OUR reviewing electricity generation proposals

OUR reviewing electricity generation proposals

Tuesday, February 19, 2013

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The Office of Utilities Regulation (OUR) last night opened a window of opportunity for firms wishing to submit proposals for a new electricity generating plant that would use liquefied natural gas (LNG) as its main fuel source.

According to the regulator, it will complete its review of the current proposal by the Jamaica Public Service (JPS) and other expressions of interest by the end of next month.

"Following the completion of this review, the OUR will formulate an opinion as to the feasibility of the offers and advise the Government whether it is worthwhile to proceed to finalise negotiations with any of these companies, including JPS," the State agency said in a news release.

"This gives all entities which have expressed an interest, including JPS, a window of opportunity for a review of their proposals before the OUR returns to the market, if necessary," the regulator said.

"The OUR will then await Government's decision whether to sole source the project, which seems most feasible by way of readiness and also achieves the overall objective of reducing electricity prices in the shortest time. If such a project cannot be identified, then the OUR will go back to invite public tender," it added.

The decision comes after the OUR, on February 1, informed the JPS and its shareholders that it had terminated the request for proposal (RFP) process in relation to the 360 MW project.

The OUR said it ended the process after JPS missed a third deadline on January 30 to complete the requirements under the RFP for the 360 MW project and had requested a 30-day extension.

But the JPS explained that the project scope changed significantly since 2011 when it was granted approval to proceed with construction of the plant.

"JPS' role initially was simply to construct the plant, but late last year the company was asked to take on the additional responsibility of identifying a supplier and managing the process of procuring the LNG," the light and power company's President and CEO Kelly Tomblin said, adding that JPS has not participated in fuel procurement in the past.

Tomblin said that, despite her company's best efforts, the market is not supporting earlier estimates of LNG prices as low as $8.50 mmbtu. "We have received indicative prices of upwards of $12.50 mmbtu for LNG and the related infrastructure, which we estimate would result in a reduction of approximately 20 per cent in electricity costs," she explained.

Last night, the OUR said it has given JPS until Friday, March 15, to submit details of an alternative proposal for provisioning of electricity generation capacity.

"This was in response to a letter, containing a broad summary of its latest offer, sent on Thursday, January 31, 2013 by the JPS," the OUR said, adding that it has advised the responsible minister of this process and he is in concurrence.

The OUR said that several other companies have expressed interest in providing electricity (generation capacity) since the termination of the RFP process.

"Those companies have also been given until March 15, 2013 to concretise their unsolicited submissions into firm proposals," the regulator said.

"A meeting was held with JPS, following which the OUR informed the company that it would be allowed to submit the details of what is now considered an unsolicited proposal. The OUR will only entertain firm proposals in a state of readiness to be finalised with minimal negotiations. The proposals must be to provide electricity only and must be accompanied by the relevant fuel supply and other financing agreements," the regulatory agency said.

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