days of receipt of the purchase order, it would not be delivered as the Surface Pro Tablet was not available in the USA at the time the agreement was signed, and when released; it was only available in limited numbers and therefore it suggested that another similar product be sourced instead and costs were incurred in the attempts to source the product.
The OUR filed a notice of application for summary judgment and to have the defence/statement of case struck out in July 2016. The Case Management Conference and the hearing of the said application which was scheduled to be heard at the Case Management Conference on 7 October 2016 was rescheduled to 17 May 2017. On 17 May 2017, the Supreme Court struck out the Defendant’s defence and entered judgment in favour of the OUR in the sum of $1,614,000 together with interest at 10% per annum from 15 May 2014 to 17 May 2017. Also, summary judgment was entered in favour of the OUR in respect of the Defendant’s counterclaim and costs on the Claim and Counterclaim. The Defendant, on 26 May 2017, appealed the judge’s decision to the Court of Appeal.
Status after 31 March 2018:
We await a date from the Court of Appeal for the Case Management Conference.
(e) Claim No. 2014 HCV 02915
Office of Utilities Regulation v The Contractor General
The OUR on 17 June 2014 applied in the Supreme Court for leave to apply for Judicial Review of the decision of the Contractor General contained in Report of Special Investigation - Right to Supply 360 Megawatts of Power to the National Grid Office of Utilities Regulation, Ministry of Science, Technology, Energy and Mining laid in Parliament on 16 September 2013 which the OUR deemed invalid, unlawful and without legal effect. The matter was heard and the Judge refused to grant the OUR leave to apply for judicial review in respect of the relief of certiorari and indicated that no leave was required in respect of the application for the declarations. The OUR, on 4 May 2016 filed a Fixed Date Claim Form applying for the declarations.
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22. LITIGATIONS (CONT’D):
(e) Claim No. 2014 HCV 02915 (cont’d)
Office of Utilities Regulation v The Contractor General (cont’d)
The matter was scheduled for hearing 3–6 and 9–11 October 2017. The Pre-Trial Review was scheduled for 29 May 2017. At the Pre-Trial Review held on the 29 May 2017, the scheduled trial dates were vacated and a new trial date for hearing was set for the week commencing 30 April 2018. Status after 31 March 2018:
Following discussions between the Director-General and the Contractor-General, it was agreed that the OUR would discontinue the court action. A joint statement explaining this development was issued on or about 24 April 2018 and a Notice of Discontinuance signed on behalf of both parties was filed in the Supreme Court on 25 April 2018, thus ending the suit. Both parties bore their own costs. A bill for legal fees from Livingston, Alexander & Levy in the amount of $1,452,755.00 was submitted on 23 April 2018 which was paid.
(f) Privy Council Appeal No. 0002 of 2016
Jamaica Public Service Company Limited v The All-Island Electricity Appeal Tribunal, Paul Harrison, Derrick McKoy, Derek Jones and the Office of Utilities Regulation
As part of its 2009 Rate Review, JPS submitted a claim to the OUR to recover $3.5 billion dollars paid in retroactive salaries and statutory payments to its workers in a reclassification exercise, plus opportunity cost of $722 million, under the Z-Factor provision of the All-Island Electric Licence, 2001. The OUR denied the claim and JPS appealed the decision to the All-Island Electricity Appeal Tribunal (EAT).
The EAT dismissed JPS’ appeal and confirmed the decision of the OUR. JPS sought and was granted leave to apply for judicial review of the EAT’s decision in the Supreme Court. The OUR sought and was granted permission to be added as an interested party in the matter. In March 2013, the Supreme Court dismissed JPS’ application indicating that there was no evidence presented by JPS that the EAT had acted irrationally, illegally or incorrectly in coming to its decision.
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22. LITIGATIONS (CONT’D):
(g) All-Island Electricity Appeal Tribunal: Appeal No.1 of 2015 (cont’d)
Appeal against Jamaica Public Service Company Limited Tariff Review for the Period 2014 - 2019 Determination Notice Jamaica Public Service Company Limited v Office of Utilities Regulation (cont’d)
In March 2017 the OUR requested JPS to indicate the grounds of appeal it intends to pursue. By letter dated 6 April 2017 JPS indicated that it is minded to withdraw certain grounds of appeal. However, there are some remaining grounds to be litigated. By letter dated 24 August 2017, JPS confirmed the withdrawal of certain grounds and its intention to proceed with the remaining grounds. Subsequently, by letter dated 8 November 2017, JPS indicated a willingness to withdraw both appeals provided there is satisfactory agreement on three matters. On 2 March 2018, JPS submitted a detailed settlement proposal regarding the three matters on which it sought agreement.
Due to the expiration of the term of the members of the Tribunal in September 2017 (the Tribunal has since been reconstituted), and in light of JPS’ proposal, no date for hearing was set and no steps has been taken by JPS to have the matter relisted for hearing.
In the OUR’s opinion, the continuation of the appeal may be of academic value only. In any event, the OUR's actions were consistent with governing legislation and licence at the time. Notwithstanding, in March 2017 the OUR requested JPS to indicate the grounds of appeal it intends to pursue.
Status after 31 March 2018:
The OUR is in the process of examining the detailed settlement proposal.
(h) All-Island Electricity Appeal Tribunal: Appeal No.2 of 2015
Appeal against Directive to Jamaica Public Service Company Limited for the repayment of foreign exchange adjustment charges on fuel supplied by Petrojam Limited during the period March 2013 to December 2013 dated 13 February 2015
In a Directive issued to the Jamaica Public Service Company Limited (JPS), the OUR directed JPS to refund its customers approximately J$973 Million that it unilaterally imposed as foreign exchange adjustments on fuel supplied by Petrojam Limited to JPS between March 2013 and December 2013. The OUR stated that JPS' action was in contravention of Exhibit 2, Schedule 3 of the Amended and Restated All-Island Electric Licence, 2011, and the customers were to be fully refunded within six (6) months of the effective date of the Directive. JPS appealed the provisions of the Directive to the All-Island Electricity Appeal Tribunal.
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22. LITIGATIONS (CONT’D):
(f) Privy Council Appeal No. 0002 of 2016 (cont’d)
Jamaica Public Service Company Limited v The All-Island Electricity Appeal Tribunal, Paul Harrison, Derrick McKoy, Derek Jones and the Office of Utilities Regulation (cont’d) JPS appealed the decision of the Supreme Court to the Court of Appeal. In March 2015, the Court of Appeal dismissed JPS’ appeal and awarded costs to the OUR and the other respondents. In November 2015, JPS was granted leave to appeal to the Judicial Committee of the Privy Council and filed its appeal therewith on 6 January 2016. The matter was heard at the Privy Council on 7 June 2017 and judgment delivered on 6 July 2017. The Privy Council dismissed JPS’ appeal and awarded the OUR and the EAT the costs of litigating the matter in the Privy Council. JPS agreed the OUR’s Privy Council costs in the amount of £52,105.00 and payment was received by the OUR on or about 9 March 2018. On 6 October 2017, the OUR instructed John G. Graham & Company to pursue the Court of Appeal costs awarded to it. By letter dated 10 October 2017, JPS’ attorneys indicated a willingness to negotiate a settlement of the OUR’s Court of Appeal costs.
Status after 31 March 2018:
The costing information has been submitted to our attorneys to facilitate negotiations with JPS’ attorneys regarding the settlement of the costs. By letter dated 31 May 2018, OUR’s attorneys proposed a settlement in the amount of $3M. The OUR awaits the outcome of the negotiations regarding same.
(g) All-Island Electricity Appeal Tribunal: Appeal No.1 of 2015
Appeal against Jamaica Public Service Company Limited Tariff Review for the Period 2014 - 2019 Determination Notice Jamaica Public Service Company Limited v Office of Utilities Regulation
The Jamaica Public Service Company Limited (JPS) appealed to the All-Island Electricity Appeal Tribunal regarding certain determinations of the OUR set out in the “Jamaica Public Service Company Limited Tariff Review for Period 2014-2019 Determination Notice” dated 7 January 2015.
The matter was scheduled for hearing on 14 March 2016, but based on the provisions of the Electricity Licence, 2016 effective 27 January 2016, which fundamentally changed the tariff regime, as well as the amendments to the Office of Utilities Regulation Act, the hearing of the matter was adjourned to 3-14 October 2016. The matter was further adjourned for hearing for a date to be agreed in September 2017.
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22. LITIGATIONS (CONT’D):
(h) All-Island Electricity Appeal Tribunal: Appeal No.2 of 2015 (cont’d)
Appeal against Directive to Jamaica Public Service Company Limited for the repayment of foreign exchange adjustment charges on fuel supplied by Petrojam Limited during the period March 2013 to December 2013 dated 13 February 2015 (cont’d)
The appeal is to be heard at the same time as Appeal No. 1 of 2015 mentioned immediately above. However, for the reasons outlined above, the hearing of the Appeals did not take place. By letter dated 8 November 2017, JPS indicated a willingness to withdraw both appeals provided there is satisfactory agreement on three matters. On 2 March 2018, JPS submitted a detailed settlement proposal regarding three matters on which it sought agreement.
Our opinion on the results of the appeal is the same as stated above.
Status after 31 March 2018:
The OUR is in the process of examining the detailed settlement proposal.
(i) Telecommunications Appeals Tribunal: Appeal by Cable & Wireless Jamaica Limited
under section 60 (4) of the Telecommunications Act against the Determination of the OUR dated 8 September 2017 in respect of the Reconsideration Decision on the “Cost Model for Fixed Termination Rates – The Decision on Rates” Determination Model (i.e. the glide path to be implemented in respect of the new rates)
By Determination Notice dated 7 June 2017 – “Cost Model for Fixed Termination Rates – The Decision on Rates” the OUR determined the new rates to be charged for fixed termination services, and prescribed a two tiered implementation of the rates with the first step down scheduled for 1 July 2017, and the second step down scheduled for 1 January 2018.
On 21 June 2017 Cable & Wireless Jamaica Limited (C&WJ) sought a reconsideration of the decision pursuant to section 60(4) of the Telecommunications Act and the OUR agreed to stay its decision until it issued its decision. After a review of the reconsideration request and consultation with the industry, the OUR issued its final decision on 8 September 2017 – “Reconsideration of the Office’s Decision: Determination Notice … “Cost Model for Fixed Termination Rates – The Decision on Rates…” confirming its previous determination except that the first step down in the glide path was fixed for 1 October 2017 and the second step down, 1 April 2018.
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22. LITIGATIONS (CONT’D):
(i) Telecommunications Appeals Tribunal: Appeal by Cable & Wireless Jamaica Limited under section 60 (4) of the Telecommunications Act against the Determination of the OUR dated 8 September 2017 in respect of the Reconsideration Decision on the “Cost Model for Fixed Termination Rates – The Decision on Rates” Determination Model (i.e. the glide path to be implemented in respect of the new rates) (cont’d)
On 19 September 2017 C&WJ filed an appeal of the reconsideration decision with the Telecommunications Appeal Tribunal (Tribunal). In the absence of a constituted Tribunal, on 28 September 2017, C&WJ filed a Notice of Application for court orders in the Supreme Court seeking leave to apply for judicial review of the OUR’s reconsideration decision and an injunction to stay the decision pending judicial review of the matter.
(j) Claim No. HCV 03122 of 2017
Cable & Wireless Jamaica Limited v Office of Utilities Regulation
C&WJ’s application for leave to apply for judicial review and an interim injunction in connection with the OUR’s Reconsideration Decision was denied by Justice Kirk Anderson on 31 October 2017. The denial was on the basis that C&WJ has an alternative remedy to judicial review to address its concerns with the OUR’s decision i.e. via an appeal to the Telecommunications Appeal Tribunal. C&WJ’s application for leave to appeal the Judge’s decision was also denied. The Tribunal was constituted and appointments became effective on 3 October 2017. Consequently, C&WJ relisted the matter before the Tribunal.
Telecommunications Appeals Tribunal: CONTINUATION
The Tribunal heard the matter on 26 February 2018 and delivered its judgment on 8 March 2018. The Tribunal dismissed the appeal and upheld the OUR’s decision regarding the implementation of new fixed termination rates.
Status after 31 March 2018:
Not Applicable
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23. SUBSEQUENT EVENT: Government of Jamaica Advance Agreement
On 28 April 2018, an agreement was signed with the Government of Jamaica (GOJ) which stipulates that an amount of $39,253,000, which represents monies recoverable by the organization for withholding tax on investment income, would be used to set off against the advances from the GOJ.
The remaining balance of $25,113,000 should be repaid in two equal annual installments over a period of 2 years, beginning 30 April 2018, until maturity on 30 April 2019. No interest is payable on these amounts, except in the event of a default where interest of 5% per annum shall become payable on such arrears of the installment.
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22. LITIGATIONS (CONT’D):
(k) Access to Information Tribunal – AT/OUR/2017/1
Nadine Newell v Office of Utilities Regulation
On 4 August 2017, Nadine Newell requested a copy “…of the OUR’s Investigation Report, inclusive of any and all side letters or supplemental documents relating to Cable & Wireless Jamaica Limited’s/ Flow’s publication of the names, telephone numbers, and addresses of private unlisted customers in the residential 2017 directory”. While there was no investigation report, the OUR shared all official documents in its possession related the matter which included letter correspondences between the OUR and Cable & Wireless Jamaica Limited (C&WJ).
Portions of one of the letters from C&WJ dated 27 January 2017, which comprised information submitted in confidence by the company, was redacted from the copy shared with Mrs. Newell.
In October 2017, Mrs. Newell sought an internal review of the OUR’s decision to redact portions of the information. The Director-General in his response modified the original decision by allowing some but not all of the redacted information to be shared with Mrs. Newell.
On 28 December 2017, the OUR was served with a Notice of Appeal indicating that Mrs. Newell has appealed to the Access to Information Appeal Tribunal regarding the OUR’s decision to refuse disclosure of portions of the letter dated 27 January 2017 from C&WJ to the OUR. The Tribunal heard the matter on 29 March 2018.
Status after 31 March 2018: The ATI Tribunal delivered its ruling on 3 May 2018 and allowed the appeal against the OUR. The letter, the subject of the appeal, including the redacted information, was sent to the Appellant’s attorneys by the OUR’s external counsel, in compliance with the Tribunal’s decision.
On 11 April 2018, a bill for legal fees from Livingston, Alexander & Levy dated 11 April 2018 in the amount of $1,308,295.00 was submitted, which was paid.
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24. RESTATEMENT OF PRIOR YEAR BALANCES:
Restatement of prior year balances relate to recognition of deferred income arising from a change in accounting policy whereby funds received for specified projects will be accounted for in the period in which the related expenses are incurred. Effects on the organization’s statement of financial position at 31 March 2016
As previously Effect of Reported Restatement As Restated $’000 $’000 $’000
ASSETS NON-CURRENT ASSETS: Property, plant and equipment 34,957 - 34,957 Post employment benefit assets 74,312 - 74,312
109,269 - 109,269 CURRENT ASSETS: Receivables 127,437 - 127,437 Taxation recoverable 29,958 - 29,958 Short term investments 19,155 - 19,155 Cash and cash equivalents 504,814 - 504,814
681,364 - 681,364 790,633 - 790,633
RESERVES AND LIABILITIES RESERVES: Retirement benefit reserve 74,312 - 74,312 Retained earnings 479,844 (113,850) 365,994
554,156 (113,850) 440,306
NON-CURRENT LIABILITY: Advances from the Government of Jamaica 64,367 - 64,367
CURRENT LIABILITIES: Payables 172,110 - 172,110
Deferred income - . 113,850 113,850 172,110. 113,850 285,960 790,633 - 790,633
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24. RESTATEMENT OF PRIOR YEAR BALANCES (CONT’D): Effects on the organization’s statement of financial position at 31 March 2017 As previously Effect of Reported Restatement As Restated $’000 $’000 $’000
ASSETS NON-CURRENT ASSETS: Property, plant and equipment 50,046 - 50,046 Post employment benefit assets 84,224 - 84,224
Long term receivable 8,171 - . 8,171
142,441 - 142,441 CURRENT ASSETS: Receivables 91,989 - 91,989 Taxation recoverable 34,537 - 34,537 Short term investments 65,617 - 65,617 Cash and cash equivalents 423,121 - 423,121
615,264 - 615,264 757,705 - 757,705
RESERVES AND LIABILITIES RESERVES: Retirement benefit reserve 84,224 - 84,224 Retained earnings 486,090 (137,450) 348,640
570,314 (137,450) 432,864
NON-CURRENT LIABILITY: Advances from the Government of Jamaica 64,367 - 64,367
CURRENT LIABILITIES: Payables 123,024 - 123,024
Deferred income - . 137,450 137,450 123,024 137,450 260,474 757,705 - 757,705
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24. RESTATEMENT OF PRIOR YEAR BALANCES (CONT’D):
Effects on the statement of cash flows year ended 31 March 2017 As previously Effect of
Reported Restatement As Restated $’000 $’000 $’000
CASH FLOWS FROM OPERATING ACTIVITIES: Net surplus/(defecit) 18,955 (23,600) ( 4,645) Items not affecting cash resources: Depreciation 17,377 - 17,377 Retirement benefit expense 3,213 - 3,213 Interest income ( 18,254) - ( 18,254) Exchange gain on foreign balances ( 1,933) - ( 1,933) Deferred income - 23,600 23,600 Movement in bad debt provision ( 13,100) - ( 13,100) Gain on disposal of property, plant and equipment ( 4,135) - . ( 4,135)
2,123 - 2,123
Changes in operating assets and liabilities: Receivables 40,134 - 40,134 Payables ( 49,086) - ( 49,086) Taxation recoverable ( 4,579) - ( 4,579) Retirement benefit contributions paid ( 15,922) - ( 15,922)
Cash used in operating activities ( 27,330) - ( 27,330)
CASH FLOWS FROM INVESTING ACTIVITIES: Interest received 18,497 - 18,497 Proceeds from disposal of property, plant and equipment 4,135 - 4,135 Purchase of property, plant and equipment ( 32,466) - ( 32,466) Short term investments ( 46,462) - ( 46,462)
Cash used in investing activities ( 56,296) - ( 56,296)
DECREASE IN CASH AND CASH EQUIVALENTS ( 83,626) - ( 83,626)
Exchange gain on foreign cash balances 1,933 - 1,933
Cash and cash equivalents at beginning of year 504,814 - 504,814
CASH AND CASH EQUIVALENTS AT END OF YEAR (note 16) 423,121 - 423,121
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24. RESTATEMENT OF PRIOR YEAR BALANCES (CONT’D):
Effects on the statement of comprehensive income year ended 31 March 2017 As previously Effect of
Reported Restatement As Restated $’000 $’000 $’000
REVENUE 740,654 (23,600) 717,054
Other operating income 6,068 - . 6,068 746,722 (23,600) 723,122
Administrative and other expenses (746,021) - . (746,021) 701 (23,600) ( 22,899)
Interest income 18,254 - . 18,254
NET SURPLUS/(DEFICIT) 18,955 (23,600) ( 4,645)
OTHER COMPREHENSIVE INCOME:
Items that will not be reclassified to statement of income –
Remeasurement gain/(loss) of the defined benefit liability 6,983 - 6,983
Remeasurement loss of the plan assets ( 9,780) - . (( 9,780) ( 2,797) - ( 2,797)
TOTAL COMPREHENSIVE INCOME 16,158 (23,600) ( 7,442)
NOTES
116OFFICE OF UTILITIES REGULATION ANNUAL REPORT 2017-2018ANNUAL REPORT 2017-2018OFFICE OF UTILITIES REGULATION
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