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Unclaimed breaches surpass $1b

Friday, March 14, 2014    

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JAMAICA Public Service Company (JPS) and National Water Commission (NWC) have breached guaranteed service standards well over 400,000 times since the beginning of 2008.

What's more, the amount of payments customers were entitled to due to the breaches over the last five years edged past $1 billion in 2013, according to a performance report recently published by the Office of Utilities Regulation (OUR).

But perhaps more alarming is that less than $110 million in compensation to consumers were paid out from 2008 to last year.

The main reason for the significant shortfall is that most of the breaches require consumers to apply for compensation rather than payments being automatic.

"The OUR should review the automatic and claimable compensation system with an aim to foster greater compliance with the guaranteed standards scheme by the utility providers," said a November 2013 Auditor General report on the utilities regulator. "The current system has not achieved its intended objective.

It went on to say: "OUR could consider levying a penalty on the utility providers for breaches, in addition to the current payments being made to consumers. In the short-term, OUR should periodically publish details of all claimable breaches committed by the utility providers."

In its quarterly performance report for October to December 2013 published last week, the OUR said that JPS reported 8,601 breaches of the guaranteed standards over the three-month period.

"The company's reported compensatory payouts relating to these breaches was approximately $480,000 out of a potential compensatory payout of approximately $32.8 million," said the report, which noted that 78 per cent of what was actually paid out was automatic.

NWC didn't provide a report for the last three months of 2013, but it registered 1,665 breaches with a potential payout of $4 million during the three months to September 30, 2013.

"Actual payout for the period amounted to approximately $69,000 (representing two per cent of the potential payment), which was also as a result of the compensation being automatically applied to the customers' account," said the OUR report.

Last November, the Auditor General's Department (AGD) reported that JPS disclosed 282,755 instances of breaches with claimable compensation totalling $755 million, of which $101 million was paid out, while NWC tallied up 127,597 breaches with potential payout of $224 million of which $3.8 million was actually compensated.

Interestingly, a larger portion of the compensation made by the electricity provider was due to consumers making claims than in the case of the water utility company — 60 per cent of the pay out from JPS was due to applications and not automatic payout compared to 95 per cent automatic

pay- out from NWC.

In any case, regulations might not go far enough to sway utilities towards abiding by quality of service rules.

"The OUR Act does not permit OUR to impose fines on water and electricity utility providers for breaches of the regulations and/or conditions in their licences," said the November 2013 Auditor General's report. "This makes it difficult for OUR to compel utility companies to address breaches, without resorting to the court. The imposition of fines is an effective enforcement measure by regulators to encourage compliance."

The AGD cited rules in the United Kingdom and The Bahamas that grant the regulators there power to impose fines as useful case studies for changing how service standards are addressed in Jamaica.

"OUR agrees that the authority to administer sanctions would allow them to execute their mandate more efficiently, as their ability to impose fines could act as a deterrent to regulatory breaches," said the AGD.

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