PRELIMINARY ENERGY SECTOR ASSESSMENTS OF JAMAICA, V. 5, ELECTRIC UTILITY RATE ANALYSIS

Technological studies were published in three volumes (with volume three being in four parts, for a total of six volumes), to which two introductory volumes were added, providing, respectively, an executive summary of the entire assessment and an economic assessment of the individual areas. This study, the last of the three technical volumes, analyzes the electric utility rate structure of the Jamaica Public Service Company (JPS) in order to determine whether it promotes economically efficient use of electricity, is based on principles of equity and fairness, and provides JPS with sufficient resources to maintain acceptable service quality. Current tariffs are described, and features such as declining block tariffs (decreasing unit price with increasing volume used), expander clauses (decreasing rate if total energy use increases without increasing maximum power demand), and ratchet clauses (little or no reduction in charges if use falls below a previously set high), which may not encourage conservation or efficient system usage, are noted. Various tariff options, based on marginal cost pricing principles (tying prices to the additional cost of supplying the electricity), are presented for each rate category in the JPS system (residential, small commercial, industrial, and large commercial). Flat rate (with and without demand charges), time of use pricing, fuel adjustment, and cost of service adjustment are considered. These options demonstrate immediate or interim steps that can be taken to gradually approach marginal cost pricing. The effects of each step in tariff development and the associated customer bill impacts are indicated. As requested by JPS, specific recommendations for the type of tariff system to be adopted are not presented. It is recommended that JPS review and analyze these options and present its own suggestions to the Ministry of Public Utilities. Appended are a 10-item bibliography (1958-77) and a summary of a splinter group discussion.