jamaica Archives - Page 16 of 79

Company with Jamaican connection offers to bail out EWI

May 2, 2014 Webmaster

Chinese Company

A Chinese company based here has approached the Government’s investment company, Jamaica Promotions Corporation (Jampro), with a view to assist with the fallout arising from Energy World International’s (EWI‘s) failed bid to meet all the requirements to construct a booster energy plant on the island.

A usually reliable source told the Jamaica Observer that officials of the Chinese company met with executives of Jampro in New Kingston yesterday and offered to work with the island to get the project off the ground.

“During the meeting with Jampro, the Chinese suggested that they were willing to work with EWI, and vowed that they could secure the necessary financing from China’s Ex-Im Bank to get the 381-megawatt project going,” the source said.

“The Chinese have said that they were also willing to meet with the Ministry of Science, Technology, Energy, and Mining as early as tomorrow (today) to get things started,” the impeccable source said.

Hong Kong-based EWI missed its deadline to pay a performance bond of US$37 million last Thursday.

The total cost of financing the project is US$737 million, of which one per cent — US$7.37 million — had been paid over as part of the bond arrangement.

However, EWI was pushed against the wall after it emerged that the Inter-American Development Bank, upon which EWI was relying to provide non-equity financing for the project, had opted against doing so, citing breaches of Jamaica’s procurement procedures in the award of the contract.

EWI was the preferred bidder to build a power plant that would bolster the national grid by supplying it with 381 megawatts of generating capacity.

The implementation of the natural gas-fuelled project would result in Jamaicans paying less for electricity, the cost of which is prohibitive to some, and has led to widespread stealing of the commodity. Jamaicans pay 42 US cents per kilowatt hour for electricity, and it is believed that when the project is fully implemented the cost will be reduced by approximately 30 per cent.

EWI has committed to deliver electricity to the grid at 12.88 US cents per kilowatt hour.

The latest move by the Chinese company would serve as the fillip that the embattled EWI needs, following countless calls for the company to be rejected as the preferred choice of generating capacity supplier.

The Office of the Contractor General (OCG) had said in a report last year that Energy Minister Phillip Paulwell intervened improperly in the bidding process by including EWI’s proposal after the closure of the bid acceptance period.

Based on that, the OCG said that the bidding process had been compromised and described the Office of Utilities Regulation’s (OUR’s) acceptance of EWI’s proposal as unfair.

Paulwell has been under fire in recent days, with the Opposition Jamaica Labour Party calling on Prime Minister Portia Simpson Miller to relieve him of portfolio responsibility for energy over the EWI affair.

Another source said that Simpson Miller met yesterday with members of the Private Sector Organisation of Jamaica, who suggested that she abandon the entire process of selection and allow a special monitoring committee to handle affairs relating to the matter.

Simpson Miller, the source said, had already laid down some conditionalities to EWI and expects the company to respond to her by Monday.

EWI, the energy arm of Energy World Corporation, is engaged in the production and sale of power and natural gas in several countries.

The company was the second preferred bidder behind United States-based consortium Azurest-Cambridge, but was upgraded last October when Azurest was disqualified after it failed to meet a 15-day deadline to produce a one per cent security bid for the project, which it projected would cost US$690 million to build.

Jamaica Observer;

Electricity Government JPS News

JPS goes after $10-b annual return

April 17, 2014 Webmaster

Electricity distributor seeks up to 93% rate hike

JPS goes after $10-b annual return

JAMAICA Public Service Company (JPS) is hoping to clear US$94-million ($10.3 billion) profit a year should its proposed rate hike be approved.

The light and power company applied to the Office of Utilities Regulations (OUR) for a raft of changes to its non-fuel tariff (the rate that recovers cost associated with transmitting and distributing electricity rather than generating it).

Residential customers will see the monthly charge for network access (which up to now has been called the customer charge) increase by a range of 70 per cent to 420 per cent, depending on usage, if JPS gets its way.

What’s more, the monopoly electricity distributor hopes to raise the non-fuel, or energy charge to households by a range of 48 per cent to 93 per cent, moving from the lower end of the range to the higher end, the more electricity is used.

For commercial customers, the rates for which JPS has applied, decreases with higher usage, supposedly to promote greater use of electricity for business purposes.

On the other hand, the utility proposes a 65 per cent increase for the smallest commercial users, while enterprises can’t realise a decrease in the overall rate until they have consumed some 140,000 kilowatt-hours (kWh).

Indeed, the utility devised creative ways of encouraging more efficient consumption, such as recommending to the regulator that it altogether remove the non-fuel rate charged to large industrial customers.

That would see JPS give up just under $5 billion in revenue, which it would earn back from proposed increases to the demand charge that are applied to bills of consumers with heavy-duty electric machinery.

When factoring in the fuel charge, the rate hikes might not seem so daunting.

JPS figures that using a fuel rate of 23 US cents per kWh, the residential tariff increases, on average, by 22 per cent. Most commerical customers, or 98 per cent of them would see an average increase of 16 per cent, using the same math.

Of course, the proposed non-fuel tariff rates coupled with the fuel rates would put the cost of electricity at 45 US cents per kWh for the average household and 43 US cents per kWh for the overwhelming majority of commercial customers.

In its latest five-year tariff review application, JPS rationalised that it accumulated net profit of US$96 million, or an average of US$24 milion a year, from 2010 to 2013.

“The target profit for JPS, allowed (not guaranteed) through the revenue requirement, has never been achieved, representing an allowed return on equity (ROE) of 16 per cent that was approved in 2009, which should have resulted in a net profit of approximately US$43 million per annum”, said JPS of its profit performance over the tariff period that recently ended.

High system losses over the period factored heavily in its shortfall.

The utility company estimated that it was not allowed to recover US$111 million in fuel costs due to penalties from 2009 to 2013.

“The magnitude of the penalty varies with the price of oil and the risk exposure was amplified with the spike in the price of oil over the past two years,” said the light and distribution company. “At the end of 2013 losses, technical (8.6 per cent) and non-technical (largely theft –18.04 per cent), stood at a total of 26.64 per cent.”

Jamaica Observer;

Electricity Government LNG News

Paulwell issues energy licence, but silent on safeguards

April 17, 2014 Webmaster

Energy Minister Phillip Paulwell

MINISTER of Science, Technology, Energy, and Mining Phillip Paulwell announced yesterday that he has granted Energy World International (EWI) a licence to supply electric power to the Jamaica Public Service Company (JPS), under the terms of the Power Purchase Agreement between the two entities.

However, the minister’s statement that he granted the licence to EWI on Monday did not address the controversial issue of whether critical safeguards, including the US$37 million performance bond, which must be provided by EWI within 10 days of the date the licence becomes effective, was included.

In the release, Paulwell admitted that he had granted a licence to EWI from as early as April 4, but had withdrawn the original one, amended it to provide for some negotiated changes, and reissued it 10 days later (April 14).

Paulwell’s statement said that the second included “a draft implementation agreement between the Government of Jamaica and EWI, outlining commitments of both parties to employ best efforts to ensure the success of this very important project”. However, with no specificity, it could not be ascertained how much attention has been paid to the call by the Private Sector Organisation of Jamaica (PSOJ) and the Energy Monitoring Committee (EMC) for the critical safeguards to be maintained.

Speaking at a Kiwanis Club luncheon just hours before the minister’s press release, PSOJ president, Chris Zacca, pointed out that the 381-megawatt plant to be built by EWI was critical in terms of the retirement of old, inefficient equipment being used by the JPS, which have been contributing to high electricity costs.

Zacca said that he was happy that Paulwell has assured the country that the public/private EMC will remain in place for the duration of the project, as it can play a very important role in providing transparency as the project moves into the implementation stage. However, he criticised the silence of the minister on the questions of ensuring that EWI keeps its promises, including: financing; construction timelines; fuel supply; and, most importantly, the provision of the five per cent, or US$37-million performance bond.

“This provision for posting a performance bond has been in existence from day one of the start of this process. I am advised that the Energy Monitoring Committee also views these safeguards as absolutely necessary, given the lack of information so far provided,” Zacca noted.

Paulwell, meanwhile, promised to meet shortly with the EMC to provide an update on both the licence and the draft implementation agreement before making documents public.

Jamaica Observer;

Electricity Government LNG News

Pressure On Paulwell – Private Sector Groups Demand Minister State Position On Disbanding EMC

April 14, 2014 Webmaster

Pengelley

ENERGY MINISTER Phillip Paulwell is facing demands that he state his position on the future of the Energy Monitoring Committee (EMC), which The Sunday Gleaner yesterday reported is to be disbanded.

Key private sector groupings such as the Private Sector Organisation of Jamaica (PSOJ), the Jamaica Chamber of Commerce (JCC), and the Jamaica Manufacturers’ Associa-tion (JMA) have reacted to the report with fury, stating that they “cannot understand why the minister would be considering disbanding this committee this early in the project”.

The EMC was established by Cabinet as part of its mandate to monitor the bid process for the 360-megawatt generation facility, ensuring that it strictly adheres to the arrangements prescribed by the Office of Utilities Regulation (OUR).

The committee is also charged with ensuring that at the end of the process, the price of electricity provided by the licensee to the Jamaica Public Service Company does not exceed the agreed price per kilowatt hour.

“We would very much appreciate hearing from the minister his reasons for not wanting the committee to pursue its mandate,” the JMA and the JCC said in a joint media release.

The EMC is made up of nine members from the Government, the private sector, and the trade union movement.

The Sunday Gleaner

Electricity Government LNG News

No Defying OUR – Paulwell To Grant 381MW Licence To EWI, Cites Fear Of Court Action

April 3, 2014 Webmaster

Energy Minister Phillip Paulwell. – File

Energy Minister Phillip Paulwell yesterday revealed he has no intention of going against an Office of Utilities Regulation (OUR) recommendation to grant a licence to Energy World International (EWI).

Paulwell, who returned to the island from St Lucia yesterday afternoon, said “once the OUR recommends to me a licence, I sign”.

He added: “They have taken me to court before, I won’t risk that again.”

Said Paulwell: “They have submitted to me, since I returned as minister (in January 2012), over 120 electricity licences, I have signed every single one of them. I am going to my desk now and I report in the morning.”

The OUR last Wednesday recommended that EWI be granted a licence to supply 381 megawatts of generating capacity using natural gas as the fuel source.

But several voices have come out in opposition to the licence being issued to the Hong Kong-based company, with the Office of the Contractor General, members of civil society, the Energy Monitoring Committee (EMC), and the private sector urging Paulwell to proceed with caution.

However, the minister yesterday indicated he has a legal obligation, under the OUR Act, to grant the licence.

“I am a creature of the law and rules, and there are certain rules that govern my operation and one of which is that you have a body called the OUR, and there are some regulations, and once they recommend to the minister a licence, it would be a serious matter to go against them,” Paulwell said.

LACK OF INFORMATION

In the meantime, the EMC said it remained concerned about the lack of adequate information provided by the EWI to support its application for a licence to construct the plant.

However, Peter Melhado, co-chair of the EMC, said the OUR was the body with the authority to make such recommendations and the committee has no choice but to accept it.

Melhado said the EMC would now turn its attention to ensuring that EWI adheres to all aspects of the licence.

“Our focus will definitely be on certainly commenting if we see any variant between … what is in the licence and the PPA (power purchase agreement) … and if there are any breaches,” he said.

Jamaica Gleaner;

Alternative Energy Electricity Energy Saving Government News Solar Energy

Has Mr Pickersgill been sidelined on Goat Islands?

March 7, 2014 Webmaster

AS the discussion about the building of a port at Goat Islands heats up, we note that the minister with responsibility for environment and climate change, Mr Robert Pickersgill, has been silent on the subject.

Minister Pickersgill’s absence from the debate is especially glaring because it was he, while on a five-day visit to China with Prime Minister Portia Simpson Miller and her team last August, who brought the matter into the public domain when he told representatives of China Harbour Engineering Company (CHEC) that the location was “now under very serious consideration”.

It’s glaring, too, given the environmental implications of building port facilities, with the accompanying infrastructure, in an area zoned for fish sanctuaries, game reserves, and housing what is perhaps the most pristine dry limestone forest in the region.

Housing, Transport and Works Minister Dr Omar Davies has been the one doing all the talking on this issue. To date, the most details the country has been fed about the much-talked-about project came in his presentation to Parliament last week Tuesday in which he outlined the basic scope of the works.

According to Dr Davies, the activities to be carried out under phase one include dredging and land reclamation, the construction of berths, warehouses, an industrial park, a container terminal, bridges, roads, pipelines, sewage lines and a sewage treatment plant.

CHEC intends, too, to build a coal-fired plant to avoid the high cost of electricity provided by the Jamaica Public Service Company.

While we maintain that environmental preservation and development do not have to be at odds with each other, we cannot overlook the effect of burning coal on air quality. In China, for instance, coal is used for about 65 per cent of its energy needs, but the Government is now seeking to cut its reliance on the fuel source by two percentage points a year.

Importantly, when coal is burned, it releases carbon dioxide, the main culprit in global warming and climate change.

On that basis, as Ms Dianna McCaulay rightly pointed out last week, the decision to allow such a plant in Jamaica is not in line with the country’s draft climate change policy. Neither does it appear to be in line with Vision 2030, which seeks to phase out fossil fuels to the point where 20 per cent of the energy mix will be supplied by renewable sources by 2030.

Surely, the apparent contradictions have not escaped Minister Pickersgill and the technocrats in his ministry. What, then, accounts for his silence?

Is the minister toeing the party line, or is he no longer committed to his oft repeated phrase “with climate change we must change”?

Jamaica Observer;

Electricity Government LNG News

Shake up, OUR

October 24, 2013 Webmaster

IN THE face of Energy World International’s (EWI) placement of its US$7-million security bond on the 360-megawatt power plant deal, it is opportune for the Government to take a hard look at the Office of Utilities Regulation (OUR) and take some serious decisions about the place. And they must be quick about it.

The first order of business is to find an obviously strong, competent and independent-minded head for the place, with a clear understanding that part of his or her mandate is cleaning shop, even as it gets on with the job of completing the energy project.

Putting this process in train lies squarely with Prime Minister Portia Simpson Miller. It is her obligation, under the OUR Act, to recommend the candidate for the post of director general of the regulatory body to the governor general. If, as we suspect, it was the case in the past that prime ministers allowed line ministers to effectively name the nominee, we recommend that Mrs Simpson Miller break with practice.

For ceding that responsibility, at this time, to Phillip Paulwell, would be to handicap the appointee, given the collapse of confidence in Mr Paulwell’s mining and energy ministry to get anything right, given the mess that has been made of the power plant issue.

To be fair, that is not all Mr Paulwell’s fault. Much, and perhaps most, of the blame rests with the OUR.

A CLUMSY HANDLING OF THE MATTER

That Jamaican consumers pay an unaffordable economic rent for electricity, which at US$0.42 per kilowatt-hour is among the highest in the region, is well known. Understand that it makes our firms uncompetitive, which, in turn, constrains economic growth.

Yet the OUR, which has been governing the responsibility for procurement of newer, and supposedly cheaper, generating capacity, has, at best, and perhaps charitably, been clumsy and bungling in its several attempts at the process. Its latest was the worse.

Delivering cheaper energy to Jamaica, which would be good for the economy, also coincides with Mr Paulwell’s political interest/ambition. It is understandable that when EWI declared an interest in Jamaica, with an apparently attractive proposal, that he would be keen to have that considered, notwithstanding that it was after the OUR’s initial deadline for unsolicited offers/expressions of interest.

THE OUR NEEDS A FIX

The response of those already engaged in the process, who might have felt they were in the most advantageous positions, was entirely predictable. The claim that the goalpost was being shifted was obvious.

But worse than Mr Paulwell was the OUR. The agency disagrees with the Office of the Contractor General that it breached the procurement rules; that EWI’s proposal should not have been entertained; and that if it was to be considered, the initial request for proposal abandoned and the process started anew. Beyond the technical issues of the procurement rules is the weak, or failed communication strategy on this issue, which has left the public uneasy about the basis of its decision.

The OUR is a critical regulatory agency. But it is need for an urgent fix. That is why we feel that a public-private sector oversight group should be part of the strategy for this energy project.

Mobile Jamaica Gleaner;

Alternative Energy Electricity Government JPS LNG News Solar Energy

The Future Of Power In Jamaica

September 25, 2013 Webmaster

Is there an energy problem in Jamaica? The growing energy crisis in Jamaica has been a cause for concern ever since the Government divested the Jamaica Public Service Company (JPS).

Consumers and producers complain about the high cost of energy. Firms often blame their low productivity, low output, high price for final goods and services, as well as low profitability, on the high cost of energy in Jamaica.

The lowest consumers pay in Jamaica is $40, or US39 cents per kilo watt hour, compared to the United States where energy cost is as low as 12 cents per kilo watt hour in some places.

Jamaica consumes approximately 605 mega watts of energy per day. The country has the capacity to produce in excess of 700 mega watts per day from the old, inefficient power plants across the island. However, plans are being put in place to replace 475 mega watts of our daily usage with cleaner, more efficient sources; a 360-mega watt plant and 155 mega watts from renewable sources including, but not limited to, solar, wind mill and hydro. These two projects combined, are expected to reduce the cost of energy to the consumer by 25 to 30 per cent by 2016.

What is being done about the issue?

The winner of the bid to establish the renewable-energy sources has not yet been announced, but Azurest Cambridge Consortium has won the bid to possibly build this new energy plant that will supply 360 mega watts of Jamaica’s daily usage.

The estimated cost, including buildings, barges, the plant and other infrastructure is US$690 million. Total cost, minus labour, is estimated to be US$580 million. In total, the plant will use three barges, the first barge will be delivered 17 months after Azurest and JPS sign off on a power-purchase agreement. Negotiation are expected to start within the next three weeks, and should take about three to four months.

Azurest plans to sell the energy to JPS, at a price between 13 and 22 cents US per kilo watt hour, earning no more than 20 per cent return on its investment.

The US$100 million core equity committed to project, with hopes of raising US$50 million locally, and the rest overseas, in a 78 per cent to 22 per cent debt-equity ratio.

How will they finance the rest?

The International Finance Corporation plans to raise funds to possibly support the establishment of the 360 mega watt-power plant project in Jamaica, by issuing bonds on the domestic market.

IFC plans to raise US$500 million, or J$51 billion, from the issue. The bonds will have a triple-A rating and will be targeted at pension funds, banks and other investors. The bonds will also carry lower interest rates than the Bank of Jamaica Treasury Bill Rates.

This strategy to raise funds is not new as it was employed in the Dominican Republic to raise approximately US $10 million to fuel two micro-finance operations in the country. The IFC is unsure as to the exact date these bonds will reach the market, but know it will occur during the course of Jamaica’s four-year agreement with the IMF.

Upon establishment of the plant, Azurest will sell all the energy it produces to the JPS, who operate both a monopoly and a monopsony market.

What is a monopoly market?

This is a situation where there is only one seller of goods and/or services in the market. There is no competition as other firms cannot enter the market freely due to barriers to entry.

In this case, based on JPS’s contract with the Government, no other firm can supply electricity in Jamaica.

Given that JPS is the only supplier in the market, if unregulated; it can charge any price it desires. The company usually charges a price higher and supply less than what is efficient.

What is a monopsony market?

A monopsony market is the other way around, instead of one sell such as the case with the monopoly, in this case there is only one buyer of goods and/or services.

JPS is the only company that buys energy in Jamaica. Any company can produce energy, but given that JPS is the only distributor of electricity, it is the only company that buys energy.

In this case, if unregulated once more, the JPS can push the cost price down because there are no other firms in this purchasers market.

Who regulates?

In Jamaica, The Office of Utilities Regulation monitors JPS’s activities.

It regulates and prevents any abuse of monopoly and/or monopsony power that the JPS might be tempted to exercise.

The Jamaica Gleaner;

Electricity Government JPS News

JPS surprised at controversial street light resolution passed by KSAC

September 13, 2013 Webmaster

‘Strange’

THE Jamaica Public Service (JPS) has expressed ‘surprise’ at Tuesday’s passing of a resolution by the Kingston and St Andrew Corporation that seeks to have Corporate Area residents pay for the repair and replacement of street lights.

According to the light and power company, a resolution of that nature warrants consultations with the company, as a number of issues would have to be resolved before any such change could be made.

“I find it strange that they would move a resolution without us doing the research and getting back to them. We don’t have an adversarial relationship, we are accessible to all the councillors, they have our cell numbers and we respond to all their complaints, including street lights,” Jennifer McKurdy, JPS parish manager for Kingston and St Andrew North, told the Jamaica Observer on Wednesday.

McKurdy said that both he and the manager for JPS Kingston and St Andrew South attended last week’s KSAC Roads and Works Committee meeting, and were asked if it would be possible for private citizens to fix their own street lights. She said that they had promised to research the issue and respond but, before they were able to do so, the resolution was passed.

Meanwhile, JPS communications boss Winsome Callum told the Observer Monday night that, currently, there is no restriction on people who live some distance away from the main, or where electricity is unavailable, to go into the JPS office and work out an arrangement.

The process is usually for a certified contractor to install a street light at their home or in their community, and have it passed by the JPS. The owner of the property then becomes responsible for the bills and the maintenance of that light. However, she said that private citizens being responsible for the service or repair of streets lights in areas for which the KSAC is responsible is a totally different matter, requiring intense discussions on how it can be approached.

The resolution is one of the most controversial to be passed by the current KSAC administration, led by Mayor Angela Brown Burke. It was opposed by minority Jamaica Labour Party (JLP) members of the council, as well as three People’s National Party (PNP) councillors who abstained from voting. The resolution was eventually passed by a 16-10 majority.

The Observer reported Tuesday that PNP councillor Ian Telfer (Hughenden) had tabled a motion in the Council, seeking to have the public contribute more to maintaining street lights by paying for the repairs.

This would be in addition to some $3.4 billion from recently increased property tax, which generates revenue the Government and the councils use to pay for the street lights and garbage collection. However, despite the heavy increase in property taxes in April, both services continue to suffer from underfunding.

In his motion, Telfer said that the KSAC has been having “major challenges” in keeping the street lights in the Corporate Area operational. He noted that some private citizens, on occasions, have paid for repairs and replaced defective lights with “lights of their own”, but that these were eventually removed by the JPS.

He admitted that neither the KSAC nor the JPS can allow private citizens to add street lights to the grid as this would create “greater problems of maintenance and accountability, in addition to increasing operational costs”, but insisted in his motion that the KSAC should “mandate” the JPS to accept payments from private citizens.

Telfer said that there were instances where citizens have paid to repair or replace street lights, but the JPS said that the practice is illegal.

JLP councillor Vernon McLeod (Havendale) said that the JPS should find cash flow “to fund its business if it wants to stay in business”.

“The KSAC should penalise the JPS, and don’t pay them if they don’t provide the service,” McLeod said.

Another JLP councillor, Duane Smith (Chancery Hall), said that the resolution would set a dangerous precedent, and could open the floodgates for citizens to be asked to pay for other public services for which they are already taxed.

“It is quite obvious that the councillor is trying to remove the burden and responsibility of maintaining the street lights from the KSAC, and placing them squarely on the shoulders of the public. And what is most unfortunate about it is that it seems to have the backing of members who should know better,” Smith said.

Councillor Delroy Williams (JLP, Seivright Gardens) said that support of the resolution would be a reward for negligence on the part of the JPS. He said the KSAC should move aggressively to get the JPS to carry out its responsibilities.

His PNP colleague, Councillor Karl Blake (Greenwich Town), who seconded the motion, said that it could not be illegal for citizens to help to secure their communities. But, PNP Councillor Eugene Kelly (Whitfield Town), who abstained, said that while the motion had a good intention, citizens were already paying property tax, out of which the JPS was paid by the KSAC for the street lights.

“The JPS is paid hundreds of millions of dollars for the street lights, and if they don’t meet their obligation they should be sued,” Kelly said.

Another PNP councillor, Kevin Taylor (Duhaney Park), who also abstained, said that if citizens were to pay for the repair of street lights, they should be able to have the payment deducted from their property tax.

Jamaica Observer;

Electricity Government JPS News

JPS surprised at controversial street light resolution passed by KSAC

September 13, 2013 jrobinson

‘Strange’

According to the light and power company, a resolution of that nature warrants consultations with the company, as a number of issues would have to be resolved before any such change could be made.

Telfer said that there were instances where citizens have paid to repair or replace street lights, but the JPS said that the practice is illegal.

JLP councillor Vernon McLeod (Havendale) said that the JPS should find cash flow “to fund its business if it wants to stay in business”.

“The KSAC should penalise the JPS, and don’t pay them if they don’t provide the service,” McLeod said.

“The JPS is paid hundreds of millions of dollars for the street lights, and if they don’t meet their obligation they should be sued,” Kelly said.

Jamaica Observer;

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