In this post, the sequel to JPS 2k13 Tariff Adjustment – impact analysis part 1, I will make good on my promise to provide detail impact analyses of the proposed 10.35% increase of JPS‘s non-fuel rates across the different class of customers. It turns out that in the submission to the OUR, JPS gave sample bill impact estimates of the annual tariff adjustment. This worked well in my favour, as with a soft version of the document, I was able to simply copy, paste and edit (corrected a few perceived errors here and there)! We are living in a copy and paste world, aren’t we?

To keep it simple, though contrary what I had initial promised, I will narrow the impact analysis to that of the typical residential and commercial customer (i.e a Rate 10 and a Rate 40 customer). For an impact analysis of the other tariff classes, please refer to appendix ii of JPS Annual Tariff Adjustment Submission for 2013. First lets look at the case of the Rate 10 customer. The following exhibit, an excerpt from the JPS submission document, illustrates the bill of the typical rate 10 customer for the month of February 2013 with total energy consumption of 175 kwh (kilowatt-hours). In the first table, the left most column gives a description of the associated cost breakdown, the second column shows the cost using the present tariff rates while the third gives cost using the proposed new tariff rates.

I will assume at this point that you have little knowledge of the structure of the typical electricity bill. The main cost components on an electricity bill are: 1) the energy cost, which for the rate 10 class, only, is charged at two rates called tiers (i.e energy first – 0 to 100kwh at the lower rate and energy next – 101kwh and above at the higher rate); 2) customer charge which is a fixed rate paid by all customers in the same tariff class – this is basically a cost you pay to stay connected to the JPS network; and 3) the foreign exchange adjustment cost which is used to correct for variations in the USD:JMD exchange rate, since JPS has to purchase oil with US dollars to generate energy which is then sold to you in Jamaican dollars. See the JPS Light Bill School for more information.

According to JPS the typical rate 10 customer will only see a 0.26% ($16.43) increase in his/her electricity bill resulting from the proposed adjustment of 10.35% in its non-fuel rates. After careful analysis, having decided not to take the easy route of simply cutting and pasting, I observed that there were a few miss calculations in JPS’s analysis. Using the rates specified in the second table above, provided by JPS, I redo the full calculations for the typical rate 10 customer for the same consumption of 175kwh, shown in the following table:

My analysis, contrary to that of JPS, showed that the typical rate 10 customer will instead see a reduction 0.72% ($45.35). This reduction is due to JPS’s proposal to introduce a $250.00 loyalty credit which seeks to reward customers who pay their bills in full and on time. The miss calculation in JPS’s analysis arises due to an error in the F/E adjustment cost, which they apparently calculate using a value (9.55%) other than that specified in the rates table above (i.e base exchange rate of $87.50, billing exchange rate of $98.50, thus F/E Adjust. = 12.57% which is consistent with what they had derived in the calculation of 10.35% factor). This miscalculation would work well in favour of customers that are able to make their payments on time. Note, however, that these calculations are merely for demonstration purposes only. Nonetheless, being able to provided accurate sample calculations would have worked in JPS’s favour, in that it would have showed the OUR that the proposals could potentially passed onto the customer a greater reduction in electricity rates (at least that of rate 10 customers).

The impact analysis of the other class of customers would of course take a similar form as that above. However, for the purpose of being thorough below is an excerpt from the same submission document, which illustrates the bill of the typical rate 40 customer for the month of February 2013 with total energy consumption of 2000 kwh and reactive power usage of 125 kvar. The bill structure is similar to that of the rate 10 customer bill, except that the energy is charged at a flat rate and there is a charge levied for reactive power usage called demand charge (for simplicity take this charge as it is, simply another charge).

Note that rate 40 customers can not qualify for the proposed loyalty reward of $250.00, unlike the rate 10 customers. The analysis, like before, showed the same miss calculation relating to the F/E Adjustment cost. This was observed in all JPS sample bill calculations (which means I could be the one that made an error, however I am merely going on what JPS specifies in the rates tables). In this instance JPS estimates that the typical rate 40 will see an increase of 1.33% ($15,029.57). My analysis on the other hand, showed a smaller increase of 0.54%($6,108.94) less than half of that which JPS estimates, as shown in the following table. While this and the other increases estimated in the other customer classes may be seen as miniscule by JPS, in Jamaica’s current economic state where everyone wants to get the most out of every dollar an increase is an increase!

My only hope at this point is that these sort of miss calculations is not a reflection of JPS billing system and by extension accounting system as this would explain why the company is currently in default to some of its main creditors!

Well I have done my part, by providing you with an analysis of the information at hand (publicly available). Now please do your part by participating is constructive discussion on the points drawn out here. You can do this by simply liking, sharing and leaving a comment below. Thanks for reading to the end!

Excellent analysis.. detailed and understandable!!! keep it up.

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Well if I didn’t appreciate any other comment on this blog I surely appreciate this one! Thank you Fabiola – my loving wife!

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Correction: JPS’s calculations of the F/E Adjustment factors were in deed correct (I guess you may be tempted to ask who am I to second guess JPS when it come to bill calculations?). As I clearly state in paragraph seven (7) the error could have been on my side and it was! It turns out that rate mechanism limits JPS to only index seventy six (76) percent of the non-fuel base tariffs to the foreign exchange. That is, 76% of the 12.57% is 9.55% which corresponds with JPS calculations presented in the article. See page 42 of JPS 2014-19 tariff application for more details.

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