Robertson underscores importance of Independent OUR

Sunday, August 01, 2010

ENERGY Minister James Robertson is underscoring the importance of an independent Office of Utilities Regulation (OUR) against the background of calls for him to roll back the rate increase granted to the Jamaica Public Service Company (JPS) by that entity, noting that any such interference by his ministry would go against the terms of the JPSCo's 2001 license and also serve to discourage investment in new generating technology and capacity by the light and power company.

"The OUR is an independent body, its head is appointed by the Governor General, I cannot interfere as this would go against the terms of the OUR and have severe consequences for our future energy prospects by discouraging investment in new energy sources such as LNG and hydro which are currently poised for major developments that will lead to cheaper and more sustainable energy generation, we're talking about the future of Jamaica not short term expediency," said Robertson in an interview.

He added that while he fully appreciated the concerns of consumers and the business sector, the government was seriously committed to LNG and energy diversification to break Jamaica's dependence on expensive imported oil with its volatile cost factor and negative environmental fallout over time.

He estimated that Jamaica year-to-date, lost some US$1.2 billion because the country did not have a cheaper, more efficient energy source, a situation that would change with the entry of LNG replete with the latest technologies.

"If Jamaica is to grow and develop we need to solve the energy problem, high energy costs are driving up the cost of doing business and restricting investment, we have to get serious about our future now," said Robertson.

The JPS had applied for a 4.81 per cent increase in non-fuel costs of electricity but the OUR granted the company a 4.79 per cent increase. For residential customers, that means an overall increase of just under two per cent on electricity bills while businesses will see rate increases ranging from just over one per cent to almost three per cent.The increases took effect on June 18 this year.

However, the JPS and Robertson noted that the 1.9 per cent inflation based rate adjustment will be blunted by decreases in fuel charges and the current revaluation of the Jamaican dollar.

Meanwhile, the Energy Minister has asserted that any future changes to the JPS licence to generate and distribute electricity would be dependent on new technologies for generation capacity, which will lead to reduced energy costs in the medium to long term through projects such as the multi billion dollar Floating Storage Regasification Liquid Natural Gas facility of which a contract was recently granted to a consortium forged by Belgian shipping and regasification group Exmar, Colombian gas distribution company, Promigas and local consultants Caribbean LNG Jamaica limited.

The project, which is due to be completed by 2012, will see the construction of a ship for the storage and regasification of LNG, a jetty and onshore buried LNG distribution lines.

The Ministry of Energy and Mining is seeking to lower Jamaica's energy bill by implementing the use of LNG and diversifying the country's fuel sources before the next JPS rate adjustment is due in 2014.

The ministry is working on a diversification strategy where approximately 90 per cent of the existing baseload of Jamaica's electric power grid will be switched to LNG from heavy-fuel oil and automotive-diesel oil.

Robertson notes that with LNG, being the cheapest fuel now available, that fuel source has to be used to offset the cost of oil and provide an alternative for the island's base load.

"Renewables don't bring down your base load cost," Robertson argued, adding that sources such as hydroelectricity and wind, were, at least in the short to medium term, expensive to produce and inconsistent.

He also pointed to the fact that LNG supplies were plentiful and cheap with vast reserves being discovered regularly which should encourage price stability over the long term unlike oil.

The Office of Utilities Regulation (OUR) was established by an Act of Parliament in 1995 to regulate the operations of utility companies while operations began in January 1997.

It is headed by a Director General and together with the Deputy Directors General comprise the Office. The Director General is appointed by the Governor General, while the Deputy Directors General are appointed by the Prime Minister.

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Robertson underscores importance of Independent OUR