Energy Minister Phillip Paulwell has dismissed reports of
It’s one of the costliest crimes plaguing Jamaica, but few people recognise the scope and gravity of this parasitic add-on.
The Jamaica Public Service Company (JPS), the monopoly distributor of electricity across the island, lamented this past weekend that it has lost US$30 million to electricity theft so far this year, and spends another US$30 million annually on technology to curb the piracy. Combined, that represents the equivalent of J$5.4 billion that inflates the cost of power to Jamaican households and businesses teetering on the edge of survival.
“About 14 per cent of the electricity produced by JPS is stolen, and the cost of this theft is shared by both JPS and our customers,” says Kelly Tomblin, JPS’s president and CEO.
Of course, that’s not the whole story. Jamaica’s electricity costs are meteoric because of JPS’s outdated plants, which deliver energy inefficiently.
Energy cost, as this newspaper has repeatedly emphasised in these columns, is the most crucial factor behind the uncompetitiveness of the Jamaican economy. This handicap puts Jamaica at a severe disadvantage internationally and against regional neighbours such as Trinidad and Tobago, on which misplaced rage has been directed for its one-sided trade relationship, on which Jamaica is running a deficit of nearly US$1 billion on mostly oil imports.
Scores, if not hundreds, of businesses that have foundered name electricity cost to be among the main reasons, if not the primary one, for their collapse. Jamaica pays up to US$0.40 per kilowatt-hour for energy – JPS will be quick to remind that August’s rate was eight cents cheaper – six times that of Trinidad and Tobago.
Phillip Paulwell, the energy minister, has been a vigorous cheerleader for the dismantling of the monopoly, which he believes will drive down costs to consumers.
Mr Paulwell predicates his vision for a liberalised electricity sector on foreign investors indulging their appetite among a Jamaican population willing to give its hand to the suitor with the sweetest proposal. But Mr Paulwell’s romanticised notions seem to ignore the compelling reality that investors may not gamble money on Jamaica’s unreliable national security structure.
LAW AND ORDER ON HOLIDAY?
The maintenance of law and order is the fundamental role of government, the glue that holds society and the economy together. It is on that score that the Jamaican Government has been found wanting.
JPS, which has decades-old roots in the Jamaican economy, may be less minded to disengage because of the breadth of its capital investment, even if it has to spend an extra US$30 million a year. A new company, however, may be less inclined to yawn at such write-offs for crime.
Politicians of both the ruling People’s National Party and the opposition Jamaica Labour Party have generally winked at the problem of electricity theft. Most inner-city communities are cobwebbed with illegal connections. And unscrupulous business operators and wealthy suburban householders are big on the gig. The police do little to prevent it.
The numbers bear the tale. According to JPS, “Since the start of the year, 38 persons have been arrested for illegal abstraction of electricity, over 5,700 meter irregularities have been discovered, and 14,000 illegal ‘throw-up’ lines removed across the island.” But that’s a drop in the bucket.
Government had better get serious about electricity theft. Or its overtures to investors might be equated with wooing a lover without the vow of protection.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.
http://jamaica-gleaner.com/gleaner/20120903/cleisure/cleisure1.html
There is never uncertainty when Shelly-Ann Fraser-Pryce rockets from the blocks in a 100-metre dash. Usain Bolt and Yohan Blake may get off a bit behind the competition, but they accelerate with such command that the prize is usually theirs.
The same, unfortunately, cannot be said for how the Jamaican Government manages the country’s affairs, exemplified this week by the confusion over energy policy.
Energy Minister Phillip Paulwell had long since declared his Government’s intention to break the monopoly in transmission and distribution (T&D) of electricity. That seemed to be settled policy. On Tuesday, Mr Paulwell was contradicted by Dr Carlton Davis, a senior adviser to Prime Minister Portia Simpson Miller. He favours a “regulated monopoly” and suggests that Mr Paulwell’s pronouncements were, for the Government, not conclusive.
Then, Prime Minister Portia Simpson Miller tiptoed between the raindrops. The upshot continued, if not deepened, uncertainty.
PROHIBITIVE COST
The policy tug of war might have been considered just another bit of Jamaican political theatre, but the fact is that the issue at hand is of great importance and urgency. There is clear consensus that, bad economic management apart, the high cost of electricity is the greatest constraint to the competitiveness of Jamaican firms and to growth in output.
Jamaicans pay upwards of US$0.40 per kilowatt-hour (kWh) of electricity, higher than the rate in most of its regional economic competitors. Policymakers have talked much, over many years, about strategies to reduce the cost of energy. They have achieved little.
Recently, though, we appeared to have been getting somewhere, with a plan to shift from expensive oil to cheaper fuels to generate power. The idea is to start with natural gas, although coal remains in the mix.
Several months ago, the Jamaica Public Service Company (JPS), the light and power provider, and its owners won a bid to establish a 360-megawatt power plant that is to be fired by natural gas. The Government is also about to rule on bids for a liquefied natural gas storage and regasification facility.
The projection is that using cheaper natural gas to fire this power plant, combined with its greater efficiency, will lead to a reduction in the cost of electricity of between 30 per cent and 40 per cent.
Paulwell’S AMBITIOuS TARGETS
At the same time, Mr Paulwell has been loudly promoting the break-up of the JPS’s monopoly on the grid, arguing that this could deliver the 60 per cent drop in the price of power that he has set as his benchmark.
The minister’s critics, however, argue that the energy minister’s focus on the power company’s T&D monopoly has introduced uncertainty into its operations – exacerbated by a recent court ruling against the exclusivity of the JPS’s operating licence – especially with the company being in the market for capital to finance the gas-fired plant.
The attention, critics feel, should be on fuel choice. Dr Davis agrees. He believes that Jamaica’s electricity market, with peak demand for under 700 megawatts, is too small for a competitive free-for-all.
The statement from the prime minister’s office acknowledges the market uncertainty engendered by the liberalisation debate and the need for continuity “in the short run”. But it makes no policy commitment.
We wonder what would have been the result of Jamaica’s record run in the men’s 4x100m relay at the Olympics if there was such uncertainty in the team.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.
http://jamaica-gleaner.com/gleaner/20120817/cleisure/cleisure1.html
Barring reversals at appeals, for which the administration is likely to lack great enthusiasm, Justice Bryan Sykes may have played a fortuitous hand in favour of Phillip Paulwell, the energy minister.
For Justice Sykes, in his ruling on Monday, broke, at least for now, the electricity supply and distribution monopoly of the Jamaica Public Service Company (JPS) – a matter seemed set to be a battle of attrition, if not a noisy war, between Mr Paulwell and the light and power company.
Whatever may be the Government‘s strategy going forward, JPS, as has been indicated by its lawyers, is not about to meekly acquiesce to Justice Sykes’ decision. But it is a signal for both sides to recalibrate their conversation and settle on a new, serious and mature discourse on Jamaica’s energy future.
The background to these developments is the 20-year (subsequently extended by seven years) licence that was granted to JPS in 2001 by the Patterson administration, of which Mr Paulwell was a Cabinet member, for the exclusive distribution of power.
Breaking that monopoly has been a mantra of Mr Paulwell since January, following the People’s National Party‘s return to office after a four-year hiatus on the opposition benches. At upwards of US$0.40 per kilowatt-hour, Jamaican consumers face among this region’s highest electricity rates. It is conventional wisdom that the cost of power is a major drag on the competitiveness of the island’s economy. Mr Paulwell feels competition would drive down costs.
He has support among Jamaican consumers who largely blame JPS directly for this state of affairs. They see JPS as neither customer-friendly nor efficient, but able to leverage its monopoly to remain profitable.
Two consumer groups and an individual manufacturer brought a class-action suit challenging the minister’s authority (Bobby Pickersgill at the time) under the Electric Lighting Act to have granted JPS an exclusive licence for the transmission and distribution of power.
Justice Sykes rejected the claimants’ argument that under Section 3 of the law, there was no provision for a single supplier of electricity, and that the minister, therefore, had no power to issue an all-island licence. What was wrong, the judge argued, was the pre-emption of the opportunity of other potential licensees.
The problem of the current licence
Said Justice Sykes: “The statute does not give the power to the minister to grant a licence on terms which effectively bar any other applicants from being considered. This, in the opinion of the court, is the problem of the current licence to JPS. The minister has committed himself and his successors to a situation in which there is no possibility of change for the required 20 years (which has been extended), even if new technology or a new company has a better and cheaper way of doing what JPS is doing.”
That, effectively, is the argument of the anti-JPS lobby – and Mr Paulwell.
This week’s ruling does not immediately affect the JPS’s ability to operate, as its licence, but for its exclusivity, remains valid. Further, Mr Paulwell has no other application on his desk. Nor are there protocols for interconnection on the JPS grid. Clearly, other potential players will be emboldened by the ruling. They will receive encouragement from consumers.
It is time for constructive engagement.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.
http://jamaica-gleaner.com/gleaner/20120801/cleisure/cleisure1.html
Energy Minister Phillip Paulwell – file photo.
Jerome Reynolds, Gleaner Writer
Energy Minister Phillip Paulwell has indicated that yesterday
ENERGY and Mining Minister Phillip Paulwell will be travelling to Japan and South Korea this year to discuss liberalisation of the national power grid with the major overseas shareholders in the Jamaica Public Service (JPS).
Speaking in the sectoral debate in the House of Representatives on Tuesday, Paulwell said that he will be travelling to South Korea this week to meet with executives of East West Power, and in the latter part of the year he will visit Japan to meet with the other major shareholder, Marubeni to assess options for liberalising the grid.
He said that he expects “constructive dialogue, cooperation and understanding” from his trips, based on the knowledge that the Japanese Government is exploring similar transmission and distribution of electricity options, while South Korea has some experience in this area.
“Let us face the fact that to fundamentally restructure our energy market we must, as a matter of urgency, take steps to liberalise the transmission and distribution of electricity, to bring down costs to the consumer,” the minister said.
He pointed out that Jamaica has been operating a vertically integrated system, in which the bulk of the generation, systems control, transmission and distribution are controlled by the same entity, the JPS.
He noted that while the JPS has a monopoly on transmission and distribution, the market for generating electricity is liberalised under a single-buyer model: The JPS purchases some 200 megawatts from independent power producers (IPPs) under long-term power purchase agreements (PPAs).
“… As a consequence, while liberalisation in generation has allowed some level of participation and competition in the sector, IPPs are required to negotiate a PPA with the utility which, in Jamaica’s case, happens to be the very company they compete with,” Paulwell told the House.
He said that an example of the “market contortion” was that in the recent procurement process for a new 360 megawatt power plant, JPS established a wholly owned subsidiary which was the sole bidder and winner of the bid.
“This new JPS subsidiary will then proceed to negotiate a power purchase agreement with itself. This underscores the urgency with which we must proceed to restructure the energy market and introduce greater transparency and competition,” Paulwell said.
Read more:
ENERGY and Mining Minister Phillip Paulwell will be travelling to Japan and South Korea this year to discuss liberalisation of the national power grid with the major overseas shareholders in the Jamaica Public Service (JPS).
Speaking in the sectoral debate in the House of Representatives on Tuesday, Paulwell said that he will be travelling to South Korea this week to meet with executives of East West Power, and in the latter part of the year he will visit Japan to meet with the other major shareholder, Marubeni to assess options for liberalising the grid.
He said that he expects “constructive dialogue, cooperation and understanding” from his trips, based on the knowledge that the Japanese Government is exploring similar transmission and distribution of electricity options, while South Korea has some experience in this area.
“Let us face the fact that to fundamentally restructure our energy market we must, as a matter of urgency, take steps to liberalise the transmission and distribution of electricity, to bring down costs to the consumer,” the minister said.
He pointed out that Jamaica has been operating a vertically integrated system, in which the bulk of the generation, systems control, transmission and distribution are controlled by the same entity, the JPS.
He noted that while the JPS has a monopoly on transmission and distribution, the market for generating electricity is liberalised under a single-buyer model: The JPS purchases some 200 megawatts from independent power producers (IPPs) under long-term power purchase agreements (PPAs).
“… As a consequence, while liberalisation in generation has allowed some level of participation and competition in the sector, IPPs are required to negotiate a PPA with the utility which, in Jamaica’s case, happens to be the very company they compete with,” Paulwell told the House.
He said that an example of the “market contortion” was that in the recent procurement process for a new 360 megawatt power plant, JPS established a wholly owned subsidiary which was the sole bidder and winner of the bid.
“This new JPS subsidiary will then proceed to negotiate a power purchase agreement with itself. This underscores the urgency with which we must proceed to restructure the energy market and introduce greater transparency and competition,” Paulwell said.
Read more:
Phillip Paulwell, minister of science, technology, energy and mining.
New cellphone, fibre-optic licence for auction
Philip Paulwell, minister of science, technology, energy and mining, said Tuesday that South Korean company Samsung has emerged the preferred bidder to develop Jamaica‘s liquefied natural gas (LNG) infrastructure.
He otherwise announced that Jamaica will auction off a new cellular phone licence and a fibre-optic licence, which will add increased competition in the telecoms market.
Speaking in Parliament, Paulwell told lawmakers that the LNG committee would now begin negotiations with Samsung, which beat out companies such as Exmar Marine of Belgium and Sener Ingenieria y Sisternas, SA of Spain for the job to develop the floating storage regasification unit.
Under the commercial structure formulated by Government, LNG gas will be funnelled through the LNG infrastructure, which will comprise a terminal and pipelines for distribution to end users, such as the Jamaica Public Service Company’s 360-megawatt plant.
Paulwell said that bidders for the supply of LNG have asked Government for a fortnight’s extension to Friday, July 27, which was granted based on a recommendation from the LNG committee now headed by Dr Carlton Davis.
“In terms of the LNG supply RFP (request for proposal), the Jamaica LNG project team received requests from all three short-listed LNG supply bidders for an extension of the original bid submission deadline,” he said.
The bids were originally due by July 17.
The introduction of LNG forms a key element of the Government’s effort to drive economic growth via slashing electricity costs, currently among the highest in the region. The submissions for the LNG terminal were due by Friday, April 27, 2012 and the final second-stage proposals for LNG supply was originally targeted for closure by the end of June 2012.
The initial demand for LNG is approximately 0.8 million tonnes of LNG per year, with future demand projected at 2.5 million tonnes per year by the end of the decade, according to Government. It is expected that the importation of LNG will serve to spur economic growth in industries across the island that would benefit from the availability of natural gas and lower energy prices.
The Cabinet, in March 2012, approved the formation of the Jamaica Gas Trust (JGT), which will act as the sole LNG purchaser for the project. It will be capitalised with US$100 million and managed by the private sector. The JGT will execute the major commercial agreements, including the LNG Sale & Purchase Agreement, Terminal Use Agreement, Gas Sales Agreements and Pipeline Transportation Agreement.
Part of the hold-up of the LNG project has been uncertainty over supplies of gas. Last week, Jamaica’s Ministry of Industry, Investment and Commerce issued a statement saying Trinidad had signalled it was committed to resolving the issue of supply.
Turning to the telecoms sector, Paulwell stated that the Government would auction spectrum to facilitate the introduction of new cellphone services.
“Mr Speaker, we intend to allocate one licence for the 700 spectrum by auction, for which there will be a reserve price. We will also attach to that award a new international fibre-optic cable licence,” said Paulwell.
He explained that the allocation of the 700-megahertz (MHz) band will provide a more cost-effective option for the deployment of 4G and Long-Term Evolution (LTE) networks in Jamaica. He said that 4G has the capacity to deliver data rates of up to 100 megabits per second (Mbits/s) of download, and up to 70 Mbits/s upload, which enables video application on the downlink as well as uplink.
“This will allow video-sharing, surveillance, conferencing and streaming in higher definition than is possible with existing 3G technologies,” the minister said.
business@gleanerjm.com
http://jamaica-gleaner.com/gleaner/20120725/business/business1.html
Minister of Science, Technology, Energy and Mining Phillip Paulwell has vowed to abolish the ‘avoided costs’ system used to compute and compensate independent power providers (IPP) supplying electricity to the national grid as an incentive for renewable-energy producers.
The alternative will be a feed-in-tariff mechanism, designed to accelerate investment in renewable-energy technologies and, unlike the avoided costs system, offer cost-based compensation, price certainty and long-term contracts that can help to finance investments.
Paulwell said that for years, when IPPs entered into purchasing agreements with the Jamaica Public Service Company (JPS), they are told that the price JPS will pay them must be related to the avoided costs, “which is a theoretical concept based on what is assumed to be the least cost of an additional unit of electricity to the grid.”
“That to me does not provide the incentive and the framework to encourage people to get into the business,” said Paulwell, at the launch of an energy cost containment initiative rolled out by Jamaica Broilers Group at one of its contractors’ poultry rearing facilities at Atkins Farm, Four Paths, Clarendon, last Wednesday.
To treat with the issue, “we recently conducted a consultancy through the World Bank and we are about to promulgate a feed-in-tariff mechanism that will reward people based on the actual costs of the technology that is being deployed. And we are going to abolish this issue of avoided costs so that we can properly incentivise those of you who wish to get involved,” the minister added.
According to a declaration by the Office of Utilities Regulation (OUR) dated December 2010, “avoided costs for the JPS electric grid can be defined as the costs to the electric utility of energy or capacity or both, but for the purchase from the qualifying facility(s), the utility would generate itself or purchase from other sources.”
Avoided costs in electricity generation and distribution refer to the cost the JPS escapes by purchasing electricity for resale from other parties instead of building a new plant. It consists of generation fixed costs or capacity costs, and generation variable costs or energy costs.
The OUR said the avoided costs considered in making the declaration are generation fixed costs, which include capital costs for new generation capacity to be installed over the planning period, depreciation of the investment and the fixed operation and maintenance costs for those facilities. Variable costs include fuel costs and variable operation and maintenance costs.
Paulwell told poultry farmers and business people that another issue “we are going to insist on for this year is the ability of businesses to establish generation in one location and to be able to wheel that to another location utilising the grid.”
Emphasising the need for Jamaica to diversify its energy sources, the minister said he intends, very shortly, to present to the country a schema in relation to how the Government will get the price of energy significantly reduced, as well as outcomes in relation to the liquefied natural gas project.
Paulwell said he will again be speaking to the use of coal as an alternative source of fuel, but wanted to “ensure and assure our environmentalists that we are not going to do anything that is going to, in any way, be reckless and careless in how we implement that project.”
The minister, who has installed solar panels – obtained from Cuba – at his home in St Andrew, said the Jamaican Government was also trying to secure a technical agreement with Cuba to train Jamaicans into assembling the panels here.
“I don’t believe it has to be a government project. I want to challenge the private sector to step forward and see how we can manufacture panels in Jamaica” with a view to exporting to other areas in the region “if we can manufacture enough,” he said.
mcpherse.thompson@gleanerjm.com
http://jamaica-gleaner.com/gleaner/20120715/business/business8.html
ELEVEN PERSONS yesterday collected the first batch of net billing licences offered by the Government that will allow them to sell the excess electricity they generate to the national grid.
Energy Minister Phillip Paulwell, who handed out the licences, said having installed a solar-energy system at his home, he intended to apply to his ministry for a licence.
“My PV (photovoltaic) system is fully up and running and I am now anticipating my JPS (Jamaica Public Service Company) bill later this month,” said Paulwell, who was speaking at a meeting of the Jamaica Energy Council held at Jamaica House yesterday.
Under the net billing system, licensees are expected to see huge reductions in their electricity bills after balancing the amount owed for energy used and what is earned from the excess energy sold to the grid.
“The bill from JPS is netted against the bill from the production and at the end of the month, the net bill to the customer,” explained Hopeton Heron, deputy director general at the Office of Utilities Regulation (OUR).
“At the end of three months, you will see whether you owe JPS or JPS owes you and a cheque is cut somewhere to settle the matter,” he added.
The system will be governed by a five-year standard offer contract that each licensee is required to sign.
Addressing concerns about the impact of adding new facilities to the grid, Heron said for the next two months, the OUR will be conducting a pilot project that will limit the new connections to two per cent of the existing capacity.
Paulwell said he hoped this would encourage more Jamaicans to come forward and apply for licences as “the Government looks to enlarge its ambition in relation to renewable energy“.
http://jamaica-gleaner.com/gleaner/20120519/lead/lead2.html
