OUR Annual Report For Web

2 Offce of Utilities Regulation / Annual Report & Financial Statements 2010 - 11
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Organisation Chart
Mission Statement
Introduction & Objectives
Director Generals Statement
SECTOR REPORTS
Consumer & Public Affairs
Electricity
Telecommunications
Water & Sewerage
Transportation
Administration/Human Resources
Key Performance Indicators (KPI)
Outlook and Work Programme for Fiscal 2011/2012
FINANCIAL STATEMENTS Year ended March 31, 2011
Index
Independent Auditors Report to the Members
FINANCIAL STATEMENTS
Statement of Comprehensive Income
Statement of Financial Position
Statement of Change in Reserves
Statement of Cash Flows
Notes to the Financial Statements
SUPPLEMENTARY INFORMATION
Statement of Income
Schedule of Expenses
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contents
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
organisation chart
To contribute to national development by creating
an environment for the efcient delivery of utility
services to the customers whilst ensuring that
service providers have the opportunity to make a
reasonable return on investment.
MISSION STATEMENT
Offce of Utilities Regulation / Annual Report & Financial Statements 2010 - 11 3
INTRODUCTION
The Ofce of Utilities Regulation Act of 1995
established the Ofce of Utilities Regulation
(the Ofce/OUR) as a body corporate.
Under the Act, the OUR is charged with the
responsibility of regulating the provision of
utility services in the following sectors:
Electricity
Telecommunications
Water & Sewerage
Public transportation by road, rail
and ferry
OBJECTIVES
To ensure that consumers of utility
services enjoy an acceptable quality
of service at reasonable cost.
To establish and maintain transparent,
consistent and objective rules for the
regulation of utility service providers.
To promote the long-term efcient
provision of utility services for
national development consistent with
Government policy.
To provide an avenue of appeal for
consumers who have grievances with
the utility service providers.
To work with other related agencies
in the promotion of a sustainable
environment.
To act independently and impartially.
THE OFFICE
The Director General and Deputy Directors
General comprise The Ofce. The Director
General is appointed by the Governor
General and the Deputy Directors General
are appointed by the Prime Minister.
This, the Fourteenth report of the Ofce,
will inform Parliament and the country at
large of the regulatory activities of the OUR
for the calendar year 2010 and its fnancial
operations for the fscal year April 1, 2010 to
March 31, 2011.
Offce of Utilities Regulation / Annual Report & Financial Statements 2010 - 11 5
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A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Offce of Utilities Regulation / Annual Report & Financial Statements 2010 - 11
The Annual Report is an opportunity to give an account
to our stakeholders by providing an assessment of
what has been achieved, the current priorities, the
challenges ahead and the plans in place to meet them.
The report also intends to provide information to allow
a discerning public to make a judgement about the
relevance and value of the work that the OUR seeks to
accomplish.
The OUR has been selected, based on its advanced
strategic preparation, as one of the initial twelve (12)
entities to be accorded full devolution. This will put
the OUR in a better position to assume signifcant
control over its fnancial and human resources and be
accountable for agreed objectives.
Even before the decision to grant devolution, the
OUR had developed strategic plans to dismantle
professional silos that required the technical staf being
assigned and working primarily according to sectors.
An emphasis of the OURs approach going forward, is
to deploy professionals seamlessly across the various
utility sectors over which the Ofce exercises its remit.
We committed last year to ensuring that the OUR
acts in tandem with its mission statement. Within this
context six mission critical objectives were established
viz:
1. Lowering utility costs (particularly electricity)
and improving competitiveness:
The process for achieving this objective is now
underway. The tender process to procure 480
megawatts of generating capacity weighted in favour
of natural gas, commenced during the year. At the
time of preparation of this report the OUR was in the
process of commissioning evaluation of competitive
bids for this capacity. It is worth noting that this is
the frst time in decades that the power sector has
embarked on a planned and timely expansion and a
retirement schedule. Commissioning more efcient
generation capacity is of course only one critical part
of the equation for lowering electricity generation
costs.
It is equally important to focus on the procurement
of fuel which represents about 65% of the cost of
electricity and is a direct pass through to customers. To
this end, the OUR has highlighted to the government
the need to put in place a mechanism for regulatory
oversight of the procurement of fuel and its pricing. It
is envisaged that this will cover:
competitive sourcing, access
to scarce infrastructure
(docking, loading and
storage) and determination
of appropriate indexation
mechanisms for reference
prices/freight, insurance
and ocean losses. The OUR
also takes the position that
a review of the Common
External Tarif as it applies
to fuel prices is desirable
director generals
statement
... the OUR has
highlighted to the
government the
need to put in place
a mechanism for
regulatory oversight
of the procurement of
fuel and its pricing.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
as its removal would see an immediate reduction in
electricity rates.
2. Modernizing the countrys utility
infrastructure and ensuring greater
availability of services at economic rates:
The OURs efort in this regard is on-going. Last year
we reported on the initiative taken to speed up the
deployment of smart meters in the electricity sector
by the earmarking of a special fund in the electricity
tarif for this purpose. It is anticipated that smart
meters and ultimately the development of a smart grid
will inter alia: allow for better control of losses, enable
easier switching by customers, enhance customers
ability to monitor and adjust consumption, reduce
theft and improve information fows to customers as
well as receive accurate actual readings and bills. A
recent publication by the European Regulatory Group
for Electricity and Gas noted that Due to the fact that
smart meters are included in the IT-Infrastructure of the
network operator, there exists a high potential for process
optimization and savings in operational costs. Using the
synergies could also lead to further benefts.
We are also of the view that the use of Smart Meters
is one of the critical indicators of the growing
phenomenon of utilities convergence which
is further revolutionizing how services are
received and costs allocated to the public.
In this regard the OUR has indicated that
the call in some quarters to separate
telecommunications regulation from
electricity is not only likely to increase
the total cost of regulation and weaken
regulatory capacity but is also counter to
the emerging trend with regard to utilities
convergence. This is manifested by such
phenomenon as the delivery of broadband
over the copper line and the use of common
billing and network security systems for
utilities, as well as the development of
smart grids that would allow integration of renewables
into the supply system.
3. Speeding up the turnaround time for
decision making:
The impending move to de-concentration of authority
and the utilization of the necessary IT tools will assist
in this area. The de-concentration of authority will
eliminate the long delays often encountered in
operationalizing decisions because of the need to
obtain administrative approval from the Ministry of
Finance and or the Cabinet Ofce. For its part, the
improved IT infrastructure will allow staf real time
internal access to data thereby reducing turnaround
time for projects and instantaneous responses to
requests for information and statistics. The OUR is also
constantly reviewing its own internal processes with a
view to reducing the time taken to make and enforce
decisions and to secure redress for the public.
4. Serving as a central repository for easily
accessible information to inform all utility
related decisions and stakeholders:
Assistance provided by the Inter-American
Development Bank (IDB) has been pivotal to
the attainment of this objective. The process
to engage consultants to provide
recommendations, training and assist
with procurement and installation of
relevant hardware and software took
place during the year. Training has
begun, some hardware and software
have been acquired and the process of
building and confguring the network is
underway. The OUR intends to appoint
a highly qualifed Chief Information
Ofcer/Director IT to develop and
manage the relational database. It is
anticipated that the OUR will be able to
transition to this database within the
next period.
... to separate
telecommunications
regulation from
electricity is not only
likely to increase
the total cost of
regulation and
weaken regulatory
capacity but is
also counter to the
emerging trend with
regard to utilities
convergence.
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A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
5. Improving effciency and effectiveness
through a comprehensive monitoring
system:
A Utility Monitoring Division has been established and
stafed. While its role and functions are still evolving,
the Division has identifed several priority areas
across the regulated sectors. These include intensive
regulatory oversight of a multi-billion dollar efciency
improvement programme in the water sector and a
multimillion US dollar energy efciency improvement
programme for JPSCo. In collaboration with the
Regulation and Policy Division, arrangements for the
development and publication of a number of standard
data reports on the regulated utilities are at various
stages of completion. Indeed quarterly data reports
for the telecommunications sector are already a part
of the reporting regime and those for electricity and
water should come on stream in the next fscal year.
6. Delivering tangible benefts to
consumers and easing social disaffection:
The OUR continues its drive to increase the awareness
of and the consumers participation in the Guaranteed
Standards scheme. The scheme represents an agreed
minimum level of service to be provided by a utility
to the consumer. The Ofce continues to monitor the
number of breaches committed by the utilities and
ensures that the consumers are given the requisite
compensation where a claim is fled. Compensation
to the consumer is also
accomplished using an
automatic mechanism
for some of the
guaranteed standards.
This was introduced for
the NWC in 2008 and the
JPS in 2010.
The Ofce also
recognises that the
continued engagement
of its stakeholders is
critical to its decision making process. The traditional
means of consultation with our stakeholders such
as media workshops and public fora are still being
employed. However, we will have more in- depth
consultations and exchange of ideas on an on-going
basis with industry and sector leaders.
RENEwABLE ENERgY
The OUR is cognisant of the limitations of
renewables for a country such as Jamaica, given
such considerations as high initial investment costs,
limited capacity to ofer subsidies, the nascence of
the various technologies and in some instances their
unsuitability as base load capacity. Even so, increasing
the contribution of the renewables as a portion of
the countrys power capacity is a vital objective
given the need for diversifcation, reduced fossil
fuel dependency, savings on foreign exchange and
protection of the environment. In this regard the OUR
notes with some satisfaction that during the year, the
JPS commissioned its wind turbines at Munro College
and completed signifcant work on its proposed hydro
plant at Maggotty, both in St. Elizabeth.
Wigton has also concluded an agreement with JPS
for the commissioning of its fourteen megawatt (14
MW) wind farm. This cleared the way for the Ofce to
recommend to the Minister of Energy and Mining the
issuance of a license for the facility. Wigton has also
submitted a new request to the Ofce for a license for
an additional four megawatt (4MW) plant.
The development of a policy on net billing on which
there has been extensive consultation during the
year is far advanced. The OUR anticipates that the
promulgation of such a policy with a standard ofer
contract for capacity below 100 kW will provide a fllip
to persons or entities wishing to invest in renewables
for small capacities.
The Ofce continues
to monitor the
number of breaches
committed by the
utilities and ensures
that the consumers
are given the requisite
compensation where
a claim is fled.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
The matter of the OURs Declaration of the Avoided
Cost of Generation has been the subject of some
misunderstanding. It is therefore important to
underscore that the calculation of avoided cost is a
technical exercise and the tarif that is established
by that process is not in and of itself a tool for the
encouragement of renewables. Ultimately, what
determines the level of renewables is policy backed
by legislation and a determination of what level of
subsidy and or incentive is appropriate to attain the
desired target for renewables as a percentage of
total electricity supply. In this regard, we continue
to encourage the government to move beyond the
statement of a policy for the promulgation of the
statutory framework to ensure attainment of the
desired levels of investment.
Natural gas Project
Although not falling directly within its remit, the OUR
was called upon to provide advice, recommendations
and expert assistance to the government with respect
to the introduction of Natural Gas into Jamaicas
energy supply mix. There will be a requirement to
build new Infrastructure to facilitate the transition to
Natural Gas as a main source of fuel for the generation
of power using combined cycle technology. However,
before natural gas can be introduced into the countrys
energy supply mix, an appropriate natural gas policy,
legislation and regulatory framework must be put in
place. The Ofce has been active in providing advice
on the statutory and regulatory framework that is
required for facilitating investment in the construction
of natural gas facilities and the
integration of natural gas as a major
source in the countrys fuel mix. In
preparation to regulate a Natural
Gas Sector, the OUR has already
begun to expose and train its staf
with respect to issues in Natural Gas
regulation and has also begun to
develop the appropriate links and
networks with international bodies
and regulatory agencies involved
in this industry. In fact I am a member of National
Association of Regulatory Utility Commissioners
(NARUC) Committee on Natural Gas.
Management Accountability Framework
The priorities outlined above are also refected in
the Management Accountability Framework to
which the OUR is committed as part of the Public
Sector Transformation initiative. The policies and
programmes, objectives, indices and deliverables set
out in the Management Accountability Framework
will, in the next reporting period and beyond, be
the benchmark for assessing the OURs performance.
Among the major commitments set out in the
Framework document are:
The attainment of a raft of legislative changes
aimed at accelerating the speed with which
matters are addressed, mandating minimum
quality standards, enhanced enforcement
powers and options, set timelines for tasks and
increased reporting against established targets
and indices.
Provisions for assessing and measuring customer
satisfaction, for on-going and constructive
engagement of stakeholders including the
development of a citizens charter and the
adoption of measures and mechanisms to enhance
both internal and external accountability;
Specifc measures to enhance the development
and orientation of the staf and the OUR toward
delivering better regulation in the public
interest and value for money in terms of the
regulatory budget;
Greater focus on risk management to ensure
the sustainability of the OUR, its adaptability to
contingency and its efectiveness in mitigating
the adverse efects of imponderables in the
regulated sectors.
... an appropriate
natural gas
policy, legislation
and regulatory
framework must be
put in place.
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A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Zia Mian
Director genral
Notably, as part of the commitment to ensuring
accountability, the OUR has followed through on
its promise to establish an Audit Committee. That
Committee is up and running and has already
provided several recommendations for improving
operations. Specifc arrangements were also made
for an internal audit function during the year and
the Policy and Procedures Manual which addresses
both internal and external elements of the Ofces
operations is under review. The updated manual
will be in place by the end of the next reporting
period. The OUR has also embarked on obtaining ISO
certifcation to establish procedures to deliver high
quality service to all stakeholders.
Im also pleased to be serving as Chairman of
the Organisation of Caribbean Utility Regulators
(OOCUR) and as 1st Vice Chair of the Commonwealth
Telecommunications Organisation (CTO). In the
capacity as Chairman of OOCUR, it was my pleasure
to have hosted the Organisations 8th annual
conference as well as a council meeting and general
assembly in Ocho Rios, St. Ann in November. The
three-day conference saw a number of regional and
international participants and was ofcially opened
by the Deputy Prime Minister Dr. the Honourable
Kenneth Baugh. Feedback from participants
indicated that the conference was successful.

CONCLUSION
I remain convinced that
no matter the challenges
and uncertainties of the
regulatory environment,
the regulator must
maintain as its primary
focus, enhancing and
protecting the public
interest. In the medium
to long term, the
true measure of this is
refected in: on-going utility
investments (expected to be over US$ 1.2 billion),
utility markets that are dynamic and innovative,
expanded services to customers and the delivery
of these at lower economic cost and with better
customer service. The OUR is committed to these
objectives and I frmly believe that the institution
has the orientation and the personnel to deliver
on this mandate. I also anticipate that those who
have the ability to infuence our resources and to
create and facilitate an environment conducive to
the delivery of our mandate will provide us with the
requisite support and necessary tools. I look forward
to another successful year.
... the regulator
must maintain as
its primary focus,
enhancing and
protecting the
public interest.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
CONSUMER & PUBLIC AFFAIRS

The Consumer and Public Afairs (CPA) Division, in
keeping with its mandate, continued its eforts at
ensuring that the interests of utility consumers were
adequately protected throughout the year. The Public
Afairs arm of the division continued its aggressive
public education programme through its media
information sharing sessions, mass media productions
and remained active in developing and maintaining
relationships among stakeholder groups.
Appeals
For the 2010 calendar year, the division accepted
for investigation, one hundred and thirty-nine
(139) new appeals. In addition to the new appeals,
one hundred and twenty-two (122) appeals which
remained unresolved in 2009 were carried forward to
2010 bringing the total number of appeals requiring
attention during the year to two hundred and sixty-
one (261).
Of the 139 new appeals, 89 (64%) were related to
services provided by the Jamaica Public Service
Company (JPSCo) while 50 (36%) were related to
services provided by the National Water Commission
(NWC). No appeals relating to services provided by the
telecommunications companies were received.
Resolution of Appeals
Of the 261 appeals that were investigated in 2010, 184
(70%) were resolved/closed as at December 31, 2010.
Of those resolved, 44 (24%) were resolved in favour
of the customer while 134 (73%) were resolved in the
utilities favour. The remaining 6 (3%) included matters
that were mutually resolved between the customers
and the service providers and those that the OUR
closed as a result of customers failure to provide the
required information to facilitate the review.
Predominant Concerns
Similar to previous years, billing related matters
continued to be the main cause of appeal to the OUR
during 2010. Concerns regarding
billing accounted for 77% of
total appeals received.
As it relates to JPSCos
services, the matter of
billing adjustment was the
predominant basis for appeals
to the OUR. These adjustments
were applied based on
allegations by JPSCo that there
was evidence of irregularity
at the premises. Some of these
alleged irregularities included illegal abstraction
(bypass etc.) and meter tampering. Investigations of
these concerns revealed that an irregularity existed at
some of the premises and the customer knowingly or
unknowingly benefted.
In regard to the NWC, the primary concern was high
consumption charges particularly during the period in
which the island was afected by drought conditions.
This situation once again brought to the fore
customers concern that air collects in the pipelines
during periods of prolonged water lock-ofs and
results in the meter recording an infated consumption
when supply is restored. In an efort to address the
concern, a meeting was held with representatives of
the Bureau of Standards Jamaica (BSJ) and the OUR.
At the meeting, the BSJ advised that it was aware of
a study on this subject that was being undertaken by
the NWC. The OUR requested a copy of the document
but it had not been received at the time of writing.
The NWC has however indicated that it has placed air
release valves at specifc points along its distribution
pipelines to mitigate against this occurrence.
While no appeals were accepted in relation to the
telecommunications service providers, there was
concern in relation to perceived unfair billing practices
and the quality of service ofered by those providers.
... billing related
matters continued
to be the main
cause of appeal
to the OUR during
2010.
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A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Credits and Compensation
As a result of the
OURs intervention, an
amount of $6.3 million
was secured for utility
customers in 2010. This
amount was primarily
due to a reduction in the
debit adjustments that
were applied to customers
accounts where accounts were
back-billed.
Utility Report on the guaranteed Standards
The NWC and the JPSCo continue to show high
incidences of breaches under the Guaranteed
Standards scheme. In the report from JPSCo, regarding
its performance under the
scheme for the year 2010, the
company indicated that it
committed approximately
83,000 breaches attracting
a potential compensation of
approximately $140-million.
Of this amount only
approximately $9-million
was credited for breaches
based on claims submitted
by customers and for those
specifc breaches to which
automatic compensation applies.
In the case of the NWC, the company indicated that
it committed approximately 30,000 breaches in the
same period, attracting potential compensation
of approximately $58-million. Credits to accounts
however only totalled approximately $600,000 and
were primarily as a result of automatic credits where
applicable as claims submitted for other breaches
continue to be low.
Public Education
The OUR continued its aggressive public education
programme throughout 2010 and provided accurate,
relevant and timely information to stakeholders.
The programme of activities included the hosting
of a successful media gathering in April 2010. The
event was organized to provide media practitioners
with information on the revised thrust of the OUR
(specifcally to focus on appeals), outline new initiatives
as well as to discuss various regulatory matters.
The public education programme also focused on the
delivery of messages through mass media productions.
These productions included the fve minute radio
programme Inside the OUR; the introduction of
time signal messages as well as newspaper strip
advertisements. During the year, the frequency of
the newsletter publication The Regulator increased
from twice yearly to four times per year.
While a strategic decision was taken to suspend Parish
Day activities during the reporting period, the OURs
interactions with its largest stakeholder group, utility
consumers, were maintained through participation
in several activities organized by church/community
groups and other private organizations.
Utility Monitoring Division
Ofcially stafed and launched in October 2010, the
Utility Monitoring Division of the OUR has primary
responsibility for ascertaining whether the regulated
entities are compliant with Ofce Directives, relevant
pieces of legislation, license conditions and tarif
requirements. Its activities are also structured to
provide the Ofce with on-going assessment of
its regulatory efectiveness. The Division carefully
monitors and assesses key utility projects and quality
standards to determine whether established targets
are met, and submits recommendations to the
Ofce on the approach to be taken in addressing
issues that have arisen or are likely to arise. The
Division ensures that all decisions include measurable
... an amount of
$6.3 million was
secured for utility
customers in 2010.
The NWC and the
JPSCo continue
to show high
incidences of
breaches under
the Guaranteed
Standards scheme.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
indices for assessing success
and refect regulatory
impact assessment. It
is also responsible for
commissioning regular
Regulatory Impact
Assessments (RIAs) regarding
the improvement in
efciency and compliance
with agreed service, quality
and investment targets.
The following are the general
activities of the Division:
monitor utility projects through progress
reports etc.;
monitor service standards through reporting
and customer feedback surveys etc.;
produce regular Regulatory Impact
Assessments;
conduct periodic audits of specifc functions
of the utilities;
prepare policy papers and recommendations
to the Ofce;
maintain communication with service
providers on actions/strategies with
respect to projects and other regulatory
undertakings.
Since inception, the Division has been actively
involved in the monitoring of the multi-billion dollar
NWC K-Factor Fund. It has recommended to the Ofce,
its no objection to requests from the NWC to make
withdrawals from the K-Factor Fund as well as requests
for new projects to be included in the K-Factor
programme.
The Division also monitors the cash infows and
outfows and the progress of existing projects. It will
also monitor the Electricity Efciency Improvement
Fund (EEIF), the rules for which are expected to be
published early in 2011.

ELECTRICITY
Overview
It was a historic and active year for the electricity sector.
The OUR which is charged with the responsibility
of ensuring the Least Cost Expansion Plan (LCEP)
approach to the addition of generation capacity, and
guided by the governments energy policy, began a
process for the procurement of 480 megawatts (MW)
of new generation capacity.
With regard to
renewable energy,
the Petroleum
Corporation of
Jamaica (PCJ), by
Ministerial Directive,
has exclusivity on
the development of
renewables and in a
number of instances
holds the right to
the information
that is required
for the immediate
exploitation of such
resources. The PCJs
exclusivity in this regard, has restricted the OURs
ability to request proposals for new generating
capacity using renewable energy sources.
This arrangement is further compounded by a confict
of interest in light of the PCJs interest in participating
as a competitor in the generation market. The
urgent need to have this matter addressed has been
The Division
ensures that all
decisions include
measurable indices
for assessing
success and refect
regulatory impact
assessment.
PCJs exclusivity
in this regard, has
restricted the OURs
ability to request
proposals for new
generating capacity
using renewable
energy sources...
such exclusivity is
inconsistent withthe
new energy policy.
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A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
communicated by the OUR to the political executive,
as such exclusivity is inconsistent with the new energy
policy.
In regard to wind and hydro power as renewable
energy sources, the OUR maintains its position that
there is need for further studies over an extended
period on the variability of wind speeds and river
fows.
Procurement of 480Mw of generating Capacity
on a Build, Own & Operate (BOO) Basis
The OUR has the responsibility for overseeing the
procurement process for additional electricity
generating capacity. In this regard, a Request for
Proposal (RFP) for the supply of up to 480 MW of
Base-Load Generating Capacity on a Build, Own and
Operate (BOO) basis was sent out to the industry on
December 13, 2010. Prospective applicants ofering
cogeneration solutions were aquired to submit their
proposals for consideration. As part of this solicitation,
alternative proposals would also be considered.
Based on the 2010 indicative Generation Expansion
Plan, a block of 480MW is required over the next six
(6) years. This is required to be commissioned in two
tranches: 360MW by January 2014 and the remaining
120MW by January 2016.
The Ministry of Energy and Mining (MEM) in its
National Energy Policy 2009 2030 identifed fuel
diversifcation as one of its main objectives. The policy
states that as part of the diversifcation strategy,
natural gas will, in the short to medium term, be the
fuel of choice for the generation of electricity and the
production of Alumina. This was factored into the RFP,
which indicated that bids conforming to the energy
policy would receive a premium in the evaluation
process. The OUR has determined that the indicative
all-in avoided cost of electricity is US$0.1005/kWh and
this cost refects the long run generation cost that is
expected from the bids.
Commissioning of the JPSCo 3Mw wind Farm at
Munro, St. Elizabeth, October 13, 2010.
The Jamaica Public Service Company Ltd. (JPSCo) was
successful in two of its three responses to the OURs
March 25, 2008 Request for Proposals for the supply
of Electricity from Renewable Energy Based Power
Generation Facilities on a Build, Own and Operate
(BOO) Basis.
The three proposals submitted by JPSCo were the
Munro Wind Farm 3MW, the Maggotty Hydro
6.3MW and the Great River Hydro 8MW projects. The
successful projects were the Munro Wind Farm and
the Maggotty Hydro. Of these two, the Munro Wind
Farm was the frst to be constructed and is the second
wind farm in operation in Jamaica.
ground Breaking for JEPs 65.5 Mw Plant
The Ofce on the 7th May 2008, issued a Request for
Proposal (RFP) for the Procurement of 60 MW of new
capacity. Jamaica Energy Partners Ltd (JEP) was the
successful bidder.
JEP sought and obtained approval from the OUR to
make available an additional 5.5 MW of capacity above
the 60 MW requested in the RFP. This request to provide
additional capacity was approved in accordance with
the Government of Jamaicas Procurement Guidelines.
The ground breaking ceremony for the 65.5 MW power
plant was held on December 2, 2010. The facility which
is called West Kingston Power Partners is a subsidiary
of the Jamaica Energy Partners and will be located at
Industrial Terrace in West Kingston.
wigton windfarmII PPA and Price Determination
Wigton Windfarm Limited (WWFL) is a company duly
incorporated under the laws of Jamaica and whose
principal shareholder is the Petroleum Corporation of
Jamaica.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
WWFL has proposed to sell energy to the grid from the
new project, Wigton WindfarmII with capacity totalling
14.98 MW. The facility is being designed to achieve an
average annual capacity factor of approximately 35%
(representing an average annual capacity of 5MW). A
Power Purchase Agreement (PPA) is being fnalised
between Wigton and the Jamaica Public Service
Company Limited (JPSCo).
WWFL requested a review of the Energy Payment Rate
which was contracted under the Power Interchange
Agreement (PIA) between itself and the JPSCo in 2010.
In its application to the OUR, WWFL requested a review
of the rate per kilowatt hour based on the avoided
cost plus 15%. WWFLs request was in keeping with the
October 2009 National Energy Policy which states that
Jamaica would ...Introduce incentives, where feasible,
and a plan of action for implementation to foster the
development of wind, solar and renewable technologies.
This will require the review by the regulatory authority
of existing renewable power generators to aford them
such incentives that may be available, to encourage the
sustainable development of the sector.
Standard Ofer Contract for Net Billing
The Standard Ofer Contract (SOC) is geared towards
assisting Jamaica to meet its renewable energy
supply targets by providing an opportunity for small
electricity generators to provide energy to the grid
through a standard pricing regime and a streamlined
process.
This initiative will help the Government of Jamaicas
stated Energy Policy objective of having 15% of total
energy generation coming from renewable sources by
2015. It will also widen competition in the generation
market since it will facilitate householders and others
involved in self-generation to sell their excess power
to the grid.
The SOC will be a legal document required to be signed
by the small power supplier [with excess energy sales
from renewable technology with capacity up to 100kW]
and JPSCo. The SOC will outline a predetermined
price structure and a well-defned interconnection
arrangement. The SOC will also include the efective
date and terms of all ownership, insurance, operating
and maintenance agreements. Additionally, it will
specify the pricing formula for energy, schedule, or a
combination of the two for determining net billing.
The OUR will convene public meetings as part of the
consultation process on the SOC.
The promulgation of rules to govern the
Electricity Efciency Improvement Fund
Arising out of the Jamaica Public Service Company
Limiteds (JPSCo) 2009 Tarif Submission, the Ofce
approved the establishment of the Electricity Efciency
Improvement Fund (EEIF). The purpose of the Fund
is to augment JPSCos proposed capital, operation
and maintenance expenditure of US$45M on system
loss reduction initiatives over the fve-year price cap
period 2009-2014. To this end, the amount of US 0.4 c/
kWh approximately US$13M annually, is expected to
go into the EEIF from the electricity tarifs specifcally
for Advanced Metering Infrastructure and other loss
reduction technologies.
Following on consultations with the JPSCo, the Ofce
issued a Determination on the Rules of Procedure.
These Rules of Procedure set out the principles,
parameters and processes to govern the operation
and administration of the EEIF.
JPSCo Annual Adjustment
The Ofce is required to undertake an annual review
of JPSCos performance under the existing price cap
regime and approve adjustments as provided for in
the Plan as it relates to movements in infation and
exchange rates. Accordingly, the OUR approved the
annual adjustment to the JPSCo tarif which resulted in
an average efective increase of 1.70% on customers
bills.
16
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
generation & Metering Code
The Generation and Metering Codes establish
the guiding principles, operating procedures and
technical standards governing the operation of the
Jamaican power generation system. The fnal draft of
the document is now being reviewed with a view to
fnalizing it in 2011.
Transmission & Distribution Code
The purpose of Transmission and Distribution Codes
is to permit the development, maintenance and
operation of an efcient, coordinated transmission
and distribution system in Jamaica. This is tied to the
Generation Codes and will be completed within the
same timeframe.
JPSCo Appeal to the Tribunal Z Factor Claim for
Reclassifcation Exercise
By a Notice of Appeal dated April 1, 2010, the JPSCo
challenged the OURs Determination on its Z-Factor
Claim for Reclassifcation costs. The Determination
Notice which was issued one month earlier denied
JPSCos claim for approximately J$4.3 billion to be
recovered under the Z- Factor on the grounds that it
failed to satisfy the criteria specifed in the Licence for
Z-factor adjustments.
The Claim was in relation to compensation to workers
following a reclassifcation exercise. The company
disagreed with the outcome of the exercise and in
particular the amount to be paid to the workers.
After several court battles the JPSCo lost its bid at the
Appeal Court to have the award quashed.
The case (Z Factor Claim) was presented to the
Electricity Tribunal in November 2010. The Tribunal is
expected to publish its ruling in 2011.
Demand Forecast
As part of the Least Cost Expansion Plan (LCEP), the
demand forecast was derived as a primary input
into the determination of electricity supply required
to meet consumer demand at the least cost. The
projected energy requirement for Jamaicas Electricity
System was developed for the period 2010 through
2030. Consequent on this assessment, system
net energy requirements and peak demand were
projected to increase respectively at a compounded
annual growth rate of 4.0 and 3.80 percent over
the next twenty years. This fnding does not difer
signifcantly from the previous projections in 2003
and 2004 (by the JPSCo and OUR respectively) when
net energy requirements were projected to increase
at a rate of 4.6 percent and net peak demand at 4.5
percent.
Figure 1: Net system peak (Mw) 1982 - 2030
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
0
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
The demand forecast sought to defne
electricity consumption as a function
of the growth in the average number
of customers and growth in the level
of average use per customer. Load
research data was also used to project
peak demand (see fgure 1) and net
generation (see fgure 2) needed to
facilitate the assessment of the additional
net generating capacity required (480
MW by 2016) and more generally over the
forecast period.
Table 1:
*Forecast
Figure 2: Net generation (Mwh) 1982 - 2030
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
9000000
10000000
0
1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
350000
700000
1050000
1400000
1750000
2100000
2450000
2800000
3150000
0
E
n
e
r
g
y

i
n

(
M
w
h
)
Figure 3: ELECTRICITY DEMAND BY RATE CLASS (1982 - 2009)
The analysis was based on several assumptions and a range of potential drivers of long term electricity demand,
including but not limited to the demand for Jamaican goods, growth in population and employment. These were
ascribed to the broad areas of economic activity (measured by GDP), demographics, electricity prices (and demand
responsiveness) and energy intensities (determined by the type of electricity end use and technology).
18
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Electricity Consumption
Figure 3 indicates electricity demand over the period
1982-2009 as infuenced by energy sales mainly from
the residential (Rate 10) and general power (Rate 40)
service classes.
Total base energy sales were forecasted at
3,231,373MWh by 2010. Similarly, this was attributed
mainly to energy sales in the Rate 10 (1,133,078 MWh)
and Rate 40 (705,873 MWh) service classes (see Table
1).
Number of Customers
Table 2 shows that the number of JPSCo customers
has increased steadily over the years 1982 to 2009,
having grown by 160%. The majority of customers
are residential (R10) followed by the general service
classes (R20 & R40) which together accounted for 90%
of total customers (excluding street light) by the close
of 2009. This attributive share has not quite changed
since 1982 when the combined share was 89.10%. The
number of customers was projected to be 649, 481 at
the close of 2010.
TELECOMMUNICATIONS
In an environment characterised by litigation, it has
become even more critical for the new Information
Table 2.
*Forecast
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
and Communications Technology Policy to be
implemented.
The current environment
also emphasizes the
urgent need to revisit
the legislative and
regulatory framework
for the sector. This
is evidenced by the
numerous disputes
regarding access
to limited facilities,
i n t e r c o n n e c t i o n
charges and other
interconnection issues
which resulted in lawsuits and counter suits among
the major providers. Additionally, with convergence
gaining momentum, it becomes increasingly important
for the legislative and regulatory framework to move
in tandem with such developments, and in so doing,
ensure the strengthening of
the regulators enforcement
powers.
The OURs operation in the
sector has been met with
varying levels of success,
headlined by the Ofces
successful defence against
Digicels appeal to the
Tribunal in the matter of
Assessment of Dominance
in Mobile Call Termination.
This ruling allows the OUR
to direct dominant providers
to issue a Reference Interconnect Ofer (RIO) which will
set out the terms and conditions of interconnections.
The OUR will then have the responsibility to approve
interconnection rates for the sector.
Notwithstanding the need to revisit the legislative
instruments governing the telecommunications
sector, it continues to perform relatively well delivering
more innovative packages with increased access to
cutting edge technology. Combined data for fixed and
mobile lines indicate that the country continues to enjoy
well over 100% teledensity attributed mainly to persons
owning more than one mobile instrument. Despite the
foregoing, there are still persons lacking access either
by virtue of economics or geographical remoteness.
Developments in the telecommunications sector
included;
Publication of the Estimate of the Weighted
Average Cost of Capital
The call for and receipt of Reference
Interconnection Ofers from all carriers
Competitive Safeguard Rules
Submarine Cable Legislation/Regulations/
Guidelines
Estimate of the weighted Average Cost of Capital
(wACC) for Jamaican Telecommunications Carriers
The consultative process to estimate the weighted
average cost of capital (WACC) began on May 9, 2008
with the issuing of the frst Consultation Document.
As a result of the need to broaden the scope of the
consultation, a second consultative document was
issued on August 31, 2009.
The process was quite extensive and involved
analysing various fnancial techniques. Additionally,
there were requests from stakeholders for extensions
for submission of comments which were granted.
Following comments from stakeholders, the OUR
issued a Determination Notice on December 9, 2010.
The document presents the study of the cost of capital
for the business of providing fxed line and mobile
telecommunications service. The Ofce, among other
things, determined it will estimate a separate WACC for
fxed line and mobile networks. The cost of capital will
be used in any future rate making process undertaken
by the OUR.
... it has become
even more critical for
the new Information
and Communications
Technology Policy to
be implemented.
... data for fxed and
mobile lines indicate
that the country
continues to enjoy well
over 100% teledensity
attributed mainly
to persons owning
more than one mobile
instrument.
20
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Reference Interconnection Ofer (RIO-6)
This document sets out the terms and conditions
under which LIME will allow other operators to
interconnect with its fxed line network. The timetable
for completing this exercise was adversely afected
by delays in the provision of critical information and
requests from stakeholders for an extension of the
period for comments. The consultation document
is currently being prepared and is scheduled to be
published in 2011.
Review and Harmonisation of Mobile RIOs
Following on the ruling of the Telecommunication Appeals
Tribunal, which upheld the OURs decision that all
mobile operators are dominant for the termination
of calls on their own network, the OUR in accordance
with the provisions of the Telecommunications Act
instructed all mobile operators to submit their RIO and
supporting documentation to the OUR by September
1, 2010 for review and approval.The RIO sets out the
terms and conditions under which mobile operators
will allow other carriers to interconnect with their
network. The harmonisation of the 3 mobile RIOs is
scheduled to commence at the start of the second
quarter of 2011 to create a single mobile RIO.
Competitive Safeguards Rules
The Ofce, in September 2007, published a
Determination Notice on rules for the voice market.
These rules are deemed necessary to promote fair and
non-discriminatory access to restricted facilities and
reduce the incidences of anti-competitive behaviour
within telecommunications markets. Subsequent to
this Determination Notice, C&WJ (now LIME) submitted
an application for reconsideration of these rules. A
decision in this regard should be published in 2011.
Submarine Cable Legislation/ Regulations/
guidelines
This activity addresses the need to ensure that there is
competitive access to submarine cable facilities as well
as the need to protect submarine cables in Jamaican
waters. The exercise which is being funded by the
United States Trade and Development Agency (USTDA)
is slated for completion by June, 2011. Activities
undertaken in regard to this project include the review
of submarine cable, cable station and backhaul access
licensing in Singapore and other countries to assess
how these regulations can be applied to Jamaicas
situation. Other activities to be undertaken include
interviews with carriers and other key players for input
on how regulations can be developed that would
lead to fair competition in Jamaicas international
telecommunications market.
Quality of Service Rules for the
Telecommunications Sector
In keeping with its statutory responsibility to ensure
quality of service to consumers, the OUR with
assistance from the Inter-American Development Bank
(IDB), commissioned consultants in November 2009 to
review mobile quality of service and to develop quality
of service standards for providers.
The project was expected to conclude in May 2010,
but was delayed because of additional activities
which had to be undertaken by the consultants. The
service providers also failed to provide their responses
within the time stipulated and this further delayed
the project. Subsequent to overcoming the foregoing
difculties, the Quality of Service Consultative
Document Quality of Service Standards and
Guidelines for the Telecommunications Sector was
published on October 25, 2010. Comments on the
document were received from the industry operators
and the Consumer Advisory Committee on Utilities
(CACU). The consultancy is expected to conclude
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Source: O.U.R
Table 3: Distribution of Mobile Subscription &
Penetration Rates (2006-2010)
Table 4: Distribution of Fixed Line Subscription &
Penetration Rates (2006-2010)
Source: O.U.R
in the frst half of 2011 and thereafter the draft rules
and guidelines will be submitted to Parliament for
afrmative resolution.
Indirect Access: Two Stage Dialling (2SD)
The Ofce issued its Determination Notice on this
matter on May 30, 2008. The Determination details
the cost beneft analysis and unfair burden test for the
imposition of indirect access obligations via 2SD. LIME
requested a reconsideration of the decision and a fnal
decision should be published before the start of fscal
year 2011/2012.
In 2-stage dialling a caller dials two distinct sets
of numbers to reach the called destination. This is
typically used by calling card providers.
The initial number or code dialled by the caller is
not the fnal destination number, but a set of digits
to activate or reach an intermediate service feature,
service platform or another network, to authenticate
the caller and/or prompt the caller (by a recorded
voice or a second dial tone, etc.) for and receive the
destination number and to route the call to the desired
destination point.
In some systems, 2-stage dialling is semi-automated
and allows a caller to dial a concatenated digit string
representative of the two sets of numbers and, in
addition to producing operational efciency gains,
gives the caller the familiar experience of single-
number dialling.
Mobile Service
The mobile sector continued to refect growth in
subscriptions up to 2010 and seminal expansion
by December 2010. This, as subscribers to mobile
telephone service totalled 3,182,000 (2010). Over
the 2006 2010 periods, growth in subscription
was highest in 2007(18%). Table 3 depicts that most
subscribers continue to opt for the pre-paid mobile
service which maintained dominance of over 95% of
total subscriptions over the fve year period.
Following the trend of increases in subscription,
mobile penetration also increased over the review
period to stand at 109.53% and 117.83% by the close of
2009 and 2010 respectively.
Fixed Line Service
Since 2007, subscriptions to fxed line services as
depicted in Table 4 have been on the decline. The most
recent decline resulted in subscriptions moving from
302,451 in 2009 to 263,060 by December 2010. This
represents a fall-of in subscription of 13.02% over the
period, and was mainly as a result of a reduction in the
number of subscriptions for residential lines. Likewise,
fxed line penetration refected declines since 2007 to
stand at 9.74% by the close of 2010.
22
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Internet Service
Subscriptions to internet services grew by 9.92%
since 2006 to stand at 114,561 by December 2009,
and thereafter subscriptions declined by 33.4% to
a total of 76,300 users by December 2010. This has
been attributed mainly to the growth in broadband
subscriptions over the 2006 2010 periods.
The penetration rates for internet services stood at
2.83% by the close of 2010.
Table 6: Number of Telecoms Licences (2000 -2010)
Table 5: Distribution of Internet Subscription
& Penetration Rates (2006-2010)
Source: O.U.R
Licences
Twelve licences were issued in 2010 resulting in a total
of 493 licences since the Telecommunications Sectors
liberalisation in 2000 (see Table 6).
Licence Terms:
DC: Domestic Carrier
DSP: Data Service Provider
DVSP: Domestic Voice Service Provider
FTZC: Free Trade Zone Carrier
FTZSP: Free Trade Zone Service Provider
IC: International Carrier (Voice/
Data/Transit)
INTL. SP: International (Voice/ Data Service
Provider)
ISP: Internet Service Provider
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
ISP (STVO): Internet Service P
IVSP: International Voice Service
Provider
SCLC: Submarine Cable Landing Carrier
Numbering Administration & Technical Support:
The OUR, as the National Numbering Administrator,
has responsibilities for the administration and
management of telecommunications numbering
resources used by carriers and service providers in
Jamaica.
The OUR must ensure impartial and equitable access
to these essential resources and provide advice to the
industry on numbering issues.
The Ofce undertook the following major numbering
activities during the period:
Numbering Resource Utilization/Forecast
(NRUF) Surveys
Area Code Relief Planning
Extra-Territorial use of International
Subscription Identities
Adoption of Alternative Emergency Numbers
Local Number Portability
Regime for Short Code
Automation of Numbering Administration
Functions
Uniform Domestic Dialling Plan
Numbering Resource Utilization/Forecast (NRUF)
Surveys
Carriers and service providers holding geographic
and mobile telephone numbers must fle Numbering
Resource Utilization and Forecast (of demand over
the next 5 years) reports semi-annually on or before
February 1 for the preceding six-month reporting
period ending on December 31, and on or before
August 1 for the preceding six-month reporting period
ending on June 30.
NRUF data support forecasts of the exhaustion date
for each area code (digits 1 through 3 of the 10-digit
telephone number). The OUR monitors central ofce
code assignment rates and adjusts the projected
exhaust dates if necessary.
Area Code Relief Planning
Area Code Relief refers to an activity that must be
performed when the Ofce Codes within an area code
are near exhaustion. Providing relief to such an area
code normally involves assigning a new area code.
Using the Numbering Resource Utilization and
Forecast data and historical growth data submitted by
carriers with their applications for additional numbers,
the Ofce estimated that the expected exhaust period
for area code 876 is the 4th quarter of the year 2012.
Based on the Ofces preliminary notifcation to
the North American Numbering Plan Administrator
(NANPA) regarding the imminent exhaust of the 876
area code, NANPA has reserved a new area code for
Jamaica, pending formal application for its assignment.
The Ofce will publish a second planning document
which will outline the activities of the second phase
of the Area Code Relief Planning Process and Relief
Implementation exercise. The new area code will cover
the same geographic area as the existing 876 area
code. This will require the dialling of the full 10 digits
of a telephone number for all local calls.
Extra-Territorial Use of International Mobile
Subscriber Identities
The International Mobile Subscription Identity
(IMSI) provides a unique international identifcation
of mobile terminals/users and to enable these
terminals/users to roam among public networks
which ofer public mobility services. The IMSI, as
24
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
provided in the International Telecommunications
Unions Recommendation ITU-T E.212, The
International Identifcation Plan for Public Networks
and Subscriptions, is made up of a Mobile Country
Code (MCC), a Mobile Network Code (MNC) and a
Mobile Subscription Identifcation Number(MSIN),
that is, MCC-MNC-MSIN. The combined MCC+MNC
identifes the home network of a mobile terminal/user.
The ITU recently added Annex E to Recommendation
ITU-T E.212, to provide for the use of the combined
MCC+MNC in a country other than the country to
which the MCC has been assigned by the Director of
the ITUs Telecommunication Standardization Bureau.
In other words, Annex E provides for cross-border or
extraterritorial use of MCC+MNCs.
The Ofce consulted with the local industry by way of
a Notice of Proposed Rule Making to formally adopt
and implement the provisions of Annex E in Jamaica.
The proposal was not opposed. The completion of the
requisite Determination Notice was rescheduled for
the frst quarter of the next calendar year
Adoption of Alternative Emergency Numbers
The Ofce carried out an industry consultation on the
implementation in Jamaica of secondary alternative
emergency numbers (112 and/or 119) for public
telecommunications networks. This was done in
accordance with the International Telecommunications
Unions Recommendation ITU-T E.161.1 (Guidelines
to select Emergency Number for public
telecommunications networks) which was developed
based on recommendations made to the ITU by the
OUR on behalf of the Government of Jamaica.
Local Number Portability
An external consultant was engaged to carry out
a feasibility study and cost beneft analysis on
implementation options for Number Portability
(NP) in Jamaica, in accordance with section 37 of the
Telecommunications Act 2000. The consultation
activities included a public workshop and individual
meetings with key industry stakeholders. The project,
which was put to international tender, was funded by
the IDBs Multilateral Investment Fund Facility.
The results of the study which are contained in the
consultants Final Report will form the basis of a public/
industry consultation and subsequent rule making.
The Number Portability rules which will govern the
implementation of number portability in Jamaica are
subject to afrmative resolution of Parliament.
It is envisaged that
subsequent to an Ofce
decision the actual NP
implementation exercise
will require at least
one year for successful
execution.
Regime for Short Code
The industry consultation
for the development
and implementation of
a numbering scheme using
numbers which are shorter than the regular telephone
number (common short codes) for the provisioning of
a broad range of existing and future services via text
messaging was rescheduled to the second quarter of
2011 to facilitate work on Local Number Portability.
Automation of Numbering Administration
Functions
After several attempts the Ofce secured the requisite
consultancy services to automate specifed aspects
of the Numbering Administration function by way of
web-based applications.
Numbering Administration involves the development
and management of the National Telecommunications
Numbering Scheme, which is a national resource, to
ensure the availability of and fair and equitable access
to telecommunications numbers. These numbers are
... Number
Portability rules
which will govern the
implementation of
number portability
in Jamaica are
subject to afrmative
resolution of
Parliament.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Table 7: Production and Consumption Data
for Potable water 2009 -2010
used by network operators and service providers to
ofer telecommunications services to their customers
and by networks to initiate, route and charge for calls.
The work which commenced on October 25, 2010 has
progressed according to schedule, with a completion
date of March 25, 2011. The project is being funded by
the IDBs Multilateral Investment Fund Facility.
Uniform Domestic Dialling Plan (UDDP)
The Uniform Domestic Dialling Plan (UDDP) which was
established by the Ofce to provide dialling parity for
all customers, for all domestic calls, remains before the
Telecommunications Appeals Tribunal. A hearing is
expected in early 2011.
Dialling parity means the ability of an end-user to use
an equal number of digits to access a particular public
telecommunications service, regardless of which public
telecommunications services supplier the end-user
chooses.
wATER AND SEwERAgE
water Production and Consumption
Total water produced by the National Water
Commission (NWC) during the calendar year 2010 was
62 billion gallons as against 67 billion gallons in 2009.
Of this amount, billed
consumption for the
year was reported as
18 billion gallons. The
large disparity between
water production and
consumption indicates
that the NWC has a high
percentage of Non-
Revenue Water (NRW). At
the end of the calendar year 2010, the NWC reported
NRW as being 71%. The Ofce has set a target for the
NWC to reduce its NRW to at most 55% within a three
year period. The Commission is striving to achieve this
target through its K-factor programme.
National water Commission K-Factor Fund
Signifcant progress was made during the last quarter of
the 2010 calendar year in regularising the operations of
the K-Factor fund. The primary objective of the fund is
to reduce non-revenue water through the replacement
of mains and other activities, and the rehabilitation
of some sewerage facilities. The regularisation
of operations arose from the establishment of a
Memorandum of Understanding (MOU) between the
OUR and the NWC in October 2010. The objective of
the MOU is to maintain the integrity of the fund. The
OUR has also developed specifc Rules and Procedures,
as specifed by the 2008 Tarif Determination, to ensure
the efcient and efective administration of the fund. It
is expected that these Rules and Procedures will come
into force in early 2011.
As at December 31, 2010, a total of forty seven (47)
projects were approved by the OUR for funding under
the K-Factor programme at an estimated cost of J$11.7B.
Based on the latest data available, approximately
J$1.22B has been expended on the various projects.
The large disparity
between water
production and
consumption
indicates that the
NWC has a high
percentage of Non-
Revenue Water.
26
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
NwCs Request for K-Factor Collections to be based
on Actual Collection rate
The Determination Notice of April 2008 on NWCs
rates stated that the Commission shall account for the
deemed K-factor cash infow calculated on the basis of
95% of K-factor billing.
The NWC submitted a letter to the OUR on October 20,
2010 requesting that the Ofce adjusts the deemed
K-factor collection rate from 95% to refect the actual
collection rate of the NWC for the applicable month.
The Commission argued that given the current
environment within which it operates, it is unable to
consistently achieve such a high collection rate.
The Ofce will provide the Commission with a response
before the end of the frst quarter of 2011.
Small Private and Commercial Potable water and
Sewerage Service Providers
There are currently, six (6) licensed small water providers
in Jamaica. They are as follows:
Four Rivers Development Company
Runaway Bay Water Company
Dairy Spring Limited
Can Cara Development Company
Dynamic Environmental
Management Limited
Hampstead Benevolent Society
Of these small water providers, only two (2) are
licensed sewerage service providers namely, Can Cara
Development Company and Dynamic Environmental
Management Limited. In addition to these two
companies, Rose Hall Utilities Company also has a
sewerage service licence but does not have a licence
for potable water. The company however obtained a
licence from the National Environment and Planning
Agency (NEPA) for the provision of water for irrigation
purposes.
Runaway Bay water Company
The Runaway Bay Water Company (RBWC) had an
annual Price Adjustment Mechanism applied to its
rates for the year 2010/2011. This is in keeping with the
Determination Notice issued by the Ofce where the
RBWC rate adjustments are tied to that of the NWC.
Rose Hall Utilities Company Limited
Rose Hall Utilities Company Limited (RHUCL) is a
licensed sewerage service provider located in Rose
Hall St. James. The company applied to the Ofce for
an increase of its sewerage rates and also requested
that the Ofce consider the possibility of developing a
methodology to price re-claimed water.

The OUR is currently consulting with the National
Environment and Planning Agency (NEPA) and the
Ministry of Health to determine how the selling of
reclaimed water can be accommodated.
** Note that the latest NWC expenditure report on the K-Factor programme is up to the period ending October 2010.
Table 8: K-Factor Project Approvals & Expenditure (Summary)
May 2008 - Oct 2010**
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Irrigation water
The National Irrigation Commission (NIC) developed
the National Irrigation Development Plan (NIDP) in an
efort to improve the efciency of water provisioning
to its various schemes. Additionally, the NIDP also
serves to foster the independence of these schemes
to enable them to eventually become Water User
Associations. In 2010 the NIC made an application to
the Ofce for a rate to be charged to the customers of
the Hounslow scheme. The application was examined
and a Determination was issued on October 19, 2010.
That Determination also included the imposition of
Guaranteed Standards similar to those applied to the
other irrigation schemes.
Sewage Treatment
The NWC remains the main operator of sewage
treatment facilities. The major challenge facing the NWC
is the modernisation of some of its older facilities to
meet the requirements of the National Environmental
and Planning Agency (NEPA).
The NWC has started the rehabilitation work on
some of these facilities using funds from the K-factor
programme.
TRANSPORTATION
The Ofces main activity in the
transportation sector remains one of
providing advice to the Minister of
Transport for the setting of bus and taxi
fares. The legislation to bring the transport
sector under the OURs regulatory remit is
still pending.
There were however no major activities in
the transportation sector which required the
OURs attention for the calendar year 2010.

ADMINISTRATION/HUMAN RESOURCES
The OUR reported a number of vacancies at the end
of 2009/2010 and lamented its inability to fll these
positions. Thankfully, despite the continued constraint
on its ability to make competitive ofers, the OUR was
able to attract a number of new professionals during
the review period and was also able to retain the
complement with which it started the year. This has
served to strengthen the team and it is hoped that
some fexibility will be allowed in the upcoming year to
ensure that the organisation is able to ofer the kind of
incentives that will allow it
to retain the skill set that
is so critical to match
those of the regulated
entities and local and
international peers with
which it has to compete.
With the OUR listed as
one of the twelve public
entities to be accorded
full devolution and
de-concentration of
authority, a
considerable amount of attention
was devoted during the year to
preparation for this status. There were
on-going engagements with the Public
Sector Transformation Unit and other
agencies to develop a Management
Accountability Framework to ensure
transparency and accountability. This
will become binding on the OUR as soon
as there is sign of on devolution.
...it is hoped that
some fexibility
will be allowed in
the upcoming year
to ensure that the
organisation is able
to ofer the kind of
incentives that will
allow it to retain the
skill set that is so
critical.
As in previous years,
great emphasis
was placed on
staf training and
development,
funded mainly from
the organisations
budget.
28
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
As in previous years, great emphasis was placed on staf
training and development, funded mainly from the
organisations budget, but also with grants from agencies such
as the Inter-American Development Bank, (IDB), through
the Multi-lateral Investment Fund (MIF) Programme, as
well as from membership benefts from payments to
the Commonwealth Telecommunications Organization,
(CTO). Topics such as Electricity Law and Natural Gas,
Internet Governance, Project Management, Alternate
Dispute Resolution, Document Management, Public
Speaking, Best Practices in Public Procurement and
Renewable Wave Energy Technologies are some of the
areas that were covered. Arrangements were also made
during the year to provide all members of staf with
training in the use of Microsoft Ofce Suite applications.
This refects the OURs determination to ensure that
its staf makes the best use of the advantages that
are aforded by Information Technology to improve
the value and timeliness of service delivered to the
public. In addition to these formal assemblies, monthly
meet and learn sessions were held where, among
other things, the general staf body was kept abreast
of regulatory issues, by way of having authors of
Consultative Documents making informal power-point
presentations to peers.
Also during the review period the OUR signed a
Memorandum of Understanding (MOU) with the
Nigerian Electricity Regulatory Commission (NERC).
This will facilitate a mechanism for mutual co-operation
between both entities.
The tradition of information exchange with other
regulatory agencies continued during the year. Staf
members from the Nigerian Electricity Regulatory
Commission and the Utilities Regulation and
Competition Authority in the Bahamas were hosted
during the year. These visits continue to underscore the
esteem in which the OUR is held by its regulatory peers.
Corporate social responsibility constitutes one of
the organisations core values. During the year,
assistance was given to the Glenhope Place of Safety
in the refurbishing of two dorms. The organisation also
partnered with the Engineering Department of the
University of Technology in providing the opportunity
for work-integrated learning/internship for students
pursuing studies in the engineering discipline.
With regard to Procurement of Goods and Services,
the Administration/HR Department continues to
ensure that the organisation is fully compliant with the
Governments Procurement Guidelines. Notably the
OUR has, on more than one occasion, been commended
by the Ofce of the Contractor General (OCG), for its
consistently prompt submissions and responses to the
requirements of that Ofce.
KEY PERFORMANCE INDICATORS (KPI)
As part of eforts to enhance transparency and
accountability the OUR has embarked on a value for
money exercise as well as a KPI project. These initiatives
will allow stakeholders to measure the performance of
the OUR against set KPIs.
Additionally regional regulators through the
Organisation of Caribbean Utility Regulators (OOCUR)
have agreed in principle to the need to benchmark
individual performances.
Some of the KPIs already agreed are acknowledgement
of all correspondence within three (3) business
days, publication of the Annual Report and fnancial
statements within one hundred (100) calendar days
of the end of the fnancial year, issuing a decision on a
tarif submission within ninety (90) days and concluding
investigations within thirty (30) business days.
Other KPIs related to regulatory decision making,
fnances and training are being developed and it is
expected that with the assistance of the Public Sector
Transformation Unit (PSTU) these will be fnalised and
published in the 2011/2012 fnancial year.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
C
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30
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
The OUR will aim to
assist in achieving
the Vision 2030 Plan
by ensuring that
its regulation of
the various utilities
seeks to align private
behaviour with the
public interest.
Outlook & work Programme
for Fiscal 2011/12
The outlook for 2011 will be driven by the OURs
mandate as well as the Governments Vision 2030 Plan.
The OUR has defned the Policies and Programmes
objectives in the following terms:
To establish and maintain transparent,
consistent and objective rules and standards
to regulate the providers of specifed utility
services while fully protecting the public
interest;
To enhance efcient utility operations and
provide an enabling environment conducive
to investments;
Analytical capacity ensuring high quality
policy options, programme design and
advice to the government; and
To align regulations, directives and
processes with legislation
and policy mandate.
The OUR will aim to assist
in achieving the Vision
2030 Plan by ensuring
that its regulation of the
various utilities seeks to
align private behaviour
with the public interest.
Success in achieving the
set objectives and goals
and accomplishing the
programme of work is
dependent however,
on the extent to which the
following assumptions hold true.
Staf turnover will be kept to a minimum.
This is critical given the elongated
learning curve that obtains for regulatory
professionals;
Staf will be operating at optimal output
throughout the period of the plan;
Anticipated policy changes and the
timetables for expected legislative
enactments and amendments materialise;
The enforcement powers of the OUR are
enhanced;
Such emergencies as arise will not be
beyond the Ofces ability to adapt and to
outsource;
The regulatory environment will at the least
not become more litigious;
The existing institutional compliment and
responsibilities are maintained or where
there are amendments the institution is
provided with the required notice and
resources to make adjustments.
Telecommunications
For information, communication and tele-
communication services, the imperative is to deploy
broadband to beneft all citizens, including those
with disabilities and to str engthen competition in
the various markets. Some of the more important
objectives determined by the Ofce for achievement
within the planned p eriod are:
Conduct a broadband baseline data survey,
the fndings of which will inform the
development of a new Universal Service/
Access Policy.
Complete work on the proposed
automated number administration system
for managing and allocating toll free
numbers. This will allow for improved
operational efciencies in number
management and administration.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Reconciliation of various mobile Reference
Interconnection Ofers (RIOs) in order to
develop a standard RIO;
Development of a Long Run Incremental
Cost (LRIC) model for mobile networks to
ensure rates are developed on a cost basis
using competitive indices.
Electricity
For electricity, the objective is to lower real costs
while improving reliability, quality and efciency
without compromising the environment. The work
programme therefore refects the imperatives of
procuring additional capacity at least economic cost
and that system losses and other efciency factors are
improved over the period. As a critical corollary, the
OUR will continue to make representations to secure
the competitive procurement of fuel for the sector and
the adoption of a transparent index for reference prices.
Within the parameters of Governments stated policy
objectives, developments with respect to the sector
and the existing regulatory framework, the major goals
identifed for the period are:
Laying the basis for breaking the cycle of
crisis addition to generation capacity with
the procurement over the next fve years of
some 480 MW of new generating capacity
(replacement and additional);
Creation and maintenance of an investment
environment that is facilitative of
competitive addition of least economic cost
generation;
Creating and enforcing a system of
incentives designed to reduce electricity
losses;
Intensify monitoring and surveillance of all
licencees within the electricity sector
Building institutional capacity as a
contingency for regulation of fuel
procurement and of a Natural Gas sector in
the event of its emergence.
water and Sewerage
For water and sewerage, the focus is to provide access
to afordable potable water and to sewerage services.
An important element of this is to reduce non-revenue
water and improve efciencies in the delivery process
(by improving the infrastructure). The main goals for
this sector are:
Facilitating increased access to potable water
and sewerage services in keeping with the
objective of universal access to potable
water;
Fostering measurable improvements
in service delivery with respect to the
availability and reliability of potable water
and sewerage services.
Enforcement of the K Factor regime for
improving efciency of the water sector.
Transport
The OUR will again be seeking to have the regulatory
framework in place to allow it to fully regulate economic
aspects of the Transport sector. Currently, the OUR
conducts the analysis of proposed tarif changes and
makes its recommendation to the Ministry.
As we have noted in previous years, the work
programme will be subject to such modifcations as
may be required given the dynamics of the regulatory
environment for each sector. The OUR is hopeful that
if there are disruptions, they will be minimal but is also
prepared to respond to such imponderables as are a
feature of the environment.
32
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
FINANCIAL STATEMENTS
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1

DFFICE DF UTILITIES PECULATIDN

FINANCIAL STATEhENTS

31 hAPCH 2011

I N 0 E X

Page

ndependent AudItors' report to the members 1 2

FNANCAL STATE|ENTS

Statement of ComprehensIve ncome J

Statement of FInancIal PosItIon 4

Statement of Changes In Feserves 5

Statement of Cash Flows 6

Notes to the FInancIal Statements 7 JJ

SUPPLE|ENTAFY NFDF|ATDN

Statement of ncome J4

Schedule of Expenses J5

INDEx
Year ended March 31, 2011
Page
33-34
35
36
37
38
39 - 66
67
68
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 1
INDEPENDENT AUDITORS REPORT
To the Members of
Office of Utilities Regulation
Report on the Financial Statements
We have audited the financial statements of the Office of Utilities Regulation set out on pages 35 to
68, which comprise the statement of financial position as at 31 March 2011 and the statements of
comprehensive income, changes in reserves and cash flows for the year then ended and a summary of
significant accounting policies and other explanatory notes.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with International Financial Reporting Standards. This responsibility includes: designing,
implementing and maintaining internal controls relevant to the preparation and fair presentation of
financial statements that are free from material misstatement, whether due to fraud or error;
selecting and consistently applying appropriate accounting policies; and making accounting estimates
that are reasonable in the circumstances.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors judgement, including the
assessment of the risks of material misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditors consider internal controls relevant to the
preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of internal controls. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1

Page 2

IN0EPEN0ENT AU0ITDPS' PEPDPT (CDNT'0)

To the |embers of
DffIce of UtIlItIes FegulatIon

n our opInIon, the fInancIal statements gIve a true and faIr vIew of the fInancIal posItIon of the DffIce
of UtIlItIes FegulatIon as at J1 |arch 2011, and of Its fInancIal performance, changes In reserves and Its
cash flows for the year then ended In accordance wIth nternatIonal FInancIal FeportIng Standards.

Peport on addItIonaI requIrements of the DffIce of UtIIItIes PeguIatIon Act

We have obtaIned all the InformatIon and explanatIons whIch to the best of our knowledge and belIef,
were necessary for the purposes of our audIt.

n our opInIon, proper accountIng records have been kept and the fInancIal statements are In
agreement therewIth, and gIve the InformatIon requIred by the DffIce of UtIlItIes FegulatIon Act, In the
manner so requIred.

Chartered Accountants

28 July 2011
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 3


STATEhENT DF CDhPPEHENSIVE INCDhE

YEAP EN0E0 31 hAPCH 2011

Note 2011 2010
$'000 $'000

NCD|E 6 4J1,404 409,508

Dther operatIng Income 7 18,642 4,507

450,046 414,015

AdmInIstratIve and other expenses J66,028 JJ0,556
84,018 8J,459

nterest Income 6,452 4,J80

NET SUFPLUS FDF THE YEAF 8 90,470 87,8J9

Dther comprehensIve Income:

FetIrement benefIt reserve 5,478 6,940

FetIrement benefIt reserve transferred ( 5,478) ( 6,940)

TDTAL CD|PFEHENS7E NCD|E FDF THE YEAF 90,470 87,8J9

STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 March 2011
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
STATEMENT OF FINANCIAL POSITION

Page 4

STATEhENT DF FINANCIAL PDSITIDN


Note 2011 2010
$'000 $'000
ASSETS
NDNCUFFENT ASSETS:
Property, plant and equIpment 9 J0,480 J4,29J
FetIrement benefIt asset 10 54,026 48,548

84,506 82,841
CUFFENT ASSETS:
FeceIvables 11 56,466 66,684
TaxatIon recoverable 12 7,565 6,015
Loans and receIvables 1J 128,904 J6,114
Cash and cash equIvalents 14 100,092 94,725

29J,027 20J,5J8

J77,5JJ 286,J79
PESEPVES AN0 LIAILITIES
FESEF7ES:
FetIrement benefIt reserve 54,026 48,548
FetaIned earnIngs 180,04J 95,051

2J4,069 14J,599

NDNCUFFENT LA8LTES:
0eferred Income 15 J9J 589

A07ANCES FFD| THE CD7EFN|ENT DF
JA|ACA 16 64,J67 64,J67

CUFFENT LA8LTES:
Payables 17 78,704 77,824

J77,5JJ 286,J79

Approved for Issue by the DffIce on 28 July 2011 and sIgned on Its behalf by:

_______________________________ ______________________________
Ahmad ZIa |Ian 0Irector Ceneral DlIve Dakley FInancIal Controller
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
STATEMENT OF CHANGES IN RESERVES

Page 5

STATEhENT DF CHANCES IN PESEPVES


FetIrement FetaIned
8enefIt Feserve EarnIngs Total
S S S

8alance at 1 AprIl 2009 41,608 14,152 55,760

Net surplus for the year 87,8J9 87,8J9

Dther comprehensIve Income for the year 6,940 ( 6,940)

8alance at J1 |arch 2010 48,548 95,051 14J,599

Net surplus for the year 90,470 90,470

After comprehensIve Income for the year 5,478 ( 5,478)

8alance at J1 |arch 2011 54,026 180,04J 2J4,069

$000 $000 $000
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 6
DFFICE DF UTILTIES PECULATIDN

STATEhENT DF CASH FLDWS


2011 2010
$'000 $'000
CASH FLDWS FPDh DPEPATINC ACTIVITIES:
Net surplus for the year 90,470 87,8J9
Adjustments for:
0eferred Income ( 196) ( 197)
0eprecIatIon 8,718 8,207
FetIrement benefIt expense 1,527 508
nterest Income ( 6,452) ( 4,151)
Effect of exchange rate translatIon ( 1,160)
|ovement In bad debt provIsIon 9,175 5,992

DperatIng cash flows before movements In workIng capItal 102,082 98,198

|ovements In workIng capItal:
FeceIvables 1,446 ( J4,084)
Payables J,548 6,971
TaxatIon recoverable ( 1,550) ( 1,28J)
FetIrement benefIt contrIbutIons paId ( 7,005) ( 7,448)

Net cash provIded by operatIng actIvItIes 98,521 62,J54

CASH FLDWS FPDh INVESTINC ACTIVITIES
nterest receIved 6,049 4,JJ6
Purchase of property, plant and equIpment ( 4,905) ( 1J,616)
Loan and receIvables ( 92,790) 9,826

Net cash (used In)/provIded by InvestIng actIvItIes ( 91,646) 546

NET INCPEASE IN CASH AN0 CASH EUIVALENTS 6,875 62,900

Cash and cash equIvalents at the begInnIng of year 94,725 J1,825

Effect of exchange rate translatIon on cash and cash
equIvalents ( 1,508)

CASH AN0 CASH EUIVALENTS AT EN0 DF YEAP (Note 14) 100,092 94,725

STATEMENT OF CASH FLOWS
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
NOTES TO THE FINANCIAL STATEMENTS
Page 7

NDTES TD THE FINANCIAL STATEhENTS

31 hAPCH 2011

1. I0ENTIFICATIDN AN0 PPINCIPAL ACTIVITY:

(a) The DffIce of UtIlItIes FegulatIon (DUF) was establIshed by the DffIce of
UtIlItIes FegulatIon Act 1995, whIch has sInce been amended by the DffIce of
UtIlItIes FegulatIon (Amendment) Act, 2000. The regIstered offIce of the
organIsatIon Is J6 Trafalgar Foad, KIngston 10.

(b) The maIn actIvIty of the DffIce Is to receIve and process all applIcatIons for
lIcences to provIde utIlIty servIces as defIned under the Act, set rates where
applIcable and to monItor the operatIons of such utIlItIes. n addItIon, the DffIce
Is charged wIth ensurIng that consumers are provIded wIth adequate levels of
servIce, that the needs of the communIty are met and that the envIronment Is
protected.

2. APPLICATIDN DF NEW AN0 PEVISE0 IFPS's:

Standards, InterpretatIons and amendments to pubIIshed standards effectIve In the
reportIng perIod

0urIng the reportIng perIod, there were certaIn new standards, amendments and
InterpretatIons whIch became effectIve. None of these had a materIal effect on the
fInancIal statements but have gIven rIse to revIsed or addItIonal dIsclosures.

Standards, InterpretatIons and amendments to pubIIshed standards that are not yet
effectIve

At the date of authorIsatIon of these fInancIal statements, there were certaIn new
standards, amendments and InterpretatIons to exIstIng standards whIch were In Issue
but whIch were not yet effectIve. Those whIch are consIdered relevant to the DffIce
are as follows:

FFS 9 FInancIal nstruments (effectIve 1 January 201J), Introduces new requIrements for
classIfyIng and measurIng fInancIal assets. The standard also amends some of the
requIrements of FFS 7, FInancIal nstruments: 0Isclosures, IncludIng added
dIsclosures about Investments In equIty Instruments desIgnated as faIr value
through other comprehensIve Income.

A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 8


31 hAPCH 2011

2. APPLICATIDN DF NEW AN0 PEVISE0 IFPS's (C0NT'0):

Standards, InterpretatIons and amendments to pubIIshed standards that are not yet
effectIve (cont'd) -

AS 1 (Amended) PresentatIon of FInancIal Statements - AS 1 (effectIve 1 January
2011), Is amended to state that for each component of equIty a
reconcIlIatIon from openIng to closIng balances Is requIred to be
presented In the statement of changes In equIty, showIng
separately changes arIsIng from Items recognIzed In profIt or loss,
In other comprehensIve Income and from transactIons wIth owners
actIng In theIr capacIty as owners.

AS 24 (FevIsed) Felated Party 0Isclosures (effectIve 1 January 2011), Introduces
changes to the related party dIsclosure requIrements for
government related entItIes and amends the defInItIon of a related
party. The standard also expands the lIst of transactIons that
requIre dIsclosure.

The 0Irector Ceneral and hIs deputIes antIcIpate that the adoptIon of the standards,
amendments and InterpretatIons, whIch are relevant In future perIods, Is unlIkely to have
any materIal Impact on the fInancIal statements.

J. SICNIFICANT ACCDUNTINC PDLICIES:

(a) Statement of compIIance -

These fInancIal statements have been prepared In accordance wIth nternatIonal
FInancIal FeportIng Standards (FFS) and theIr InterpretatIons adopted by the
nternatIonal AccountIng Standards 8oard, and have been prepared under the hIstorIcal
cost conventIon. They are also prepared In accordance wIth provIsIons of the DffIce of
UtIlItIes FegulatIon Act.

(b) asIs of preparatIon -

The fInancIal statements are presented usIng JamaIcan dollars, whIch Is
consIdered the currency of the prImary economIc envIronment In whIch the
DffIce operates ("the functIonal currency").

The prIncIpal accountIng polIcIes applIed In the preparatIon of these
fInancIal statements are set out below. The polIcIes have been consIstently
applIed to all the years presented. Where necessary, prIor year comparatIves
have been restated and reclassIfIed to conform to current year presentatIon.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page


31 hAPCH 2011

J. SICNIFICANT ACCDUNTINC PDLICIES (CDNT'0):
(c) ForeIgn currency transIatIon -

TransactIons In foreIgn currencIes are converted Into the functIonal currency at the
exchange rates prevaIlIng at the dates of the transactIons. At the end of the
reportIng perIod, monetary assets and lIabIlItIes denomInated In foreIgn currency are
translated usIng the exchange rate rulIng at that date. 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.

Non monetary Items carrIed at faIr value that are denomInated In foreIgn currencIes
are translated at the rate prevaIlIng at the dates when the faIr value was determIned.
Non monetary Items that are measured In terms of hIstorIcal cost In foreIgn currency
are not translated.

(d) Property, pIant and equIpment -

0eprecIatIon Is calculated on the straIghtlIne basIs at annual rates estImated to wrIte off
the carryIng value of the assets over the perIod of theIr estImated useful lIves. Annual
rates are as follows:

Leasehold Improvement 10
FurnIture and fIxtures 10
DffIce machInery and equIpment 10
Computer and accessorIes 20
|otor vehIcles 20

Property, plant and equIpment are revIewed perIodIcally for ImpaIrment. Where the
carryIng amount of an asset Is greater than Its estImated recoverable amount, It Is wrItten
down ImmedIately to Its recoverable amount.

Any Item of property, plant and equIpment Is derecognIzed upon dIsposal or when no
future economIc benefIts are expected to arIse from the contInued use of the asset.
Any gaIn or loss arIsIng from the dIsposal or retIrement of the Item Is determIned as
the dIfference between the sales proceeds and the carryIng amount of the asset and Is
recognIzed In the statement of comprehensIve Income.

(e) FInancIaI Instruments -

A fInancIal Instrument Is any contract that gIves rIse to both a fInancIal asset for one
entIty and a fInancIal lIabIlIty or equIty of another entIty.

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J. SICNIFICANT ACCDUNTINC PDLICIES (CDNT"0):

(e) FInancIaI Instruments (cont'd) -

FInancIaI assets

The DffIce classIfIes Its fInancIal assets In the followIng categorIes: faIr value through
profIt or loss, avaIlable for sale assets and loans and receIvables. The classIfIcatIon
depends on the purpose for whIch the fInancIal assets were acquIred. |anagement
determInes the classIfIcatIon of Its fInancIal assets at InItIal recognItIon and re
evaluates thIs desIgnatIon at every reportIng date.

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.

FaIr-vaIue through profIt or Ioss (FVTP)

A fInancIal asset may be desIgnated In thIs category If upon InItIal recognItIon It Is
desIgnated by the entIty as F7TP. Such a desIgnatIon elImInates or sIgnIfIcantly
reduces a measurement or recognItIon InconsIstency that would otherwIse arIse, If
the fInancIal Instrument forms a part of a group of fInancIal assets whIch Is managed
and Its performance Is evaluated on a faIr value basIs In accordance wIth documented
rIsk management or Investment strategy and InformatIon Is provIded Internally on that
basIs. FInancIal assets at F7TP are stated at faIr value wIth any gaIns or losses arIsIng
on remeasurement recognIzed In the statement of comprehensIve Income.

AvaIIabIe-for-saIe fInancIaI assets

AvaIlableforsale fInancIal assets are nonderIvatIves that are eIther desIgnated In thIs
category or are not classIfIed In any other categorIes. Changes In the faIr value of
fInancIal assets classIfIed as avaIlableforsale are recognIzed In other comprehensIve
Income.

Loans and receIvabIes

Loans and receIvables are nonderIvatIve fInancIal assets wIth fIxed or determInable
payments that are not quoted In an actIve market. Loans and receIvables are measured
at amortIsed cost usIng the effectIve Interest rate method, less any ImpaIrment. nterest
Income Is recognIzed by applyIng the effectIve Interest rate method.

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31 hAPCH 2011



are not translated.



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(e) FInancIaI Instruments (cont'd) -

FInancIaI IIabIIItIes

The DffIce's fInancIal lIabIlItIes are InItIally measured at faIr value, and are
subsequently measured at amortIzed cost usIng the effectIve Interest method. These
lIabIlItIes are classIfIed as faIr value through profIt or loss and other fInancIal lIabIlItIes
and are Included In current and noncurrent lIabIlItIes In the statement of fInancIal
posItIon.

(f) ImpaIrment -

FInancIal assets other than those at faIr value through profIt or loss are assessed for
IndIcators of ImpaIrment at the end of each reportIng perIod. FInancIal assets are
consIdered to be ImpaIred when there Is objectIve evIdence that as a result of one or
more events that occurred after the InItIal recognItIon of the fInancIal asset the
estImated future cash flows of the Investment have been affected.

For fInancIal assets objectIve evIdence of ImpaIrment could Include:

(I) SIgnIfIcant fInancIal dIffIculty of the Issuer or counterparty
(II) 8reach of contract such as a default or delInquency In Interest or
prIncIpal
(III) t becomIng probable that the borrower wIll enter bankruptcy
or fInancIal reorganIsatIon
(Iv) The dIsappearance of an actIve market for that fInancIal asset because
of fInancIal dIffIcultIes.

For certaIn categorIes of fInancIal assets, such as trade receIvables, assets that are
assessed not to be ImpaIred IndIvIdually are In addItIon assessed for ImpaIrment on a
collectIve basIs. DbjectIve evIdence of ImpaIrment for a portfolIo of receIvables
Include the past experIence of collectIng payments, an Increase In the number of
delayed payments In the portfolIo past the average credIt perIod as well as observable
changes In natIonal condItIons that wIll correlate wIth defaults on receIvables.

For fInancIal assets carrIed at amortIsed cost the amount of the ImpaIrment loss
recognIzed Is the dIfference between the asset's carryIng amount and the present
value of estImated future cash flows dIscounted at the fInancIal asset's orIgInal
effectIve Interest rate.

For fInancIal assets carrIed at cost, the amount of the ImpaIrment loss Is measured as
the dIfference between the asset's carryIng amount and the present value of the
estImated future cash flows dIscounted at current market rate of return for a sImIlar
fInancIal asset. Such ImpaIrment loss wIll not be reversed In a subsequent perIod.
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J. SICNIFICANT ACCDUNTINC PDLICIES (CDNT"0):

(f) ImpaIrment (cont'd) -

The carryIng amount of the fInancIal asset Is reduced by the ImpaIrment loss dIrectly
for all fInancIal assets wIth the exceptIon of trade receIvables where the carryIng
amount Is reduced through the use of an allowance account. Subsequent recoverIes
of amounts wrItten off are credIted agaInst the allowance account. Changes In the
carryIng amount of the allowance account are recognIzed In the statement of

When an avaIlable for sale fInancIal asset Is consIdered to be ImpaIred, cumulatIve
gaIns and losses prevIously recognIsed In other comprehensIve Income are reclassIfIed
to the profIt and loss account In the perIod.

For fInancIal assets measured at amortIsed cost, If In a subsequent perIod the amount
of the ImpaIrment loss decreases and the decrease can be related objectIvely to an
event occurrIng after the ImpaIrment was recognIzed, the prevIously recognIzed
ImpaIrment loss Is reversed through profIt and loss to the extent that the carryIng
amount of the Investment at the date that the ImpaIrment Is reversed does not exceed
what the amortIsed cost would have been had the ImpaIrment not been recognIzed.

(g) EmpIoyee benefIts -

PensIon obIIgatIons

0efIned benefIt plan

The DffIce partIcIpates In a defIned benefIt plan. The plan Is generally funded through
payments to a trusteeadmInIstered fund as determIned by perIodIc actuarIal
calculatIons. Payments to the plan are recognIzed as an expense when employees have
rendered servIces entItlIng them to the contrIbutIons.

The defIned benefIt oblIgatIon Is calculated annually by Independent actuarIes usIng
the projected unIt credIt method. ActuarIal gaIns and losses arIsIng from experIence
adjustments and changes In actuarIal assumptIons In excess of the greater of 10 of the
value of plan assets or 10 of the defIned benefIt oblIgatIon are charged or credIted to
Income over the employees' expected average remaInIng workIng lIves.

The retIrement benefIt oblIgatIon In the statement of fInancIal posItIon represents the
present value of the defIned benefIt oblIgatIon as adjusted for unrecognIzed actuarIal
gaIns and losses and unrecognIzed past servIce costs and as reduced by faIr value of
plan assets. Any asset resultIng from thIs calculatIon Is lImIted to unrecognIzed
actuarIal losses and past servIce costs plus the present value of avaIlable funds and
reductIons to future contrIbutIons to the plan.

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31 hAPCH 2011



are not translated.



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(g) EmpIoyee benefIts (cont'd) -

VacatIon Ieave

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) Cash and cash equIvaIents -

Cash and cash equIvalents are carrIed In the statement of fInancIal posItIon at cost. For
the purpose of the cash flow statement, cash and cash equIvalents comprIse cash at bank,
In hand, deposIts and short term hIghly lIquId Investments wIth orIgInal maturItIes of three
months or less, net of bank overdraft.

(I) Trade and other receIvabIes -

Trade receIvables are carrIed at amortIsed cost less any provIsIons made
for ImpaIrment losses. A provIsIon for ImpaIrment of trade receIvables Is
establIshed when there Is objectIve evIdence that the organIsatIon wIll not be
able to collect all amounts due accordIng to the orIgInal terms of receIvables.
Dther receIvables are stated at amortIsed cost less ImpaIrment losses.

(j) Trade and other payabIes -

Trade payables are stated at amortIsed cost.

(k) ProvIsIons -

ProvIsIons are recognIsed when the DffIce 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 a relIable estImate of the amount of the oblIgatIon
can be made.

(I) TaxatIon -

The DffIce as a government organIzatIon Is exempt from ncome tax pursuant to sectIon
12(8) of the ncome Tax Act.

(m) orrowIngs and borrowIng costs -

8orrowIngs are recognIzed InItIally at the proceeds receIved, net of transactIon costs
Incurred. 8orrowIngs are subsequently stated at amortIsed cost and any dIfference
between proceeds and the redemptIon value Is recognIzed In the statement of
comprehensIve Income over the perIod of the borrowIngs. 8orrowIng costs are
recognIzed as expense In the perIod In whIch they are Incurred.
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(n) Pevenue recognItIon -

Fegulatory fees Is recognIzed In the statement of comprehensIve Income on an
accrual basIs. Fegulatory fees Is measured at the faIr value of the consIderatIon
receIvable.

nterest Income Is recognIzed for all Interest bearIng Instruments on an accrual basIs
unless collectabIlIty Is doubtful.

(o) Crants -

The organIzatIon receIves the followIng types of grants:

(I) Fevenue grants

Fevenue 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.

(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.

(p) Leases -

As Iessee

Leases of property, plant and equIpment where the DffIce assumes substantIally
all the benefIts and rIsks of ownershIp are classIfIed as fInance leases. FInance
leases are capItalIzed at the estImated present value of the underlyIng lease
payments. Each lease payment Is allocated between the lIabIlIty and fInance charges
so as to achIeve a constant rate on the fInance balance outstandIng. The
correspondIng rental oblIgatIons, net of fInance charges, are Included In fInance lease
oblIgatIons. The Interest element of the fInance charge Is charged to the Income
statement over the lease perIod. The property, plant and equIpment asset acquIred
under fInance leasIng contracts Is deprecIated over the useful lIfe of the asset.

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(p) Leases (cont'd) -

As Iessee (cont'd)

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 Income statement on a straIghtlIne 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 recognIsed as an
expense In the perIod In whIch termInatIon takes place.

As Iessor

When assets are sold under a fInance lease, the present value of the lease payments Is
recognIsed as receIvable. The dIfference between the gross receIvable and the
present value of the receIvable Is recognIzed as deferred profIt. Lease Income Is
recognIzed over the term of the lease so as to reflect a constant perIodIc rate of
return.

4. CPITICAL ACCDUNTINC JU0CEhENTS AN0 KEY SDUPCES DF ESTIhATIDN UNCEPTAINTY:

The preparatIon of fInancIal statements to conform to FFS requIres management to make
estImates and assumptIons that affect the reported amounts of assets and lIabIlItIes,
contIngent assets and contIngent lIabIlItIes at the end of the reportIng perIod and the revenue
expenses durIng the reportIng perIod. Actual results could dIffer from those estImates. The
estImates and underlyIng assumptIons are revIewed on an ongoIng basIs and any adjustments
that may be necessary would be reflected In the year In whIch actual results are known. The
followIng are the crItIcal judgements that the DffIce has made In the process of applyIng
the accountIng polIcIes that have the most sIgnIfIcant effect on the amounts recognIzed In the
fInancIal statements. n addItIon, the followIng are the key assumptIons concernIng the future
and other key sources of estImatIon uncertaInty at the end of the reportIng perIod that have
a sIgnIfIcant rIsk of causIng a materIal adjustment to the carryIng amounts of assets and
lIabIlItIes wIthIn the next fInancIal year.

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4. CPITICAL ACCDUNTINC JU0CEhENTS AN0 KEY SDUPCES DF ESTIhATIDN UNCEPTAINTY
(CDNT'0):

(a) Allowance for ImpaIrment losses on receIvables

n determInIng amounts recorded for ImpaIrment losses on receIvables In the
fInancIal statements, management makes judgements regardIng IndIcators of
ImpaIrment, that Is, whether there are IndIcators that suggest there may be
measurable decrease In estImated future cash flows from receIvables, for
example, through unfavourable economIc condItIons and default. |anagement
wIll apply hIstorIcal loss experIence to IndIvIdually sIgnIfIcant receIvables wIth
sImIlar characterIstIcs such as credIt rIsk where ImpaIrment IndIcators are not
observable In theIr respect.

(b) Expected useful lIfe and resIdual value of property, plant and equIpment

The expected useful lIfe and resIdual value of an asset are revIewed at least at
each fInancIal year end. Useful lIfe of an asset Is defIned In terms of the
asset's expected utIlIty to the organIzatIon.

(c) PensIon plan assets and postretIrement benefIt oblIgatIons

The cost of these benefIts and the present value of pensIon and other post
retIrement lIabIlItIes depend on a number of factors that are determIned on an
actuarIal basIs usIng a number of assumptIons. The assumptIon used In
determInIng the net perIodIc cost (Income) for pensIon and postretIrement
benefIts Include the expected longterm rate of return on the relevant
plan assets, the dIscount rate and, In the case of post employment
medIcal benefIts, the expected rate of Increase In medIcal costs. Any changes
In these assumptIons wIll Impact the net perIodIc cost (Income) recorded for
pensIon and postretIrement 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 longterm Investment returns.
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4. CPITICAL ACCDUNTINC ESTIhATES AN0 JU0CEhENTS IN APPLYINC ACCDUNTINC PDLICIES:
(CDNT'0):

(c) PensIon plan assets and postretIrement benefIt oblIgatIons (cont'd)

The DffIce 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 pensIon and postretIrement benefIt oblIgatIons. n determInIng the
approprIate dIscount rate, the DffIce consIdered Interest rate of hIghqualIty
corporate bonds that are denomInated In the currency In whIch the benefIt wIll
be paId, and that have terms to maturIty approxImatIng the terms of the
related pensIon lIabIlIty. The expected rate of Increase of medIcal costs has
been determIned by comparIng the hIstorIcal relatIonshIp of actual medIcal
cost Increases wIth the rate of InflatIon In the respectIve economy. Past
experIence has shown that actual medIcal costs have Increased on average by
one tIme the rate of InflatIon. Dther key assumptIons for the pensIon and post
retIrement benefIt costs and credIts are based In part on current market
condItIons.

(d) FaIr value of fInancIal assets

|anagement uses Its judgement In selectIng approprIate valuatIon technIques
to determIne faIr values of fInancIal assets adoptIng valuatIon technIques
commonly used by market practItIoners supported by approprIate assumptIons.

5. FINANCIAL AN0 CAPITAL PISK hANACEhENT:

(a) FInancIaI rIsk factors -

The DffIce's actIvItIes expose It to a varIety of fInancIal rIsks: market rIsk (IncludIng
currency rIsk and prIce rIsk), credIt rIsk, lIquIdIty rIsk, Interest rate rIsk and
operatIonal rIsk. The organIsatIon's overall rIsk management polIcIes are establIshed
to IdentIfy and analyze the rIsks faced by the organIzatIon and to set approprIate rIsk
lImIts and controls and to monItor rIsk and adherence to lImIts. The rIsk management
framework Is based on guIdelInes set by the 0Irector Ceneral and hIs deputIes
together wIth management, and seeks to mInImIze potentIal adverse effects on the
DffIce's fInancIal performance.

(I) harket rIsk

PrIce rIsk

PrIce rIsk Is the rIsk that the value of a fInancIal Instrument wIll fluctuate as a
result of changes In market prIces. The DffIce manages Its exposure by
maIntaInIng only short term Investments.
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31 hAPCH 2011

5. FINANCIAL AN0 CAPITAL PISK hANACEhENT:

(a) FInancIaI rIsk factors -

(I) harket rIsk (cont'd)

Currency rIsk

Currency rIsk Is the rIsk that the value of a fInancIal Instrument wIll fluctuate
because of changes In foreIgn exchange rates. The DffIce manages Its foreIgn
exchange rIsk by holdIng foreIgn currency balances. The followIng are the
foreIgn balances Included In the statement of fInancIal posItIon.

Assets . LIabIIItIes .
2011 2010 2011 2010
$ $ $ $

USS J7J,496 480,J89 2J8,245 J67,785
C8P 250
EUFD 780

SensItIvIty analysIs

StrengthenIng or weakenIng of the currencIes agaInst the JamaIcan dollar
would have Increased or (decreased) net surplus In the amounts shown below.
ThIs analysIs assumes that all other varIables, In partIcular Interest rates,
remaIn constant.

2011 2010
ncome Statement ncome Statement
S'000 S'000

5 15 5 15
StrengthenIng WeakenIng StrengthenIng WeakenIng

US 1,595 (4,784) 2,1J7 ( 6,410)
C8P 2 ( 5)
EUFD 5 ( 14)

(II) Interest rate rIsk

nterest rate rIsk Is the rIsk that the value of a fInancIal Instrument wIll
fluctuate due to changes In market Interest rates. The DffIce's Interest rate
rIsk arIses from loans and receIvables and cash and cash equIvalents.
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5. FINANCIAL AN0 CAPITAL PISK hANACEhENT (CDNT'0):

(a) FInancIaI rIsk factors (cont'd) -

(II) Interest rate rIsk (cont'd)


At the reportIng date the Interest profIle of the DffIce's Interest bearIng
fInancIal Instruments was:

2011 2010
CarryIng amount CarryIng amount
S'000 S'000
7arIable rate Instruments:
Loans and receIvables 128,904 J6,114
Cash and cash equIvalents J1,76J 42,547

Cash flow sensItIvIty analysIs for varIable rate Instruments:

A change In Interest rates at the reportIng date would have Increased/
(decreased) net surplus by the amounts shown below. ThIs analysIs
assumes that all other varIables, In partIcular foreIgn currency rates, remaIn
constant.
2011 2010
ncome Statement ncome Statement
S'000 S'000

4 5 5 10
ncrease 0ecrease ncrease 0ecrease

Loans and
receIvables 4,976 (6,220) 1,806 (J,611)

Cash and cash
equIvalents 1,270 (1,587) 2,1J7 (4,27J)
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(III) 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 maInly from credIt gIven to customers and deposIts wIth
fInancIal InstItutIons. 8alances arIsIng from these actIvItIes are accounts
receIvable, loans and receIvable and cash and cash equIvalents. The
maxImum credIt exposure Is represented by the carryIng amount of
fInancIal assets In the statement of fInancIal posItIon.

|axImum exposure to credIt rIsk at the reportIng date was:

2011 2010
S'000 S'000

Trade receIvables J1,J85 45,055
Dther receIvables 25,081 21,629
Loan and receIvables 128,904 J6,114
Cash and cash equIvalents 100,092 94,725

285,462 197,52J


Trade receIvables

The DffIce Is a regulatory body and Its customer base Is determIned by
organIzatIons fallIng wIthIn the utIlIty sectors. The organIzatIon has polIcIes In
place to ensure that customers are legItImate and have a strong fInancIal base.

The DffIce manages Its credIt rIsk by screenIng Its lIcencees and puttIng
In place procedures geared towards recovery of amounts owed.

The DffIce establIshes an allowance for ImpaIrment that represents Its
estImate of Incurred losses In respect of trade receIvables.

The DffIce's average credIt perIod Is J0 days. Allowances for ImpaIred
trade receIvables are recognIsed based on an estImate of amounts that
would be Irrecoverable whIch Is determIned by past default experIence and
expected receIpts.

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31 hAPCH 2011



(III) CredIt rIsk (cont'd)

SensItIvIty analysIs (cont'd)

Loans and receIvables

The credIt rIsk on loans and receIvables Is lImIted because these are held
wIth reputable fInancIal InstItutIons.

Cash and cash equIvalents

The credIt rIsk on lIquId funds Is lImIted because the counterpartIes are
major banks wIth hIgh credIt ratIngs.

(Iv) LIquIdIty rIsk

LIquIdIty rIsk Is the rIsk that an enterprIse wIll encounter dIffIculty In raIsIng
funds to meet commItments assocIated wIth fInancIal Instruments. The DffIce
manages thIs rIsk by keepIng commItted credIt lInes avaIlable.

Contractual undIscounted cash flows

Total
CarryIng Cash WIthIn 1 2 2 5
Amount Dutflow 1 year Years Years
S'000 S'000 S'000 S'000 S'000

J1 |arch 2011

Fefundable bonds 20,429 20,429 20,429
Dther accruals 58,275 58,275 58,275

78,704 78,704 78,704

J1 |arch 2010

Fefundable bonds J2,829 J2,829 J2,829
Dther accruals 45,151 45,151 45,151

77,980 77,980 77,980

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31 hAPCH 2011



(v) EquIty rIsk

EquIty rIsk arIses out of prIce fluctuatIons In equIty prIces. The rIsk arIses out
of holdIng posItIons In eIther IndIvIdual stocks or In the market as a whole.
The DffIce Is not exposed to thIs rIsk.

(vI) CapItaI rIsk

CapItal rIsk Is the rIsk that the DffIce faIls to comply wIth mandated
regulatory requIrements resultIng In breach of those requIrements. The
DffIce's objectIves when managIng capItal are to comply wIth capItal
requIrements, safeguard the DffIce's abIlIty to contInue as a goIng concern
and to maIntaIn a strong capItal base to support the development of Its busIness.

(vII) DperatIonaI rIsk

DperatIonal rIsk Is the rIsk of dIrect or IndIrect loss arIsIng from a varIety of
causes assocIated wIth the DffIce's processes, personnel, technology and
external factors, other than fInancIal rIsks, such as generally accepted
standards of corporate behavIour. The DffIce manages operatIonal rIsk so as to
avoId fInancIal loss and damage to Its reputatIon.

(b) FaIr vaIue estImatIon -

FaIr value Is the amount for whIch an asset could be exchanged, or a lIabIlIty settled,
between knowledgeable, wIllIng partIes In an arm's length transactIon.

The amounts Included In the fInancIal statements for cash and cash equIvalents,
receIvables and payables, reflect theIr approxImate faIr value because of the short
term maturIty of these Instruments.

Long term lIabIlItIes reflect the DffIce's contractual oblIgatIons and are carrIed at
amortIsed cost, whIch Is deemed to approxImate the faIr value of these lIabIlItIes
because these lIabIlItIes are subject to such terms and condItIons as are avaIlable In
the market for sImIlar Instruments.

A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1

Page 23
DFFICE DF UTILIES PECULATIDN


31 hAPCH 2011

6. INCDhE:

ncome represents, prImarIly, regulatory servIce fees Imposed on utIlIty companIes by the
DffIce. n addItIon, the organIzatIon charges fees for processIng applIcatIons for lIcences.

The followIng are the major contrIbutors to revenue:

2011 2010
X X

TelecommunIcatIons sector 41 4J
ElectrIcIty sector 40 40
Water sector 18 6
TransportatIon sector 1 1

7. DTHEP DPEPATINC INCDhE:
2011 2010
$'000 $'000

Crant Income 14,241 J,787
Dther Income 4,401 720

18,642 4,507

Expenses relatIng to the grants receIved durIng the year totaled S14,240,975 (2010 SJ,787,488).

8. NET SUPPLUS FDP THE YEAP:

2011 2010
$'000 $'000
Net surplus for the year Is stated after chargIng

0Irector and deputy dIrector generals' emoluments:
|anagement remuneratIon 26,100 19,4J0
AudItors' remuneratIon current year 900 1,290
prevIous year overprovIsIon ( 510)
Staff costs (note 18 245,952 211,62J
8ad debts 9,J20 5,992

Page 31


31 hAPCH 2011

16. A0VANCES FPDh THE CDVEPNhENT DF JAhAICA:

The amounts represent advances from the Covernment of JamaIca wIth no stated terms of
repayment. The advances were to fund the startup costs of the DffIce of UtIlItIes FegulatIon
(DUF).

17. PAYALES:
2011 2010
$'000 $'000

Fefundable bonds 20,429 J2,829
Accrued vacatIon pay 10,648 9,579
CratuIty payable 17,008 9,97J
Dther accruals J0,619 25,44J

78,704 77,824

Fefundable bonds represent a proposal securIty receIved from applIcants In the amount of
1 of the expected total capItal cost of the project for the Supply of ElectrIcIty from Fenewable
Energy 8ased Power CeneratIon FacIlItIes.

The proposal securIty wIll be returned to unsuccessful applIcants prIor to the expIratIon of the
proposal valIdIty or If they wIthdraw theIr proposals before the deadlIne for submIssIon of proposals.
f any applIcant's proposal Is determIned to be nonresponsIve to the Fequest for Proposal
requIrements, the proposal securIty wIll also be returned.

After the hIghest ranked applIcants have been selected and have extended the valIdIty of theIr
proposals, If necessary, the proposal securIty of all other unsuccessful applIcants wIll be returned.
The proposal securIty of the remaInIng unsuccessful applIcants wIll be returned upon the expIratIon
date of theIr proposals or the executIon of the project agreements by the successful applIcant and
furnIshIng of the performance securIty by that applIcant, whIchever Is earlIer. The proposal
securIty of the successful applIcant wIll be returned when that applIcant has executed the project
agreements and has furnIshed the requIred performance securIty.

18. STAFF CDSTS:
2011 2010
$'000 $'000

SalarIes and related expenses 218,87J 178,269
TravellIng allowance 9,857 9,12J
Staff costs mIscellaneous 882 2,105
Staff traInIng 16,J40 22,126

245,952 211,62J

The organIzatIon employed 56 persons at the end of the year (201049).

A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1

Page 23
DFFICE DF UTILIES PECULATIDN


31 hAPCH 2011

6. INCDhE:

ncome represents, prImarIly, regulatory servIce fees Imposed on utIlIty companIes by the
DffIce. n addItIon, the organIzatIon charges fees for processIng applIcatIons for lIcences.

The followIng are the major contrIbutors to revenue:

2011 2010
X X

TelecommunIcatIons sector 41 4J
ElectrIcIty sector 40 40
Water sector 18 6
TransportatIon sector 1 1

7. DTHEP DPEPATINC INCDhE:
2011 2010
$'000 $'000

Crant Income 14,241 J,787
Dther Income 4,401 720

18,642 4,507

Expenses relatIng to the grants receIved durIng the year totaled S14,240,975 (2010 SJ,787,488).

8. NET SUPPLUS FDP THE YEAP:

2011 2010
$'000 $'000
Net surplus for the year Is stated after chargIng

0Irector and deputy dIrector generals' emoluments:
|anagement remuneratIon 26,100 19,4J0
AudItors' remuneratIon current year 900 1,290
Staff costs (note 18 245,952 211,62J
8ad debts 9,J20 5,992

Page 31


31 hAPCH 2011


(DUF).

17. PAYALES:
2011 2010
$'000 $'000


78,704 77,824




18. STAFF CDSTS:
2011 2010
$'000 $'000


245,952 211,62J


A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1

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Page 25


31 hAPCH 2011

10. PETIPEhENT ENEFIT ASSET:
2011 2010
$'000 $'000

Asset recognIzed In the statement of fInancIal posItIon
PensIon plan 54,026 48,548

Amount recognIzed In the statement of comprehensIve
Income 1,527 508

(a) PensIon benefIts -

The DffIce operates a defIned benefIt pensIon plan whIch Is admInIstered
by CuardIan LIfe LImIted In whIch all permanent employees who have
completed three months of servIce are requIred to partIcIpate. The plan Is funded
by employees' contrIbutIon at a mandatory rate of 5 of pensIonable salary and
they may make voluntary contrIbutIons not exceedIng a further 5. The DffIce
contrIbutes at a rate of 8.J of pensIonable salarIes. Normal retIrement pensIon
Is based on 2 of fInal pensIonable salary per year of pensIonable servIce. The last
actuarIal valuatIon was carrIed out as at J1 |arch 2011.

The amounts recognIzed In the statement of fInancIal posItIon were determIned as
follows:

2011 2010
$'000 $'000

Present value of funded oblIgatIons ( 7J,205) ( 71,815)
FaIr value of plan assets 122,546 111,807
49,J41 J9,992

UnrecognIsed actuarIal loss 4,685 8,556

Asset In the statement of fInancIal posItIon 54,026 48,548

A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 26


31 hAPCH 2011

10. PETIPEhENT ENEFIT ASSET (CDNT'0):

(a) PensIon benefIts (cont'd) -

The movement In the faIr value of plan assets durIng the year was as follows:

2011 2010
$'000 $'000

At begInnIng of year 111,807 94,914
Expected return on plan assets 11,272 9,760
ActuarIal (loss)/gaIn on plan assets ( 2,J65) 1,765
ContrIbutIons 14,247 14,079
8enefIts paId and admIn expense ( 12,415) ( 8,711)

At end of year 122,546 111,807

The movement In the present value of funded oblIgatIons durIng the year was as
follows:

2011 2010
$'000 $'000

FaIr value of plan assets at begInnIng of year 71,815 54,007
Current servIce cost 11,207 7,967
nterest cost 8,8J4 9,219
ActuarIal (gaIn)/loss on oblIgatIon ( 6,2J6) 9,JJJ
8enefIt paId and admIn expenses ( 12,415) ( 8,711)

At end of year 7J,205 71,815

|ovements In the net assets recognIzed In the statement of fInancIal posItIon:

2011 2010
$'000 $'000

8alance at begInnIng of year 48,548 41,608
Total expense as shown below ( 1,527) ( 508)
ContrIbutIons paId 7,005 7,448

8alance at end of year 54,026 48,548
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 27


31 hAPCH 2011


(a) PensIon benefIts (cont'd) -

The amounts recognIzed In the statement of comprehensIve Income are as follows:

2011 2010
$'000 $'000

Current servIce cost J,965 1,JJ5
nterest cost 8,8J4 9,219
Expected return on plan assets (11,272) (9,760)
ncome not elIgIble for recognItIon due to lImIt ( 286)

Total, Included In staff costs (note 18) 1,527 508

The total charge was Included In admInIstratIve and other expenses.

The actual return on plan assets was S8,907,000 (2010 S11,525,000).

The expected contrIbutIons to the plan for the year ended J1 |arch 2012 Is S8,979,046.

(b) PrIncIpaI actuarIaI assumptIons used In vaIuIng post-empIoyment benefIts
were as foIIows:
2011 2010
X X

0Iscount rate 10.5 11.5
Expected return on assets 10 10
Future salary Increases 7 7

Postemployment mortalIty for actIve members as well as mortalIty for pensIoners
and deferred pensIoners Is based on the 1994 Croup AnnuIty |ortalIty Tables
(CAh 4) (U.S. mortalIty tables).
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1

Page 28


31 hAPCH 2011


(b) PrIncIpaI actuarIaI assumptIons used In vaIuIng post-empIoyment benefIts were as
foIIows (cont'd) -

The InservIce specImen rates (number of occurrences per 1,000 members) are as
follows:

|ales Females
_______________________________________________________________________

WIthdrawals llhealth 0eaths In WIthdrawals llhealth 0eaths In
Age from servIce retIrements servIce from servIce retIrements servIce
20 0.507 0.284
25 0.661 0.291
J0 0.801 0.J51
J5 0.851 0.478
40 1.072 0.709
45 1.578 0.97J
50 2.579 1.428
55 4.425 2.294
60 7.976 4.4J9

(c) 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:

2011 2010 200 2008 2007
$'000 $'000 $'000 $'000 $'000
FaIr value of plan
assets 122,546 111,807 94,914 77,279 61,485
0efIned benefIt
oblIgatIon ( 7J,205) ( 71,815) ( 54,007) ( 41,652) ( J4,842)

Surplus 49,J41 J9,992 40,907 J5,627 26,64J

ExperIence adjustments
(gaIn)/loss
ArIsIng on plan assets ( 2,J65) 1,765 ( 299) 1,278 1,666
ArIsIng on plan
lIabIlItIes J,511 ( 2,J22) 7,615 1,105 J,07J

A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1

Page 2


31 hAPCH 2011

11. PECEIVALES:
2011 2010
$'000 $'000

Trade receIvables 61,876 66,J70
ProvIsIon for doubtful debts ( J0,491) ( 21,J15)
J1,J85 45,055
0ue from employees 4,074 J,452
0eposIts 2,8J0 J,972
Dther 18,177 14,205

56,466 66,684

The average credIt perIod on amounts receIvable from the utIlIty companIes Is J0 days.

AgIng of trade receIvables from utIlItIes companIes:

2011 2010
Cross mpaIred Cross mpaIred
S'000 S'000 S'000 S'000

Not past due 21,199 910 42,294 998
J160 days 729 499 2,564 499
6090 days 621 499 699 499
90 days and over J9,J27 28,58J 20,81J 19,J19

61,876 J0,491 66,J70 21,J15

The average age for receIvables past due but not ImpaIred Is 100 days (2010 - 60 days).

The movement In allowance for doubtful debt In respect of trade receIvables durIng the year
was as follows:
2011 2010
$'000 $'000

8alance at begInnIng of year 21,J15 15,J2J
mpaIrment loss recognIzed 9,176 5,992
8alance at end of year J0,491 21,J15

Allowance for doubtful debts relates to utIlIty customers that have defaulted on theIr
contractual terms. 8ased on past experIence, the DffIce belIeves that trade receIvables not
past due and those past due for whIch no provIsIon Is made relates to utIlIty companIes
that have a good record of payment.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1

Page 30


31 hAPCH 2011

12. TAXATIDN PECDVEPALE:

ThIs balance represents wIthholdIng tax arIsIng on loans and receIvables.

1J. LDANS AN0 PECEIVALES:

ThIs represents purchases of Covernment of JamaIca SecurItIes under agreements that they wIll
be resold by the DffIce to fInancIal InstItutIons and brokers on specIfIed dates, at specIfIed
amounts. These are, In effect, collateralIzed lendIng to the fInancIal InstItutIons and brokers.

These loans and receIvables have an average maturIty of J0 days (2010J8 days) and attracted
average Interest rate at 6.J0 durIng the year (20101J.14).

The market value of the underlyIng securItIes as at J1 |arch 2011 was S128,90J,595 (2010
SJ6,114,028).

14. CASH AN0 CASH EUIVALENTS:
2011 2010
$'000 $'000

Cash at bank and In hand 100,092 94,725

ThIs Includes S21,580,689 for refundable bonds (2010 SJ2,508,558).

15. 0EFEPPE0 INCDhE:
2011 2010
$'000 $'000

8alance at begInnIng of year 589 786
Transferred to Income statement 196 197
8alance at end of year J9J 589

ThIs represents a grant from prIvate Sector 0evelopment Programme, (A European
CommunIty Project Implemented by JA|PFD), for the purchase of a computer server on
behalf of the DffIce of UtIlItIes FegulatIon. The amount wIll be amortIsed over the asset's
remaInIng useful lIfe.

A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 31


31 hAPCH 2011


(DUF).

17. PAYALES:
2011 2010
$'000 $'000


78,704 77,824




18. STAFF CDSTS:
2011 2010
$'000 $'000


245,952 211,62J


A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 32


31 hAPCH 2011

19. PELATE0 PAPTY TPANSACTIDNS AN0 ALANCES:

PartIes are consIdered to be related If one party has the abIlIty to control or exercIse
sIgnIfIcant Influence over the other party In makIng fInancIal or operatIonal decIsIons. The
followIng transactIons were carrIed out wIth related partIes.

2011 2010
$'000 $'000

Key management compensatIon:
SalarIes and other shortterm employee benefIts 25,090 18,571
Statutory contrIbutIons 1,010 859

26,100 19,4J0

Fegulatory fees:
JamaIca Urban TransIt Company 5,992 5,992
NatIonal Water CommIssIon 77,068 58,8J7

8J,060 64,829

20. LEASE CDhhIThENTS:

Future lease payments under operatIng leases at J1 |arch 2011 were as follows:

hInImum Lease Present VaIue of
Payments hInImum Lease Payments
2011 2010 2011 2010
$'000 $'000 $'000 $'000

No later than one year 15,J66 15,J66 14,496 1J,969
Later than one year 15,J66 15,J66 1J,676 12,699
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 33
OFFICE OF UTILITIES REGULATION
31 MARCH 2011
21. LITIGATIONS:
The following is the legal report from the Offices independent Attorneys.
Oceanic Digital Jamaica Limited (trading as Claro) v Telecommunications Appeal Tribunal and
Office of Utilities Regulation .
Claro filed an Application for Leave to Apply for Judicial Review of the decision of the
Telecommunications Appeal Tribunal handed down on 14 December 2010 and the decision
and reconsideration of the Office of Utilities Regulation dated 14 June 2010 and 5 August 2010
respectively. These decisions relate to the automatic diversion by Claro of calls to its
customers from Digicel number + 1 876 619 5000 to a voice mail service. An acknowledgement
of Service and Skeleton Submission has been filed on behalf of the Office of Utilities Regulation.
The matter is scheduled for hearing in September 2011.
Appeal by Cable & Wireless Jamaica Limited 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) .
In this matter Cable & Wireless is appealing against the Reconsideration Decision of the Office
of Utilities Regulation dated 19 March 2007 on assessment of RIO-5 and Tariff Schedule RIO-5A.
The appeal has been fixed for hearing on 12 and 13 October 2011.
The Office of Utilities Regulation v Jamaica Urban Transit Company Limited
In this matter the OUR filed suit against the Jamaica Urban Transit Company Limited (JUTC)
to recover the sum of $22,469,130 being monies due and owing for outstanding Regulatory
fees. This JUTC was served on 22 March 2011 and on 24 March 2011 they filed and served
an Acknowledgement of Service of Claim Form. To date they have not filed a defence. By
letter dated 26 May 2011 a letter was written to the Director of States Proceedings that there
will be an application for judgement in default if a Defence is not filed promptly.
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 34
OFFICE OF UTILITIES REGULATION
STATEMENT OF INCOME
YEAR ENDED 31 MARCH 2011
2011 2010
$000 $000
INCOME:
Regulatory service fees 431,079 400,113
Licence application processing fees 325 9,395
431,404 409,508
Other income:
Grants 14,241 3,787
Interest received 6,452 4,380
Foreign exchange gain 1,160 -
Other 3,241 720
25,094 8,887
Total income 456,498 418,395
EXPENSES:
Administrative and other expenses (page 68) 366,028 330,556
NET SURPLUS FOR THE YEAR 90,470 87,839
STATEMENT OF INCOME
A n n u A l R e p o R t 2 0 1 0 - 2 0 1 1
Page 35

SCHE0ULE DF EXPENSES


2011 2010
$'000 $'000
A0|NSTFAT7E AN0 DTHEF EXPENSES:

SalarIes 185,664 15J,40J
Statutory costs 10,571 8,559
PensIon contrIbutIons 2,914 508
Croup lIfe Insurance 1,974 1,6J2
Health Insurance 6,JJ9 5,060
Staff welfare 11,411 9,106

ForeIgn travel 6,570 10,151
EntertaInment 4J2 505
TravellIng and subsIstence 9,946 9,J55
|otor vehIcle expenses J,775 J,560
nsurance J80 J12
Fental 16,0J1 14,207
Telephone 1,981 1,967
ProfessIonal fees 28,461 28,478
AudIt fees current year 900 1,290
FepaIrs and maIntenance 706 577
Annual report 482 715
StatIonery and prIntIng 1,545 1,204
DffIce and general expenses J,7JJ J,19J
nformatIon technology 4,550 5,272
PublIc educatIon 6,017 14,698
|embershIp dues 19,287 14,481
Consumer advIsory commIttee 628 4J4
AdvertIsIng 1,576 1,212
PromotIon 716 1,894
DDCUF conference 4,515
8ad debts 9,J20 5,992
8ank charges 174 J5J

J66,028 JJ0,556
SCHEDULE OF ExPENSES

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2 Offce of Utilities Regulation / Annual Report & Financial Statements 2010 - 11

(c) ForeIgn currency transIatIon -

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