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.