‘Sanction them’ - OUR investigation committee recommends strong measures imposed on utilities in severe breach
AN Office of Utilities Regulation committee, which investigated the electricity grid shutdown last August, has recommended that the regulator be given the power to impose sanctions on the power provider when there are serious breaches.
More specifically, the technical team was concerned about system shutdowns, "which affect the entire country, resulting in significant financial and economic impact to the various rate categories including industrial and residential customers".
"Consequently, if there are situations where there has been a clear breach of set standards, practices or codes, or where such breach continues to be in existence, despite the reasonable efforts of the OUR, then sanctions should be applied," said the Jamaica Public Service Company (JPS) Power System Integrity Investigation Report, which was completed a month ago.
"It is necessary that the OUR be vested with the authority to impose sanctions on regulated entities in the electricity sector in instances of serious breaches under the OUR Act or in a situation of ongoing non-compliance with the directives of the OUR."
The investigation did not seek to determine the economic impact of power outages on economic activity, but it can be huge.
For instance, every day, 500,000 Americans (less than 0.2 per cent of the population) lose power for an hour or more, estimates place the cost of outages to the US economy at US$80 billion (0.5 per cent of GDP) to US$188 billion per year (1.3 per cent) (See related story on 20B).
Last August, it took a total of approximately nine hours and 27 minutes to restore the grid and electrical supplies to 92 per cent of customers islandwide.
The factors leading to the islandwide system shutdown last August, which prompted the investigation, were found to be "typical of those which precipitated the three earlier system shutdowns, including the first major incident in 2006".
"Human error and maintenance shortcomings have played a part, as well as manifested deficiencies in the islandwide grid and generation infrastructure," said the report.
Last August, lightning struck at a pole located on the Duhaney to Naggo Head 69kilovolt (kV) transmission line as Tropical Storm Ernesto passed nearby the island which led to a shutdown.
But it was the lack of a protection relay, which apparently malfunctioned or was removed from the system the April before, which was "primarily blamed for precipitating the subsequent islandwide system collapse.
Similarly, in 2006, the failure of distance relays to operate at the Duncans substation, following a lightning strikes to the Duncans to Bogue 138kV transmission line, caused a system-wide shutdown.
In 2008, a fault on the Duhaney to Tredegar 38kV transmission line wasn't cleared after a pole fell to the ground.
The 2006 system shutdown was reviewed by Gowlings Consulting Incorporated and Rusnov Associates Limited, whose recommendations were complied with, in the main.
But the OUR technical staff believes that the most recent episode showed that, where a "crucial protection relay was not repaired or replaced for some four months at Duhaney substation, that the intent of this system is not being achieved".
The technical team also recommended that "the 10 substations reported as not having SCADA (Supervisory Control And Data Acquisition) visibility need to be put on the system as soon as possible".
The SCADA system allows control engineers to remotely monitor and control the power system, and JPS has 53 substations in all.
The Telecommunications Act already provides for such sanctions, but the OUR Act does not have a provision for electricity providers, which means that the law would have to be changed to allow for such measures to be imposed.
Currently, the legislation only mandates a penalty against a licensee if the entity is not fulfilling its obligations under its licence conditions, or enabling instrument, while the OUR Act allows for the prosecution of the licensee before a resident magistrate wherein a fine may be imposed.
"However, it is not expected that the Electric Lighting Act, which was enacted many years ago, will any time soon be amended or reframed to cover the issue of sanctions for breaches," said the report. "Therefore for the foreseeable future, reliance would have to be placed on amendments to the provisions of the existing OUR Act to deal with the matter of sanctions in the electricity sector."
The technical team recommends that a detailed study be conducted by legal experts and other relevant professionals to "remedy the likely impediments inherent in the framework for the imposition of such sanctions", and ultimately develop the appropriate mechanism for the imposition of sanctions by the OUR in the electricity sector.
Indeed, transparency in any investigation carried out by the OUR would have to be a pre-condition of giving the regulator powers that may appear that it is "judge and jury", according to the report.
The investigation committee also recommends that the "monetary value of the sanctions should be interpreted as a penalty to licensee for the breach and not as compensation to any customer or customers of the licensee who may have suffered financially from the breach".
They also suggest that sanctions be capped.
"While it may appear practical and reasonable to set the limitation of a monetary sanction for a breach as a percentage of the net Income of the licensee, the complexity and subset of the licensee's net income may be such that the sanction level which results may be an unreasonable amount for the breach," said the report.
"A similar situation may exist if the sanction is based on the asset base of a utility given the variation in investment value and size of the regulated entities and their mode of operation."