Section 28: Principles applicable to tariff determination

28. Principles applicable to tariff determination (1) For the purposes of a determination under this Part, the Authority shall, inter alia, ensure that the tariff— (a) allows for the recovery of costs which are reasonably and necessarily incurred by the licensee in providing the electricity service, including— (i) the costs of expansion, replacement and maintenance of the facilities of a licensee; (ii) the costs of financing the activities of a licensee through loans and other borrowings; and (iii) any other expenses, taxes, duties and levies imposed on the licensee; (b) provides a reasonable return on the capital invested in the undertaking of the licensee comparable to that for a company in a sector of comparable risk; (c) provides incentives for improvement of technical and economic efficiency and quality of the services; (d) contributes to conservation and efficient use of electricity; (e) avoids undue discrimination among customers; (f) phases out or reduces cross-subsidies between different categories of customers; (g) provides for subsidised charges or other financial assistance for certain categories of customers; and (h) allows the licensee to sustain an operating and capital investment regime and reasonable earnings for prudent operation and the provision of a quality and reliable electricity service. (2) The Authority may— (a) in respect of a contract for any utility service negotiated between licensees or between a licensee and one or more largevolume customers, determine a specified tariff formula; or (b) in respect of the purchase in bulk supply for resale, determine a tariff on the basis of such competitive processes as it may decide and in conformity with this section. (3) Notwithstanding subsection (1), in determining any tariff, the Authority may— (a) differentiate among customers on the basis of differences in total monthly or annual consumption, the time periods for which the electricity service is provided, the load factors, power factors, voltage levels and such other criteria as may affect the cost of providing an electricity service; E4 – 13 [Issue 1] Electricity Act 2005 (b) allow a tariff incorporating cross-subsidies for certain classes of customers necessary to enable such customers to pay for an electricity service, subject to recovery by the licensee of the relevant costs thereof as may be prescribed; and (c) take into consideration the price and availability of electricity produced from non-conventional sources of energy. (4) Without prejudice to subsections (1) to (3), the Authority may authorise— (a) temporary charges pending a final tariff determination; (b) a licensee to implement different charges in different phases, provided that the Authority shall ensure that a licensee recovers the total amount due on the basis of a final determination made by the Authority.