‘Cut JPS monopoly’

‘Cut JPS monopoly’

EU head wants Jamaica to open up electricity sector to more players

BY ALPHEA SAUNDERS Senior staff reporter saundersa@jamaicaobserver.com

Wednesday, January 27, 2016

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HEAD of cooperation at the European Union (EU) Delegation in Jamaica, Jesús Baguena, has called on the Jamaican Government to open up the electricity sector to additional players for purchase and transmission of power if it wants to attract more investors, as the current Jamaica Public Service Company (JPS) monopoly is stifling the growth and diversification of the sector.

Baguena pointed to the low feed-in tariffs set by the Office of Utilities Regulation and the JPS, and lack of spare capacity on the national grid for more energy production as a turn-off to potential investments.

"The market for energy production and sale by independent producers is constrained by the JPS’s unwillingness to buy electricity from them," he remarked, noting that the JPS monopoly is facilitated by the All-Island Electricity Licence granted by the Government for purchase and transmission of electricity across the country.

Baguena was speaking at the national programme conference for the EU-funded Energy Services Company (ESCO) industry at the Knutsford Court Hotel yesterday.

He said that there is no indication of any short-term change in the status quo in the sector, given that the JPS licence is good until 2027. Still he encouraged the Government to review the regulatory framework in the interim. "We believe that a sound regulatory environment is a necessary prerequisite for attracting upstream investments that can improve the service to customers and allow new connections to be made," he stated.

At the same time, Baguena argued that the development of an ESCO industry in Jamaica, which was implemented in 2012 and was to end in 2015, had not advanced quickly enough due to constraints caused by the very same regulatory framework governing the sector.

He outlined that the €431,000 grant being provided to develop an ESCO industry in the island is aimed at creating new business opportunities and jobs in the energy sector, reducing operational costs, and lowering the country’s oil import bill in the long run.

Baguena noted though that three years after implementation of the programme, there was some disappointment that not enough progress had been made to meet the expected outcomes. "At that point, we took the exceptional decision to limit our support to the project as we were no longer confident that it could be rescued within the remaining time frame of the financing agreement," he said.

Baguena further stated that the current regulatory environment is not the most conducive for the development of an ESCO industry locally.

In response, Energy Minister Phillip Paulwell insisted that the Government is committed to the reform of the energy sector, and that significant steps had been taken to ensure the growth and buoyancy of the sector in Jamaica. He pointed to ongoing programmes, such as the initiative to lower energy costs in the public sector by 30 per cent; removal of the monopoly arrangement with the Petroleum Cooperation of Jamaica for renewable energy; net billing initiative; removal of tax from solar equipment; funding provided by the Development Bank of Jamaica for energy projects.

Paulwell noted also that phase three of the Wigton Windfarm project in Manchester is to start next month to provide 60 megawatts of wind energy. He pointed out, too, that Liquefied Natural Gas — "the most significant energy issue that has eluded us for many years," — is to become a reality as of April when the Bogue plant in Montego Bay starts to receive LNG.

"That 190-megawatt plant will see a tremendous transformation taking place because we are going to be removing over 290 megawatts of existing obsolete equipment that uses traditional fuel," he stated.

The conference is one of several activities being undertaken towards creating the infrastructure that is required for the development of a local ESCO industry.

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