Office of Utilities Regulation

Electricity Peak and Energy Demand Forecast 2010 - 2030

June, 2010

Office of Utilities Regulation Electricity Peak and Energy Demand Forecasts 2010-2030 Document No. Elec2010005_FCT001

Table of Contents
1. 2. 3. 4. EXECUTIVE SUMMARY.…………………………………………………………………………………………………………………….2 ELECTRICITY DEMAND FORECAST MODEL REVIEW ............................................................................ 17 HISTORICAL ELECTRICITY DEMAND PATTERNS/ CHARACTERISTICS ................................................... 21 ECONOMIC OUTLOOK AND THE UNCERTAINTY IN ELCTRIC DEMAND FORECASTING…………………….27 4.1 General Economic Conditions………………………………………………………………………………………………………27 4.1.1 National Economic Growth……………………………………………………………………………………………………….27 5. FORECAST METHODOLOGY……………………………………………………………………………………………………………30 5.1 5.2 5.3 5.4 5.5 5.6.1 5.6.2 5.6.3 6. Overview ..................................................................................................................................... 30 Explanatory Variables for Models ............................................................................................... 30 Determination of Variables Selected .......................................................................................... 35 Regression Model Specifications and Results ............................................................................. 38 Forecast results ........................................................................................................................... 43 Base Forecast .......................................................................................................................... 44 High Forecast Scenario............................................................................................................ 45 Low Forecast Scenario ............................................................................................................ 46

APPENDICES ........................................................................................................................................ 47 6.1 Inputs ................................................................................................................................................. 48 6.2 Econometric Model Outputs ............................................................................................................. 49

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1. EXECUTIVE SUMMARY
SUMMARY OF CUSTOMER, SALES, AND DEMAND FORECAST The projection of demand and energy requirements for Jamaica’s Electric System was developed for the period 2010 through 2030. Over this period, system net energy requirements and peak demand were projected to increase at a compound annual growth rate of 4.0 and 3.80 percent respectively. The present projections are lower when compared to projections of 4.6 percent for Net Energy requirements and 4.5 percent for net peak demand obtained for the 2003 and 2004 forecasts done by JPS and the OUR respectively. There are two main reasons for the change in these overall growth patterns: 1. Assumptions about economic growth variables used in both previous base forecast were more optimistic than that assumed for this forecast. assumptions for this forecast are illustrated in Table 1e. The

2.

The higher nominal electricity prices brought on by the higher fuel prices over the period, coupled with the significant retrofitting of household lighting with fluorescence Cuban Light bulbs have served to put a damper on average electricity usage, in particular for the residential class. Analysis has shown a slower rate of growth in the residential demand curve. Additionally, end-use data analysis is indicating that major appliance usage for refrigerators and microwave are near the saturation points whereas, prior to the last ten years these two appliances were significant drivers for average residential usage.

The forecast method used by the OUR seeks to define electricity consumption as a function of the growth in the average number of customers and growth in the level of average usage per customer. Average use per customer is defined as a function of socio-economic variables where different models are developed for each rate class according to their particular usage pattern.
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Table 1a. Base forecast of Sales, Net Energy and Net Peak Demand, 2010 - 2030

Year

R10 Sales (MWh)

R20 Sales (MWh)

R40 Sales (MWh)

R50 Sales (MWh)

R60 Sales (MWh)

Base Sales (MWh)

Net Generation (MWh)

Load Factor

Net System Peak (MW)

Peak Demand Growth Rate

2008 2009

1,032,182 1,071,646

650,424 651,045

759,739 679,027

592,918 626,473

96,973 99,588

3,132,236 3,127,780

4,123,290 4,213,983

77.97% 78.42%

603.7 619.9

-1.18% 2.69%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

1,133,078 1,171,834 1,225,444 1,271,458 1,322,824 1,372,082 1,423,534 1,474,719 1,527,064 1,579,770 1,633,316 1,687,452 1,742,350 1,797,940 1,854,294 1,911,407 1,969,318 2,028,043 2,087,614 2,148,055 2,209,398

640,736 636,917 640,269 659,217 686,293 717,962 750,137 782,831 821,142 860,463 900,830 942,283 984,867 1,028,628 1,073,615 1,119,881 1,167,480 1,216,470 1,266,911 1,318,865 1,372,398

705,873 731,245 755,770 779,429 802,215 824,125 845,166 865,351 884,696 903,224 920,959 937,929 954,165 969,696 984,557 998,778 1,012,393 1,025,435 1,037,935 1,049,925 1,061,435

649,412 677,541 713,232 768,906 836,670 912,565 990,900 1,071,501 1,162,486 1,256,698 1,354,055 1,454,487 1,557,937 1,664,365 1,773,745 1,886,067 2,001,337 2,119,575 2,240,815 2,365,108 2,492,517

102,274 105,033 107,795 110,561 113,333 116,111 118,896 121,689 124,490 127,302 130,125 132,960 135,809 138,672 141,551 144,446 147,360 150,293 153,246 156,222 159,220

3,231,374 3,322,569 3,442,509 3,589,573 3,761,334 3,942,845 4,128,634 4,316,089 4,519,879 4,727,457 4,939,285 5,155,112 5,375,128 5,599,301 5,827,762 6,060,580 6,297,888 6,539,816 6,786,521 7,038,175 7,294,967

4,253,796 4,373,845 4,531,735 4,725,330 4,951,437 5,190,379 5,434,953 5,681,720 5,949,989 6,223,245 6,502,098 6,786,213 7,075,842 7,370,946 7,671,693 7,978,175 8,290,569 8,609,043 8,933,808 9,265,086 9,603,128

77.60% 77.96% 78.28% 78.57% 78.84% 79.07% 79.28% 79.47% 79.64% 79.80% 79.93% 80.06% 80.17% 80.27% 80.35% 80.43% 80.51% 80.57% 80.63% 80.68% 80.72%

625.8 640.5 660.8 686.5 717.0 749.3 782.6 816.1 852.8 890.3 928.6 967.7 1007.6 1048.3 1089.9 1132.3 1175.6 1219.8 1264.9 1310.9 1358.0

0.95% 2.35% 3.18% 3.89% 4.44% 4.51% 4.43% 4.29% 4.50% 4.39% 4.30% 4.21% 4.12% 4.04% 3.97% 3.89% 3.82% 3.76% 3.70% 3.64% 3.59%

1982 to 2008 2009 to 2030

4.50%

4.10%

3.05%

5.75%

4.05%

4.18%

4.42%

0.64%

3.75%

?

3.51%

3.61%

2.15%

6.80%

2.26%

4.12%

4.00%

0.14%

3.80%

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The model specification, diagnostic tests and elasticities established are documented to add to the usefulness of the document to all levels of users (see appendix 1). The base forecast is summarized in Tables 1a. The projected demand is based on independent estimates of energy sales for each rate class. Attendant with expanding to meet growth in electricity demand, JPS will need to expand its customer service infrastructure to meet a growth in customer base of 3.20 percent per annum (see table 1b).

1.2 Losses:
Over the forecast period, it is assumed that JPS will reduce its overall system losses to 15.8 percent from the present level of 22.9 percent per annum. For the purpose of this forecast it is reasonable to assume that the reduction in losses will have some effect on the system load factor while not necessarily reducing the growth of the net generation requirement. This is likely to be the case as the reduction in non-technical losses is expected to result in non paying customer becoming legitimised. However, it is also likely that they will adjust their consumption pattern of electricity downwards, once they are forced to begin paying for the commodity. The resultant effect of the loss reduction programme is an increase in sales, an adjustment to the system load factor but little or no impact on the net generation requirements.

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1.3 Net Generation
In order to facilitate the increase in energy demand, net generation is expected to grow at an average annual rate of 4.00% (see table 1). The growth rate is dependent on the main drivers such as real GDP growth, population, real prices and real disposable income. The forecast projects that growth in consumption will be strongest in the Industrial class (Rate 50) with an average annual growth rate of 6.8 percent. This compares with General Service (Rate 20) of 3.61 percent and Residential (Rate 10) of 3.51 percent.

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1.4 Peak Demand
Peak demand is expected to grow at an average rate of 3.7% per annum on account of continued improvements in the system load factor (see table 1). The forecast of Peak Demand was heavily influenced by the class demand profiles and coincidence factors determined by load research and assumes that these trends are likely to continue over the forecast period. An important

trend in the load profile on the system in the last fifteen years has been the development of an evening peak higher than the daytime peak. The forecast analysis of the rate classes’s contribution to System Peak indicate that this trend is likely to continue with the Residential Rate class forecasted to move from 33 percent to 35 percent of total peak demand over the forecast period. The General Service category (Rate 20) contribution to System Peak is expected to move from 17 percent to 23 percent (an average increase of 1.2 percent) annually over the forecast period. Rate 40 and Rate 50 contributions are expected to decline marginally (<1 percent). There are reasons for the continued dominance of an evening peak over daytime peak for the system. These are as follows:
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1. There has been a relative shift in Residential and Commercial electricity prices over the past fifteen years mainly due to adjustments made in various tariff updates driven by demand responsibility allocations. The real price of Residential Electricity went from being 10 percent higher than the General Service (Rate 20) real electricity price in 2000 to only 5% percent lower in 2008. Additionally, real price of residential electricity went from being 26 percent higher than the General Power, (Rate 40) electricity prices in 2000 to just 12 percent higher in 2008. This relative shift in electricity prices has had quite an impact on the growth of the evening peak that coincides with this relative shift in

Ratio

of

Real

Ratio

of

Real

Residential/General Service Electricity Price Year

Residential/General Power Electricity Price

2000 2001 2002 2003 2004 2005 2006 2007 2008

1.10 1.045 1.094 0.159 1.050 0.986 0.973 0.976 0.951

1.26 1.30 1.42 1.48 1.26 1.27 1.21 1.23 1.12

electricity prices.

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It is also instructive to compare the relative income and price elasticities established through econometric modeling (regression analyses) of the average use per customer for Residential, General Service and General Power rate classes. Table 1c

Price Elasticity

Income Elasticity

Residential (R10)

-0.2532

0.3348

General (R20)

Service

-0.0657

-

General (R40) Power -0.0632

It can be seen from this table that while income elasticity is greater, price elasticity is comparatively significant. The price elasticity for residential electricity is generally higher in magnitude than General Service (Rate 20) and generally higher than General Power (Rate 40). This reinforces the argument and the conclusion that the relative shift in prices over the last few years cannot be ignored as one possible cause of the shift in the peak from daytime to one of predominantly evening peak.

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The shift in evening peak is not entirely due to growth in Residential demand, as with the exception of 1994, 1995, 1996 and 1997, during the last ten years Residential Sales have grown no faster than commercial sales. . Regression analysis shows that the number of visitor arrivals is a significant factor in explaining General Power electricity sales. Hence, increased tourism activity is a significant contribution to the growth of the evening peak. Load demand profiles on Residential Peak consumption coincides with that of the hotel sub-category peak demand. Hotel demand therefore also contributes to the growth and dominance of the evening peak demand.

1.5 Number of Customers The number of JPS customers is projected to grow by an average rate of 3.20% per annum, driven by increases chiefly in the large power and residential service classes and therefore by increases in hotel and residential construction.

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Table 1d Forecasted average number of Customers by Rate Class
General Service General Power Large Power Total (Excluding street light)

Years

Residential

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Average Annual Growth Rates 1982- 2008 2009- 2030

566783 586014 605898 626199 646928 668100 689727 711824 734405 757486 781081 805208 829881 855119 880938 907356 934391 962063 990390 1019393 1049091 1079505

62668 61777 61436 61713 63334 65645 68337 71060 73815 77029 80311 83666 87095 90601 94189 97862 101623 105476 109426 113476 117631 121895

1550 1568 1588 1612 1645 1682 1720 1758 1795 1834 1872 1910 1947 1984 2020 2056 2091 2127 2161 2196 2230 2264

122 122 123 125 131 138 147 156 165 175 186 197 208 219 231 243 256 269 282 295 309 323

631123 649481 669045 689649 712038 735565 759931 784798 810180 836524 863450 890981 919131 947923 977378 1007517 1038361 1069935 1102259 1135360 1169261 1203987

3.46% 3.34%

3.87% 3.05%

2.29% 1.82%

7.92% 4.57%

4.39% 3.20%

Assumptions The base forecast of customer sales and peak demand of electricity for the period 2010 - 2030 is based on an average annual growth rate for Gross Domestic Product (GDP) of 2.0 percent for 2010 - 2030. The assumption is taking into account the Planning Institute of Jamaica (ESSJ) projections and analysis of the actual GDP growth rate over the period 1982 – 2009. PIOJ is
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projecting GDP growth of 3.0 percent for the medium term and the average annual historical growth rate of real GDP for the period 1982 – 2009 is 2.0 percent. The OUR has however adjusted these projections to reflect the current and short term economic outlook in the context of the historical growth rate and the expected recovery from the recession brought on by the global financial crisis. OUR analysis envisage GDP growth rate of -2.7 to 0 percent for the medium term 2009 -2014. The forecast is also based on the following macro economic assumptions underlying the average annual GDP growth rate as shown in table 1e. Table 1e

Compound Annual Growth Rate Variables 2010 2011-2030

Gross Domestic Product

0%

2.2%

Exchange Rate Depreciation

0%

4.0%

Population

0.75%

0.75%

Inflation

8.0%

6.0%

1.6 Scenarios
Sensitivity Analysis Using sensitivity analysis to determine the impact of different assumed economic growth variables on the base forecast, the OUR have developed high (optimistic) and low (pessimistic)
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forecast scenarios based on the same econometric models as the base forecast but with different growth scenarios. The base load forecast is based on a Gross Domestic Product (GDP) growth rate of 2.0 percent compounded annually. The higher ( optimistic) forecast assumed a Gross Domestic Product (GDP) growth rate of 4 percent compounded annually and the lower (pessimistic) forecast assumed a GDP growth rate of 0.5 percent compounded annually. Alternative scenarios of projected net generation and system net peak are compared in Tables 1f and Table 1g respectively.

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Table 1.f. Pesimistic Forecast

Net Generation (MWh) 2008 2009 4,123,290 4,213,983

Net Generation Growth Rate 1.17% 2.20%

Load Factor 78% 78%

Growth 2.38% 0.58%

Net System Peak (MW) 604 620

Peak Demand Growth Rate -1.18% 2.69%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

4,200,306 4,280,216 4,394,610 4,515,761 4,674,215 4,838,504 5,001,740 5,160,705 5,316,970 5,469,455 5,618,650 5,764,213 5,906,330 6,044,935 6,180,146 6,312,015 6,440,659 6,566,187 6,688,730 6,808,424 6,925,414

-0.32% 1.90% 2.67% 2.76% 3.51% 3.51% 3.37% 3.18% 3.03% 2.87% 2.73% 2.59% 2.47% 2.35% 2.24% 2.13% 2.04% 1.95% 1.87% 1.79% 1.72%

78% 78% 78% 79% 79% 79% 79% 79% 80% 80% 80% 80% 80% 80% 80% 80% 81% 81% 81% 81% 81%

0.52% 0.46% 0.42% 0.37% 0.33% 0.30% 0.27% 0.24% 0.21% 0.19% 0.17% 0.15% 0.14% 0.12% 0.11% 0.10% 0.09% 0.08% 0.07% 0.06% 0.06%

618 627 641 656 677 699 720 741 762 782 802 822 841 860 878 896 913 930 947 963 979

-0.32% 1.43% 2.25% 2.38% 3.17% 3.21% 3.10% 2.93% 2.81% 2.67% 2.55% 2.43% 2.32% 2.22% 2.12% 2.03% 1.95% 1.87% 1.79% 1.72% 1.66%

19822008 20092030

4.42% 2.39%

0.64% 0.16% 10.43%

3.75% 2.20%

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Table 1.g. Optimistic Forecast

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
19822008 20092030

Net Generation (MWh) 4,123,290 4,213,983 4,321,214 4,503,073 4,728,639 4,971,610 5,254,511 5,606,396 5,979,749 6,372,128 6,786,523 7,222,889 7,683,046 8,167,861 8,678,883 9,217,413 9,785,047 10,383,376 11,014,170 11,679,284 12,380,722 13,120,615 13,901,243

Net Generation Growth Rate 1.17% 2.20% 2.54% 4.21% 5.01% 5.14% 5.69% 6.70% 6.66% 6.56% 6.50% 6.43% 6.37% 6.31% 6.26% 6.21% 6.16% 6.11% 6.08% 6.04% 6.01% 5.98% 5.95%

Load Factor 0.78 0.78 0.78 0.78 0.78 0.79 0.79 0.79 0.79 0.79 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.81 0.81 0.81 0.81 0.81

Growth 2.38% 0.58% 0.52% 0.46% 0.42% 0.37% 0.33% 0.30% 0.27% 0.24% 0.21% 0.19% 0.17% 0.15% 0.14% 0.12% 0.11% 0.10% 0.09% 0.08% 0.07% 0.06% 0.06%

Net System Peak (MW) 604 620 636 659 690 722 761 809 861 915 973 1,033 1,097 1,165 1,236 1,311 1,390 1,474 1,562 1,655 1,753 1,856 1,966

Peak Demand Growth Rate -1.18% 2.69% 2.55% 3.73% 4.58% 4.75% 5.34% 6.38% 6.38% 6.31% 6.28% 6.23% 6.19% 6.15% 6.11% 6.07% 6.04% 6.01% 5.98% 5.95% 5.93% 5.91% 5.89%

4.42% 5.85%

0.64% 0.16% 10.43%

3.75% 5.65%

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Figure 1

Figure 2

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ELECTRICITY DEMAND FORECAST MODEL REVIEW

Background
The importance of electricity is evidenced by the dependence of all sectors of the Jamaican economy on electric power to drive economic activity. This need for electricity exists amongst all economic agents - from households to government and businesses, which use the energy provided for lighting and as input (both direct and indirect) into productive output. The necessity of electricity indicates that the very basis on which it is produced must be in tact and working efficiently in order to meet the increasing demands of a growing economy. Analysing backwards from need to supply implies that sufficient generation and distribution mechanisms must be in place to not only meet demands, but to do so in a timely, cost effective manner to avoid shortages and blackouts. This document represents the OUR analysis and assessment of the load requirements that will impact the Least Cost Expansion Plan (LCEP). The LCEP is used as a basis for strategic planning for expansion of production facilities to deliver electricity to customers. The mechanics of demand and supply and the unwanted implications of insufficient supply mechanisms point to the need for effective planning to ensure that electricity demand is met with efficient delivery. The latter calls for detailed forecasting of future electricity demand in order to outline the generating capacity and new expansion projects needed overtime. The development of new facilities (if and where needed) takes time and therefore this demand forecast spans the period 2010-2030.

Process
The objective of the demand forecast is to estimate the total sales of electricity, generation and peak demand overtime as driven by the increases in the average
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number of customers and average use per customer. The fact that electricity is defined into five rate classes of service means that a model is developed for each rate class so as to estimate customer number and usage. This is then aggregated across all rate classes and used to estimate total sales/ demand for the electricity system. Of specific note is that the forecast across rate classes is based on certain assumptions of both economic and non-economic explanatory variables specified in the models. These assumptions are based on historic, a priori, as well as macroeconomic expectations and projections.

Key Drivers
There is a wide range of potential drivers of long term electricity demand, ranging from demand for Jamaica produced goods, population growth and long tern growth in employment. The drivers can be split into four (4) broad areas; economic activity (measured by GDP), demographics, electricity prices (and demand responsiveness) and energy intensities (determined by the type of electricity end use and technology). The availability of reliable series of historical and forecast data largely determines the drivers that can be utilised for long term forecasting. The key drivers and contributing factors are outlined in this document. The models assessed in this analysis are focused at producing forecasts that reflect changes in historical demand and its drivers. Underlying historical improvements in energy efficiency, for example, are already reflected in the demand numbers. Changes in demand may occur as a result of policy changes. It is outside the scope of this analysis to consider the impact of future policy changes and if, and how, they should be wound into the demand forecasts.

General Modelling
The scope of this forecast review is limited to forecasting Energy and Peak demand and Customer growth. Different sources of electricity demand have different growth
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characteristic. Growth in demand sourced from the manufacturing industry for example has different drivers to growth associated with household residencies. The ability to model specific areas of demand is reliant on the availability of relevant historical and forecast data. Although detailed breakdowns of demand are often available on a year by year basis, consistent data over sufficiently long periods is generally available only at a largely consolidated level. While there may be scope for additional analysis in the future, the demand modelling considered in this review has been focused at five key demand groups: • • • • • Residential Service General Service Rate 40 – Power Service LOW VOLTAGE Rate 50 – Power Service MEDIUM VOLTAGE Rate 60 - Streetlights

Peak demand forecasts are at the grid exit point and therefore include lines losses Model type The model used to develop the electric system long term forecast is based on an econometric approach to forecasting. This involves assessing the relationship between historical demand and likely key drivers of demand such as GDP and population, then using the relationships to forecast future demand using forecast of the key drivers. It is the view of the OUR that the forecasting model needs to be intuitive and clear to the “non-experts”. The OUR is of the view that other forecasting methods such as - Trend Method - End Use Method - Time Series Method

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-

- Advance Modelling Method - Hybrid of the above

Whilst useful did not meet the criteria of being most cost effective, intuitive yet technically robust enough to assess historical demand data and establishing relationships between demand and the demand drivers. On the assessment of alternative models carried out as part of the development of the demand forecast, has resulted in the selection of an econometric approach. Modelling Software The Eview Quantitative Micro Software Version 6 package was selected as a platform for analysis due to its scripting flexibility ( eg. estimation, forecasting, statistical analysis, graphics, data management) and the relative ease of setting up multiple runs of the demand models. Once a preferred model (based on goodness of fit) has been selected the parameter estimates from the regression output is then rebuild in excel to derive the forecasted demand. Modelling Period The OUR is of the view that for the econometric method, it is reasonable to include a wide span of data to get the best estimates of relationships between the demand for electricity and the drivers that influence those demands. To this end annual data covering the period 1982 to 2009 was used based on the availability of data consistently across the set of variables used to model electricity demand. Modelling uncertainty Various econometric models for each rate classes was postulated and assessed. On assessment, models were selected based on how well they fitted the historical data while minimising forecast uncertainty. The OUR is of the view that model accuracy needs to be balanced against the requirement that the model be intuitive, theoretically sound and fairly easy to explain. Additionally, scenario assumptions about economic and demographic growth projections are made to account for the risk or uncertainty of the forecast being too high or too low.

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2. HISTORICAL ELECTRICITY DEMAND PATTERNS/CHARACTERISTICS Organization of the Electricity Sector The electricity sector in Jamaica has been characterized by the growing access to electricity by the population for lighting purposes. During the early 1980s, just over 50% of Jamaicans had electricity power. However, by the end of 2008, electricity access increased significantly to approximately 91% according to estimates from the Planning Institute of Jamaica. The Jamaica Public Service Company Limited (JPSCo) remains the sole commercial distributor of electricity in Jamaica, with support in service expansion by the government funded Rural Electrification Programme (REP). JPSCo owns the majority of the country’s electricity generating capacity with other sources of generation stemming from the bauxite and alumina industries, the cement company and sugar industries. These generating capacities are mainly used for internal industrial demand and to a limited extent to generate power for the national grid. The level of generating capacity at the end of 2008 stood at 621.09 MW, while that provided by independent generators totalled 196.66 MW together amounting to 817.75 MW. This compares to 503.60 MW and 152.56 MW respectively to amount to a total of 656.16 MW at the end of the previous decade. The contribution by independent power producers (IPP) currently emanates from the following companies: The Jamaica Energy Partners (JEP) (124.36 MW) JPPC (61.30 MW) Jamalcoa (11 MW) Wigton (20 MW) Total IPP supply = 196.66 MW

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Figure 3:

Present and Historical Demand With majority electricity demand emanating from the residential (Rate 10) service class over the 1998 to 2008 period, total electricity sales amounted to 3,116.96 Gigawatt hours (GWh) by 2008. This represents an average annual increase of 3.0% over the total sales of 2451.94 GWh in 1998. The demand in 2008 was supported by net generation of 4123.29 Gigawatt hours (GWh), with a maximum net peak of 603.7 megawatts (MW). The general trend of electricity sales reflects modest increases up to 2007 when demand peaked at 3150.92 GWh and declined by 1% at end 2008. The decline was lead by a falloff in rates 10, 20 and 40 electricity demand between 2007 and 2008. This was attributed mainly to reduced demand in the residential rate category likely due to the results of energy conservation initiatives bolstered by increased fuel rates and high

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electricity bills during the one year period when world oil prices dramatically increased. Load Characteristics Figure 4:

Load Research Analysis Results The system peak for 2009 was 647.8 MW gross (619.9 MW net), and this occurred in September 2009. This is the continuation of the pattern that has emerged since the last fifteen years, whereby the system peak is occurring in the evening as opposed to mid day in earlier years. The system peak frequently occurred towards the end of the year around December, and the lowest peak for each year is frequently occurring in the month of February.

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Table 5 shows the contribution of each rate class to the system peak. The commercial and industrial classes (rates 20, 40 and 50) accounted for a total of 58% of the on peak and the residential class 38%. and streetlights (4%) account the remaining net generation. Losses is excluded. Table 5.Maximum Demand Contribution by Rate Class
Max Demand Contribution Partial Peak On Peak 22% 38% 31% 17% 28% 23% 19% 18% 0% 4%

Rates RT10 RT20 RT40 RT50 RT60

Key Findings

The other findings from the Load Research Study and Survey for the period 2008 were as follows: • The system peak occurred in the evening and this represents a continuation in the pattern from the mid-1990s’, where the system peaked in the mid-day period. • The gap between evening and day peak is narrowing and is relatively lower than in previous years. This represents increased commercial consumption relative to Residential consumption. • Based on the results of the residential survey1 of homes supplied with electricity, the major electrical appliances found in households were as follows:

1

Survey was done in 2000 by JPS Load Researh Unit. In the absence of more recent data, the results of the customer appliance survey 2000 is reproduce.

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Fraction of households Appliance having appliance

Typical for developed countries

I)

Refrigerators - Manual - Frost free (65%) (22%)

87%

98 %

II) III) IV) V) VI) VII)

Television Radio Clothes iron House fan Blender VCR/DVD

81% 74% 73% 49% 48% 31% 20% 10 % 6%

99 % 99 % 95 % 30 % 50 % 60 % 70 % 90%(w/o gas) 35% (w gas) 80 %

VIII) Washing machine IX) Electric water heaters X) Air conditioning

Refrigerators, air conditioners and electric water heaters are the high energy devices to be found in households. The refrigerator accounts for up to half of the energy

consumed in households; while the saturation level of this appliance is high, market research will have to be done to assess the impact of this device, as well as air conditioners and electric water heaters on future residential energy sales.

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3. Economic Outlook and the Uncertainty in Electric Demand Forecasting
3.1 General Economic Conditions

The preparation of a load forecast for strategic planning requires estimates of energy and loads at the rate class level. For this reason consideration must be given not just to national demographic and economic conditions but to sector growth patterns. This section outlines general economic and demographic trends in Jamaica and discusses the implications for power demand. 4.1.1 National Economic Growth Structural adjustment programs were initiated in Jamaica in 1981 and although it can be argued that tangible gains resulted over the years, economic growth as measured by the Gross Domestic Product is at best anaemic. The last five years have seen marginal growth. In the four years from 2005 to 2008, real economic growth was 1.0 percent, 2.8 percent, -0.1 percent, and -2.7 percent respectively. Between 1983 and 1988, real GDP growth ranged from 1.47 percent to 6.23 percent, with the lowest rate of growth occurring in 1988 (influenced by Hurricane Gilbert) and the highest occurring in 1987. Real growth slowed thereafter averaging 3.5 percent for the period 1989 - 1992 and 1.0 percent for the period 1993-95. Over the 1988 – 2009 periods, GDP of 1.0 percent average growth rate have been achieved (see figure 5). Nonetheless, based on the views of the relevant planning agencies, there is general agreement that positive real economic growth is possible over the next decade. The Government of Jamaica through the Vision 2030 plan envisages a 3 - 5 percent long term GDP growth, with low inflation. This is the average growth rate
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adopted for the load forecast, albeit adjusted based on the GDP outlook for the short to medium term. Historic and forecast GDP (at constant prices) are shown in Figure 5. Inflation has dropped from peak levels of 72.1 percent in 1991/1992 to average 10 percent in 2008.

Long term growth of 3% to 5% per annum is predicated upon continued adjustment of the exchange rate to maintain competitiveness. The economy is highly vulnerable to external shocks, with tourism, bauxite, alumina and other commodity sales dependent on international prices as well as natural events. While alumina and bauxite prices remain depressed (but expected to increase) and the likelihood of a major double dip recession in the U.S. is not great, changes in these variables may have a strong impact on Jamaica.

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In terms of sectoral contributions to growth, non-traditional manufacturing exports rose from 4 percent to 5 percent per annum during the period 1986 - 1988. The causes of manufacturing growth are varied but key factors were the currency devaluations in 1984 and 1985 and the success of export zones in Kingston and Montego Bay, especially with garments, which were helped by preferential U.S. tariff treatment. Tourism

construction activity increased in real terms by 2.0 percent and 1.0 percent in 1990 and 1991 respectively reflecting slower expansion of hotel facilities. Unemployment fell to 15.3 percent in 1994 from a peak of 29 percent in 1983, with all employment increases taking place in the non-public sectors. In 1994 Public sector employment was 32 percent below 1980 levels, partly due to divestitures. Population growth is projected to grow no faster than 0.75 percent per annum over the next decade due largely to continued high migration levels, which itself puts a drag on economic growth because of skilled workers are among the migrants. Disposable income figures in Jamaica are generally thought to be understated. One prime reason given is overseas remittances from relatives which do not show up in official statistics. Therefore real per capita disposable income growth is likely to be understated. However, adjusting power demand forecasts for income figures for is difficult. An argument can be made that this other income translates into increased power demands, especially from the residential category. We have seen significant increase in saturation of end use appliances. Economic variability carries a particular risk for generating capacity addition. The Electric Utility Industry must therefore plan for expansion based on long term growth prospects and this carries the risk of facilitating more capacity than needed during times of economic slowdown. Without reliable power, industries such as tourism

would suffer since there is substantial competition in this market and tourist can shift destinations rapidly as was shown in the early 1980s. JPS cannot attempt to time its
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expansion to the economic swings because it must precede expansion in other sectors. Thus the load forecast focuses on long term average growth with the exception of known activity over the next few years. The government appears determined to

support export earning project which implies increased support for tourism, mining and manufacturing. The tourism sector is currently strong and any government

incentives will likely accelerate this condition. Substantial increase in hotel capacity is expected within the next decade in Montego Bay, South West Coast, St. Mary and Ocho Rios.

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4. FORECAST METHODOLOGY
4.1 Overview

The method of forecasting is based on economic modelling techniques, in particular econometric analysis, which determines electricity demand based on growth in the number of customers and usage per customer. This form of analysis establishes electricity demand as dependent on a number of determinants that explain the growth/ changes in the number of customers and use per customer using least squares regression models. Models for each service class are developed against the background of economic theory, seeking to estimate economic and other variables which influence electricity demand. The selected variables for each model are determined by the characteristics and usage pattern of each service/ rate class. Based on the model specification, regression analysis is applied to determine whether the selected variables provide statistically significant explanations for electricity demand at the 95% confidence level. The results are then assessed for goodness of fit and other standardized features of robust variables with the intention to specify the strength and relationship between electricity demand and the variables on which it depends.

4.2

Explanatory Variables for Models
Residential Service Class (Rate 10)

The residential service class demand forecast is a projection based on the estimates and gross values from the models of both the average number of rate 10 customers and
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average usage per rate 10 customer. For the former, the following variables were used as determinants: 1. Mean population 2. Household size The determinants arise from the implication that the population indicates the total number of persons using electricity as its source of residential lighting. Meanwhile, the household size (average number of persons in each household) is indicative of the number of households which could be JPSCo residential customers. Both explanatory variables were projected to have a potentially significant effect on changes in the average number of residential customers. The average use per residential customer is given by the annual megawatt hour (MWh) electricity consumption per rate 10 customer. This is derived by dividing the total annual rate 10 electricity sales by the average annual number of residential customers. The determinants used for the average usage per customer model were: 1. Real per capita disposable income 2. Real rate 10 electricity price ($/kwh) 3. Real LPG price (J$/litre) These determinants were selected based on economic theory which suggests that residential consumption pattern is a result of household choices given disposable income and the price of a commodity demanded. The implication is that households will only demand and use the levels of a commodity that can be afforded given the price of the commodity and the price of substitute commodities (in this case liquid petroleum gas - LPG). The price of electricity is derived by dividing the total annual residential sales revenue by the total residential electricity consumption ( KWh).

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General Service Class (Rate 20) The general service class consists of non-residential, small commercial/ industrial businesses which demand under 25 kilovolt-amperes (kVA). This class span a diverse and heterogeneous set of business which ranges from inter alia, service entities such as banks, hairdressing/ barber shops, small hotels and restaurants to non-profit and government entities such as hospitals, schools and churches as well as general stores, which includes pharmacies and gas stations. The demand forecast for this rate class is a projection also based on the estimates and gross values from the models of both the average number of rate 20 customers and average usage per rate 20 customers. The primary input into their growth and viability is electricity and the nature of this service class implies that several variables may possibly explain both components from which electricity demand is determined. To explain the average number of customers, the following variables were used: 1. Urban population* 2. Real GDP per capita 3. Net interest rate (loans) 4. Exchange rate Economic theory implies that these variables should affect the level of establishment and growth in businesses overtime. The stipulated variables are believed to either facilitate or inhibit the local business environment and therefore their projections should explain changes in the number of general service customers. The average use per general service rate class customer is given by the annual megawatt hour (MWh) consumption per rate 20 customer. This is obtained by dividing the total annual rate 20 electricity sales by the average annual number of general service customers. The explanatory variables are selected chiefly from the premise that businesses are established and sustainable based on economic conditions.
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Therefore the determinants for the average usage per rate 20 customers included: 1. Urban population2* 2. Real rate 20 electricity price ($/kwh) 3. Average exchange rate
*

Large Commercial/ Industrial Class (Rate 40) This service class consist of medium to large commercial and industrial customers with demand of over 25 kilovolt-amperes (kVA). The number of rate 40 customers has been influenced by class reclassification, particularly between this and the rate 50 service class. As such both the projection and estimates of the changes in the average number and usage per customer are subject to errors which in the case of the latter have been corrected for using the econometric autoregressive process at order one (1). The determinants for the average number of rate 40 customers included: 1. Real GDP per capita3* 2. Net interest rate (loans) 3. Average exchange rate 4. Average annual inflation rate4* The projected average usage per rate 40 customers were derived based on similar economic theory as that assumed in selecting the determinants of rate 20 usage. The

2

Dropped from models due to lack of explanatory power Dropped from models due to lack of explanatory power Dropped from models due to lack of explanatory power

33

44

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dependent variable was derived by dividing the total annual rate 40 electricity sales by the average annual number of large commercial/ industrial service class customers. Proposed independent variables including urban population were assessed but only the following were selected for a determination of the average usage per rate 40 customers: 1. Tourist stopover arrivals 2. Real rate 40 electricity price ($/kwh) 3. Average length of stay in hotels Large Industrial Class (Rate 50) The large industrial service class represents large industrial customers as well as big hotels with demand of over 25 kilovolt-amperes (kVA). The rate 50 demand forecast is projected based on a model specification which considers variables influencing the growth in number of customers and their average use. The determinants of the average number of rate 50 customers also depend on economic conditions, which included: 1. Real GDP per capita 2. Net interest rate (loans)* 3. Average exchange rate To explain the average use per rate 50 customers, both urban population and the real price of electricity were selected as likely determinants which may predict electricity demand for the service class. The dependent variable was obtained by dividing the total annual rate 50 electricity sales by the average annual number of large industrial class customers. Street Lighting and Municipalities (Rate 60) The demand forecast for the rate 60 service class is based solely on average usage. Therefore, the projection was executed somewhat differently, whereby an overall sales

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model was developed with urban population and household size used as explanatory variables.

4.3

Determination of Variables Selected

Several economic and other factors were used to build models of electricity demand determination. Of these, some major explanatory variables in the specified models are based on certain assumptions and projections, which will be explained in this section. The critical variables include real GDP, real per capita disposable income, population growth, real electricity price, LPG price, and the inflation rate (used to deflate nominal prices). Real GDP Real GDP is a core economic indicator which is nominal GDP adjusted for inflation. As in the 2006 Forecast, data for real GDP at 1996 prices were used. However, whereas the historical data from 1982 to 2006 was obtained from the Statistical Institute of Jamaica then, for this forecast, that for the period 2002 – 2007 were obtained from the Planning Institute of Jamaica in order to maintain consistency in the flow of the data (which otherwise would be unachievable). Real GDP is expected to grow at an average annual rate of -2.5% in 2009, with economic turn-around projected in 2013 at a 1% growth rate to level off at 3.0% for the final 13 years of the forecast period. The per capita real GDP (GDP/ population) was used in the rates 20, 40 and 50 service class models as a more precise predictor of changes in the average number of customers in those rate classes over time.

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Real per capita disposable income Real per capita disposable income is nominal disposable income adjusted by both inflation and population. The historical data for this variable continues to be obtained from the Statistical institute of Jamaica. Real per capita disposable income was included in the analysis as an indicator of the level of demand that can be expected for residential electricity use because disposable income is a clear determinant of a household’s affordability of consumer goods. As such, the variable was used in the rate 10/ residential service class model to determine the average use of electricity and therefore the level of electricity expected to be in demand for the residential customers over the forecast period. Real disposable income is expected to grow at an average rate of 4.07% annually. Population/ Urban Population Both population and urban population data were used as explanatory variables. The population data was obtained from the Statistical Institute of Jamaica, whereas urban population data were given by the Population Census Country Reports as a percentage of the total population for the Census years 1982, 1991 and 2001. The remaining data points were extrapolated based on trending methodology. Population data was used in the residential service class model, while urban population was included in the rates 20, 40 and 50 service class regression models but was found to be statistically insignificant in all cases. The average annual growth rate for the population is expected to be 0.48% in 2009 and is forecasted to decline to 0.15% by 2030. The forecasted average annual growth rate for the urban population ranges from 0.95% in 2009 to 0.62% by the end of the forecast period.

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Real average electricity price Real average electricity price is the average price of electricity per kilowatt hour adjusted for inflation. The average electricity price is the average operating sales revenue divided by average energy sales in kilowatt hours. This was included as an explanatory variable for the average customer usage models for each service class excepting the street lighting service category. Real LPG price Liquid petroleum gas prices were used to capture the effects of non-fuel prices on electricity usage patterns. This was included in the average customer usage models for each service class with the exception of street lighting and municipalities. The LPG prices were obtained from the Ministry of Energy expressed in LPG per litre and adjusted for inflation to reflect real prices. Inflation The average annual point to point inflation was used to create an inflation factor which deflates nominal variables such as GDP, disposable income, electricity prices. The inflation factor was derived from the average annual point to point inflation rate obtained from the Statistical Institute of Jamaica. Using 1980 prices as the base year, the inflation factor was calculated from 1981 as follows: Inflation factor = previous factor * (1+ current year point to point inflation rate) Where the inflation factor for 1980 (the base year) = 1 The annual inflation factor was then used to convert nominal explanatory variables to real variables, which were then incorporated in the various models as more precise measure having taken account of inflation.

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4.4

Regression Model Specifications and Results

The model specifications and general form of the econometric models for each service class is outlined below Log(Yt) = a +β1log(X1t) + β2log(X1t)+ β3log(X1t) +…….εt ; t = 1,2….27 years The model seeks to establish parameter estimates (β1, β2, β3…...) for the explanatory variables (Xit), driving both the number of customers and usage per customer for each rate class. In order to form the basis for forecasting electricity demand, regression analysis was applied to each model which yielded the following results:

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Table 6: Number of Customer Models
Explanatory variable Mean population Household size Real disposable income per capita Real electricity price LPG price Urban population Net interest rate Exchange rate Real GDP per capita Inflation rate Tourist stopover Average length of stay Constant Rate 10 4.8744 0.002* -0.4464 0.3974** Rate 20 -58.4603 0.0113* 0.5541 0.0056* 3.9927 0.0359 0.5521 0.0107* -0.2226 0.0004* 0.1993 0.0000* 1.2759 0.0048* Rate 40 -0.2937 0.0022* 0.1975 0.0000* 5.9774 0.0000* 0.6160 0.0011* Rate 50 0.4926 0.0000* 1.4698 0.0338* -3.9831 0.1558 0.5216 0.0117* Rate 60 AR(1)

Probability values denoted in green = statistical significance; orange = statistical insignificance at the 95% confidence level; * denotes statistically significant probability values; **Urban population becomes statistically significant when lagged one period. AR(1) was used as a means of accounting for serial correlation. Including an autoregressive (AR) and/or moving average (MA) term in the requisite models is a common econometric tool applied when tests have indicated that serial correlation exists in data.

Table 6 summarizes the regression output for the number of customer models. This includes select explanatory variables, the estimated coefficients (elasticities), the
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probability values (denoted in green and orange). The R-squared for each service class model is reflected in appendix 6.2 (below) which provide the econometric outputs. Each model regresses the natural log of select independent variables on the logged dependent variable (number of customers) for each service class. Besides the reported estimates, most models were inclusive of a number of explanatory variables some of which were dropped because of poor goodness of fit, incorrect coefficient signs and or other modelling and data problems. The combination of variables in the final service class model (see table above) improved goodness of fit (see R-squares), showed mainly correct coefficient signs and reflected better explanatory power for the number of customers per service category. The number of observations used in each assessment was consistently 27, ranging from the years 1982 – 2008.

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Table 7: Sales Per Customer Models Explanatory variable Rate 10 Rate 20 Mean population Household size Real disposable income per capita Real electricity price LPG price Urban population Net interest rate Exchange rate Real GDP per capita Inflation rate Tourist stopover Average length of stay Constant AR(1) 0.5114 0.0002* 0.3348 0.0000* -0.2532 0.0019* 0.0188 0.6711 -2.3611 0.0000* -0.0657 0.0265* -0.0222 0.3709 -2.4263 0.0000

Rate 40 -0.0632 0.2971 -** 0.4640 0.0400* 0.5862 0.3923 -1.8751 0.6554 0.8918 0.0000*

Rate 50 -0.1469 0.0069* 0.6715 0.5138 -0.7233 0.9599* 0.7723 0.0000*

Rate 60 -0.1871 0.6708 2.5169 0.0000* -24.2315 0.0023*

Probability values denoted in green = statistical significance; orange = statistical insignificance at the 95% confidence level; * denotes statistically significant probability values; **Urban population becomes statistically significant when lagged one period. AR(1) was used as a means of accounting for serial correlation. Including an autoregressive (AR) and/or moving average (MA) term in the requisite models is a common econometric tool applied when tests have indicated that serial correlation exists in data.

Table 7 summarizes the regression output for the sales per customer models. This includes select variables, the estimated coefficients (elasticities), the probability values
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(denoted in red and orange). As in the case of the number of customer model, the Rsquared for each service class in this model is reflected in appendix 6.2 (below). Each model regresses the natural log of select independent variables on the logged dependent variable (usage per customer) for each service class. Likewise, most models were inclusive of a number of explanatory variables some of which were dropped for similar reasons. The combination of variables in each service class model improved goodness of fit (see R-squares), showed mainly correct coefficient signs and reflected better explanatory power for the number of customers per service category. The number of observations used in each assessment was also consistently 27, ranging from the years 1982 – 2008.

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4.5

FORECAST RESULTS

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5.5.1 Base Forecast
R10 Sales (MWh) 1,133,078 1,171,834 1,225,444 1,271,458 1,322,824 1,372,082 1,423,534 1,474,719 1,527,064 1,579,770 1,633,316 1,687,452 1,742,350 1,797,940 1,854,294 1,911,407 1,969,318 2,028,043 2,087,614 2,148,055 2,209,398 4.50% R20 Sales (MWh) 640,736 636,917 640,269 659,217 686,293 717,962 750,137 782,831 821,142 860,463 900,830 942,283 984,867 1,028,628 1,073,615 1,119,881 1,167,480 1,216,470 1,266,911 1,318,865 1,372,398 4.10% R40 Sales (MWh) 705,873 731,245 755,770 779,429 802,215 824,125 845,166 865,351 884,696 903,224 920,959 937,929 954,165 969,696 984,557 998,778 1,012,393 1,025,435 1,037,935 1,049,925 1,061,435 3.05% R50 Sales (MWh) 649,412 677,541 713,232 768,906 836,670 912,565 990,900 1,071,501 1,162,486 1,256,698 1,354,055 1,454,487 1,557,937 1,664,365 1,773,745 1,886,067 2,001,337 2,119,575 2,240,815 2,365,108 2,492,517 5.75% R60 Sales (MWh) 102,274 105,033 107,795 110,561 113,333 116,111 118,896 121,689 124,490 127,302 130,125 132,960 135,809 138,672 141,551 144,446 147,360 150,293 153,246 156,222 159,220 4.05% Base Sales (MWh) 3,231,374 3,322,569 3,442,509 3,589,573 3,761,334 3,942,845 4,128,634 4,316,089 4,519,879 4,727,457 4,939,285 5,155,112 5,375,128 5,599,301 5,827,762 6,060,580 6,297,888 6,539,816 6,786,521 7,038,175 7,294,967 4.18% Net Generation (MWh) 4,253,796 4,373,845 4,531,735 4,725,330 4,951,437 5,190,379 5,434,953 5,681,720 5,949,989 6,223,245 6,502,098 6,786,213 7,075,842 7,370,946 7,671,693 7,978,175 8,290,569 8,609,043 8,933,808 9,265,086 9,603,128 4.42% Load Factor 77.60% 77.96% 78.28% 78.57% 78.84% 79.07% 79.28% 79.47% 79.64% 79.80% 79.93% 80.06% 80.17% 80.27% 80.35% 80.43% 80.51% 80.57% 80.63% 80.68% 80.72% 0.64% Net System Peak (MW) 625.8 640.5 660.8 686.5 717.0 749.3 782.6 816.1 852.8 890.3 928.6 967.7 1007.6 1048.3 1089.9 1132.3 1175.6 1219.8 1264.9 1310.9 1358.0 3.75% Peak Demand Growth Rate 0.95% 2.35% 3.18% 3.89% 4.44% 4.51% 4.43% 4.29% 4.50% 4.39% 4.30% 4.21% 4.12% 4.04% 3.97% 3.89% 3.82% 3.76% 3.70% 3.64% 3.59%

Year

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 19822008 20092030

3.51%

3.61%

2.15%

6.80%

2.26%

4.12%

4.00%

0.14%

3.80%

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5.5.2 High Forecast Scenario
Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 19822008 20092030 R10 Sales (MWh) 1,147,613 1,194,454 1,257,084 1,312,626 1,374,385 1,434,678 1,497,994 1,561,777 1,627,553 1,694,491 1,763,126 1,833,211 1,904,952 1,978,297 2,053,349 2,130,125 2,208,694 2,289,099 2,371,404 2,455,662 2,541,936 4.50% 4.17% R20 Sales (MWh) 657,640 670,789 691,749 721,231 760,258 820,174 883,686 950,994 1,022,315 1,097,880 1,177,937 1,262,750 1,352,602 1,447,795 1,548,652 1,655,516 1,768,754 1,888,755 2,015,936 2,150,738 2,293,631 4.10% 6.18% R40 Sales (MWh) 705,873 731,245 755,770 779,429 802,215 824,125 845,166 865,351 884,696 903,224 920,959 937,929 954,165 969,696 984,557 998,778 1,012,393 1,025,435 1,037,935 1,049,925 1,061,435 3.05% 2.15% R50 Sales (MWh) 669,188 719,215 779,689 852,811 941,371 1,063,782 1,196,744 1,340,744 1,496,293 1,663,934 1,844,239 2,037,824 2,245,342 2,467,500 2,705,052 2,958,813 3,229,657 3,518,526 3,826,432 4,154,462 4,503,786 5.75% 9.85% R60 Sales (MWh) 102,274 105,033 107,795 110,561 113,333 116,111 118,896 121,689 124,490 127,302 130,125 132,960 135,809 138,672 141,551 144,446 147,360 150,293 153,246 156,222 159,220 4.05% 2.28% Base Sales (MWh) 3,282,588 3,420,736 3,592,087 3,776,658 3,991,562 4,258,870 4,542,486 4,840,554 5,155,348 5,486,831 5,836,387 6,204,674 6,592,869 7,001,960 7,433,161 7,887,678 8,366,858 8,872,109 9,404,953 9,967,008 10,560,008 4.18% 5.68% Net Generation (MWh) 4,321,214 4,503,073 4,728,639 4,971,610 5,254,511 5,606,396 5,979,749 6,372,128 6,786,523 7,222,889 7,683,046 8,167,861 8,678,883 9,217,413 9,785,047 10,383,376 11,014,170 11,679,284 12,380,722 13,120,615 13,901,243 4.42% 5.85% Net Generation Growth Rate 2.54% 4.21% 5.01% 5.14% 5.69% 6.70% 6.66% 6.56% 6.50% 6.43% 6.37% 6.31% 6.26% 6.21% 6.16% 6.11% 6.08% 6.04% 6.01% 5.98% 5.95% Load Factor 77.60% 77.96% 78.28% 78.57% 78.84% 79.07% 79.28% 79.47% 79.64% 79.80% 79.93% 80.06% 80.17% 80.27% 80.35% 80.43% 80.51% 80.57% 80.63% 80.68% 80.72% 0.64% 0.16% 10.4% Growth 0.52% 0.46% 0.42% 0.37% 0.33% 0.30% 0.27% 0.24% 0.21% 0.19% 0.17% 0.15% 0.14% 0.12% 0.11% 0.10% 0.09% 0.08% 0.07% 0.06% 0.06% Net System Peak (MW) 635.7 659.4 689.5 722.3 760.9 809.4 861.0 915.3 972.7 1033.3 1097.2 1164.7 1235.8 1310.9 1390.1 1473.6 1561.8 1654.8 1752.9 1856.5 1965.8 3.75% 5.65% Peak Demand Growth Rate 2.55% 3.73% 4.58% 4.75% 5.34% 6.38% 6.38% 6.31% 6.28% 6.23% 6.19% 6.15% 6.11% 6.07% 6.04% 6.01% 5.98% 5.95% 5.93% 5.91% 5.89%

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5.5.3 Low Forecast Scenario
Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 19822008 20092030 R10 Sales (MWh) 1,111,102 1,137,908 1,177,911 1,209,355 1,244,692 1,276,856 1,309,913 1,341,597 1,373,242 1,404,143 1,434,751 1,464,861 1,494,643 1,524,053 1,553,166 1,581,992 1,610,574 1,638,935 1,667,110 1,695,124 1,723,008 4.50% 2.36% R20 Sales (MWh) 632,320 620,379 615,692 618,081 631,617 648,705 665,449 681,858 697,942 713,712 729,181 744,365 759,277 773,934 788,351 802,544 816,530 830,324 843,942 857,400 870,714 4.10% 1.33% R40 Sales (MWh) 705,873 731,245 755,770 779,429 802,215 824,125 845,166 865,351 884,696 903,224 920,959 937,929 954,165 969,696 984,557 998,778 1,012,393 1,025,435 1,037,935 1,049,925 1,061,435 3.05% 1.53% R50 Sales (MWh) 639,330 657,042 681,366 713,189 759,200 810,151 860,633 910,445 959,414 1,007,392 1,054,257 1,099,911 1,144,279 1,187,305 1,228,953 1,269,204 1,308,051 1,345,502 1,381,576 1,416,298 1,449,703 5.75% 4.15% R60 Sales (MWh) 102,115 104,869 107,603 110,319 113,020 115,708 118,384 121,053 123,715 126,374 129,031 131,689 134,350 137,016 139,690 142,372 145,067 147,774 150,497 153,237 155,996 4.05% 2.18% Base Sales (MWh) 3,190,741 3,251,444 3,338,343 3,430,375 3,550,744 3,675,545 3,799,546 3,920,303 4,039,009 4,154,844 4,268,179 4,378,755 4,486,713 4,592,004 4,694,717 4,794,890 4,892,614 4,987,970 5,081,060 5,171,984 5,260,855 4.18% 2.39% Base Sales Growth Rate 2.35% 1.90% 2.67% 2.76% 3.51% 3.51% 3.37% 3.18% 3.03% 2.87% 2.73% 2.59% 2.47% 2.35% 2.24% 2.13% 2.04% 1.95% 1.87% 1.79% 1.72% Net Generation (MWh) 4,200,306 4,280,216 4,394,610 4,515,761 4,674,215 4,838,504 5,001,740 5,160,705 5,316,970 5,469,455 5,618,650 5,764,213 5,906,330 6,044,935 6,180,146 6,312,015 6,440,659 6,566,187 6,688,730 6,808,424 6,925,414 4.42% 2.39% Net Generation Growth Rate -0.32% 1.90% 2.67% 2.76% 3.51% 3.51% 3.37% 3.18% 3.03% 2.87% 2.73% 2.59% 2.47% 2.35% 2.24% 2.13% 2.04% 1.95% 1.87% 1.79% 1.72% Load Factor 77.60% 77.96% 78.28% 78.57% 78.84% 79.07% 79.28% 79.47% 79.64% 79.80% 79.93% 80.06% 80.17% 80.27% 80.35% 80.43% 80.51% 80.57% 80.63% 80.68% 80.72% 0.64% 0.16% 10.4% Growth 0.52% 0.46% 0.42% 0.37% 0.33% 0.30% 0.27% 0.24% 0.21% 0.19% 0.17% 0.15% 0.14% 0.12% 0.11% 0.10% 0.09% 0.08% 0.07% 0.06% 0.06% Net System Peak (MW) 617.9 626.7 640.8 656.1 676.8 698.5 720.2 741.3 762.1 782.5 802.4 821.9 841.0 859.7 878.0 895.8 913.3 930.3 947.0 963.3 979.3 3.75% 2.20% Peak Demand Growth Rate -0.32% 1.43% 2.25% 2.38% 3.17% 3.21% 3.10% 2.93% 2.81% 2.67% 2.55% 2.43% 2.32% 2.22% 2.12% 2.03% 1.95% 1.87% 1.79% 1.72% 1.66%

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5. Appendices

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5.1

DATA INPUTS
Average Annual Exchange Rate J$/US$ 1.78 1.92 3.94 5.58 5.50 5.51 5.51 5.77 7.24 12.22 22.99 25.11 33.29 35.35 37.25 35.51 36.65 39.20 43.08 46.08 48.54 57.93 61.34 62.50 65.88 69.06 72.68

Year 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Mean Population 2,200,100 2,241,000 2,280,000 2,311,300 2,336,100 2,350,900 2,356,600 2,375,100 2,403,000 2,425,500 2,428,150 2,430,800 2,454,800 2,483,000 2,509,900 2,534,300 2,556,800 2,574,300 2,589,400 2,604,100 2,615,200 2,625,700 2,638,100 2,650,400 2,663,100 2,675,800 2,687,200

Household Size 4.2531 4.2706 4.2833 4.2804 4.2649 4.2310 4.1811 4.1541 4.1432 4.1226 4.0290 3.9376 3.8819 3.8332 3.7826 3.7286 3.6723 3.6096 3.5445 3.4799 3.4275 3.3750 3.3257 3.2769 3.2292 3.1822 3.1342

Real Per Capita Disposable Income 2,125 2,180 2,000 2,033 2,176 2,344 2,855 2,749 2,609 2,116 2,747 3,013 3,682 3,658 3,783 3,751 4,046 4,020 4,289 4,275 4,434 4,564 4,667 4,596 4,975 4,742 4,911

R10 Real 1980 Price ($/kWh) 0.2648 0.2733 0.4187 0.3757 0.2713 0.2660 0.2063 0.2373 0.2361 0.1900 0.3309 0.2606 0.2621 0.2172 0.1951 0.1764 0.1661 0.1631 0.2057 0.2052 0.2115 0.2372 0.2264 0.2571 0.2793 0.2655 0.2903

Real LPG 1980 Price 0.1726 0.1627 0.1819 0.1726 0.1595 0.1443 0.1639 0.1343 0.2047 0.2280 0.1854 0.1844 0.1869 0.1779 0.2034 0.1896 0.1669 0.1896 0.2958 0.2531 0.2233 0.3330 0.3857 0.4067 0.4173 0.4160 0.4546

Average no. of Rate 10 Customers 216403 220669 222895 226123 231871 241958 230366 260946 274692 287739 299544 312087 325669 342926 357310 376140 393944 409120 423799 439647 451219 462107 482299 493696 505260 515886 523728

R10 Avg Use (MWh/Cust) 1.5185 1.6562 1.6515 1.5051 1.5857 1.7239 1.7665 1.7933 1.9115 1.8529 1.7881 1.8192 1.8964 1.9950 2.1379 2.2047 2.3513 2.4625 2.4701 2.4234 2.4448 2.3949 2.2412 2.2426 2.1657 2.0840 1.9708

Urban Population ('000) 1051648 1075607 1098829 1118499 1135153 1147046 1154559 1168412 1187003 1203048 1210067 1217125 1234964 1255067 1274673 1293161 1310822 1326045 1340140 1354132 1366345 1378329 1391397 1404505 1417920 1431430 1445068

Net Interest Rate (%) 0.1574 0.1637 0.1819 0.2484 0.2441 0.2521 0.2488 0.2637 0.3417 0.3561 0.4604 0.4960 0.4579 0.4856 0.3781 0.3193 0.3008 0.2464 0.2212 0.1950 0.1826 0.1932 0.1772 0.1732 0.1759 0.1711 0.1694

Real GDP Per Capita (1996 $) 76.08 76.41 74.46 70.04 70.47 75.60 77.07 81.85 86.00 85.91 87.24 89.29 89.29 90.44 89.70 87.88 86.11 86.27 86.20 87.00 87.50 88.90 89.60 90.70 91.50 93.30 93.67

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Year

R20 Customers

R20 Real Price of Electricity

R20 Avg. Energy Use (MWh/

Inflation Rate (Annual Average)

Avg no of rate 40 customers

Tourist Stopover

Average length of stay in hotels

R40 Real 1980 Price ($/kWh)

R40 Avg. Energy Use (MWh/

GDP (1996 J$ M)

Avg no of rate 50 customers

Real price of electricity rate 50 (J$/kWh)

R50 Avg. Energy Use (MWh/

Rate 60 + Other Sales (MWh)

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

25496 25605 23224 22981 25149 26030 24783 28259 30018 31558 33137 35138 39611 41673 43229 46129 48453 50282 51925 53358 53526 52885 54543 55752 57397 59221 60530

0.1991 0.1921 0.2895 0.3749 0.3350 0.3137 0.3390 0.2117 0.2442 0.1783 0.3291 0.2598 0.2538 0.2122 0.1873 0.1688 0.1597 0.1585 0.1871 0.1964 0.1934 0.2047 0.2156 0.2608 0.2871 0.2721 0.3055

8.9744 10.4779 10.9284 10.7923 10.4292 11.5844 11.7481 12.1127 12.9900 12.0768 11.7040 11.4803 11.0144 11.2910 11.5856 11.8354 12.1576 12.0518 11.5227 11.3342 11.5471 12.3354 11.7634 11.2732 11.2272 11.1366 10.7455

0.0650 0.1130 0.2780 0.2600 0.1480 0.0670 0.0830 0.1430 0.2200 0.5100 0.7730 0.2210 0.3510 0.1990 0.2640 0.0970 0.0870 0.0600 0.0820 0.0700 0.0700 0.1010 0.1350 0.1510 0.0850 0.0930 0.1687

923 914 888 868 844 827 812 813 798 787 777 820 1155 1109 1323 1280 1174 1192 1269 1308 1356 1391 1434 1469 1502 1531 1554

467763 566151 603436 571713 663593 738827 648873 829288 989275 1006804 1057182 1105382 1098287 1147001 1162449 1192194 1225287 1248397 1322690 1276516 1266366 1350285 1414786 1478663 1678905 1700785 1722950

9.70 9.20 9.00 9.80 10.20 10.10 10.30 10.60 10.90 10.90 11.20 11.00 10.70 10.90 11.10 10.80 10.90 10.30 10.10 10.20 10.20 10.20 9.90 9.80 9.80 9.60 9.60

0.1991 0.1921 0.2895 0.2691 0.2334 0.2250 0.2008 0.1806 0.1849 0.1450 0.2813 0.2164 0.2187 0.1823 0.1609 0.1457 0.1306 0.1387 0.1627 0.1574 0.1487 0.1605 0.1790 0.2020 0.2303 0.2159 0.2582

377 394 402 422 452 514 507 566 599 542 510 541 374 407 356 387 440 437 452 446 440 450 473 500 507 504 489

167393 171228 169765 161874 164616 177737 181622 194411 206652 208380 211831 217050 219187 224565 225129 222707 220172 222083 223770 227070 229536 235200 237400 240900 246900 249600 251846

22 22 22 22 24 24 23 23 31 58 69 74 76 75 77 80 79 86 93 97 97 102 97 91 102 113 126

0.2218 0.2498 0.4937 0.5515 0.5295 0.5397 0.5645 0.5405 0.6938 1.0265 2.6528 2.7527 3.4963 3.6623 3.7478 3.6501 3.7695 4.0486 5.0091 5.2588 5.3158 6.5374 7.8715 10.2959 12.4737 13.8829 19.4909

6301.77 6633.86 6471.73 7000.32 7149.00 6871.96 6342.96 6889.83 6766.58 4987.66 4662.48 4541.74 4372.33 4532.21 4646.60 4458.36 4542.30 4460.53 4030.16 3969.31 4344.23 5300.24 5098.52 5026.03 4960.41 5021.55 4687.06

34509 32867 35976 38640 43331 35906 39058 47029 47330 47816 47644 47292 47823 48217 55002 60912 60657 60346 59166 62397 62841 65028 67353 70067 74083 77501 84044

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6.2 ECONOMETRIC MODEL OUTPUT

Dependent Variable: LOGAVGCUSTRATE10 Method: Least Squares Date: 10/09/09 Time: 18:33 Sample (adjusted): 1983 2008 Included observations: 26 after adjustments Convergence achieved after 10 iterations White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGPOPULATION LOGHHSIZE AR(1) R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Inverted AR Roots Coefficient -58.46026 4.874430 -0.446372 0.554095 0.994642 0.993911 0.023398 0.012044 62.91245 1361.284 0.000000 .55 Std. Error 21.14392 1.388355 0.517152 0.180538 t-Statistic -2.764873 3.510940 -0.863136 3.069135 Prob. 0.0113 0.0020 0.3974 0.0056 12.74638 0.299849 -4.531727 -4.338174 -4.475991 2.195352

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Dependent Variable: LOGR10AVGUSE Method: Least Squares Date: 10/12/09 Time: 10:52 Sample: 1982 2008 Included observations: 27 White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGREALPERCAPDISINC LOGR10REALPRICE LOGREALLPGPRICE R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient -2.361059 0.334806 -0.253170 0.018785 0.855217 0.836332 0.063140 0.091694 38.43793 45.28607 0.000000 Std. Error 0.463467 0.054692 0.072203 0.043668 t-Statistic -5.094345 6.121669 -3.506360 0.430175 Prob. 0.0000 0.0000 0.0019 0.6711 0.682582 0.156072 -2.550958 -2.358982 -2.493874 1.020525

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

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Dependent Variable: LOGAVGCUSTRATE20 Method: Least Squares Date: 12/10/09 Time: 16:56 Sample (adjusted): 1983 2008 Included observations: 26 after adjustments Convergence achieved after 23 iterations White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGINTERESTRATE LOGREALGDPPERCAP LOGAVGEXCHRATE AR(1) R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Inverted AR Roots Coefficient 3.992690 -0.222641 1.275908 0.199316 0.552079 0.979472 0.975561 0.052562 0.058017 42.47407 250.4933 0.000000 .55 Std. Error 1.780699 0.052767 0.405055 0.027033 0.197158 t-Statistic 2.242204 -4.219292 3.149963 7.373110 2.800191 Prob. 0.0359 0.0004 0.0048 0.0000 0.0107 10.57723 0.336226 -2.882621 -2.640679 -2.812950 1.798906

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Dependent Variable: LOGR20AVGUSE Method: Least Squares Date: 10/12/09 Time: 12:01 Sample (adjusted): 1983 2008 Included observations: 26 after adjustments Convergence achieved after 8 iterations White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGR20REALPRICE LOGAVGEXCHRATE AR(1) R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Inverted AR Roots Coefficient 2.426343 -0.065743 -0.022254 0.511434 0.563056 0.503473 0.036267 0.028937 51.51698 9.449918 0.000332 .51 Std. Error 0.113242 0.027636 0.024363 0.113237 t-Statistic 21.42626 -2.378884 -0.913432 4.516480 Prob. 0.0000 0.0265 0.3709 0.0002 2.441557 0.051469 -3.655152 -3.461599 -3.599416 2.199831

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

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Dependent Variable: LOGAVGCUSTRATE40 Method: Least Squares Date: 10/12/09 Time: 12:30 Sample (adjusted): 1983 2008 Included observations: 26 after adjustments Convergence achieved after 37 iterations White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGINTERESTRATE LOGAVGEXCHRATE AR(1) R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Inverted AR Roots Coefficient 5.977377 -0.293685 0.197499 0.615980 0.932819 0.923658 0.069691 0.106850 34.53518 101.8239 0.000000 .62 Std. Error 0.101512 0.084678 0.027154 0.164234 t-Statistic 58.88336 -3.468269 7.273343 3.750620 Prob. 0.0000 0.0022 0.0000 0.0011 6.993509 0.252227 -2.348860 -2.155307 -2.293124 1.667568

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Dependent Variable: LOGR40AVGUSE Method: Least Squares Date: 10/12/09 Time: 12:50 Sample (adjusted): 1983 2008 Included observations: 26 after adjustments Convergence achieved after 34 iterations White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGTOURISTSTOP LOGR40REALPRICE LOGAVG_LENGTH_STA Y AR(1) R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Inverted AR Roots Coefficient -1.875068 0.464024 -0.063171 0.586209 0.891771 0.566227 0.483604 0.095014 0.189580 27.08111 6.853109 0.001079 .89 Std. Error 4.142455 0.211996 0.059077 0.671208 0.091376 t-Statistic -0.452647 2.188838 -1.069306 0.873364 9.759322 Prob. 0.6554 0.0400 0.2971 0.3923 0.0000 6.135396 0.132219 -1.698547 -1.456606 -1.628877 2.172385

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

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Dependent Variable: LOGAVGCUSTRATE50 Method: Least Squares Date: 10/12/09 Time: 15:56 Sample (adjusted): 1983 2008 Included observations: 26 after adjustments Convergence achieved after 12 iterations White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGREALGDPPERCAP LOGAVGEXCHRATE AR(1) R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Inverted AR Roots Coefficient -3.983107 1.469838 0.492633 0.521592 0.975176 0.971791 0.106466 0.249369 23.51753 288.0810 0.000000 .52 Std. Error 2.709927 0.649276 0.068874 0.189829 t-Statistic -1.469820 2.263809 7.152702 2.747686 Prob. 0.1558 0.0338 0.0000 0.0117 4.065842 0.633894 -1.501348 -1.307795 -1.445612 1.788024

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Dependent Variable: LOGR50AVGUSE Method: Least Squares Date: 10/12/09 Time: 16:10 Sample (adjusted): 1983 2008 Included observations: 26 after adjustments Convergence achieved after 8 iterations White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGURBANPOP LOGR50REALPRICE AR(1) R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Inverted AR Roots Coefficient -0.723253 0.671548 -0.146924 0.772258 0.835994 0.813630 0.082274 0.148919 30.21947 37.38058 0.000000 .77 Std. Error 14.22110 1.011898 0.049284 0.131511 t-Statistic -0.050858 0.663652 -2.981202 5.872176 Prob. 0.9599 0.5138 0.0069 0.0000 8.557292 0.190579 -2.016882 -1.823329 -1.961146 1.772768

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

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Dependent Variable: LOGR60SALES Method: Least Squares Date: 10/12/09 Time: 16:13 Sample: 1982 2008 Included observations: 27 White Heteroskedasticity-Consistent Standard Errors & Covariance Variable C LOGURBANPOP LOGHHSIZE R-squared Adjusted R-squared S.E. of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) Coefficient -24.23146 2.516871 -0.187070 0.955822 0.952140 0.057414 0.079113 40.43030 259.6257 0.000000 Std. Error 7.099198 0.465711 0.434703 t-Statistic -3.413266 5.404366 -0.430339 Prob. 0.0023 0.0000 0.6708 10.86042 0.262441 -2.772615 -2.628633 -2.729802 1.537355

Mean dependent var S.D. dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter. Durbin-Watson stat

Office of Utilities Regulation Electricity Peak and Energy Demand Forecasts 2010-2030 Document No. Elec2010005_FCT001

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Office of Utilities Regulation Electricity Peak and Energy Demand Forecasts 2010-2030 Document No. Elec2010005_FCT001

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Office of Utilities Regulation Electricity Peak and Energy Demand Forecasts 2010-2030 Document No. Elec2010005_FCT001

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