Government senator Aubyn Hill says he is concerned that the Jamaica Public Service Company (JPS) energy licence, granted shortly before the general election of February 25, 2016, is inconsistent with international trends and would lead to entrenching the company’s “near monopoly” of the energy sector.

Senator Hill said that there are several issues of concern, and some would seem to be opposed to the interest of Jamaicans and the efficiency of electricity production and distribution in the country.

Senator Hill, who is also the deputy president of the Senate, was opening the 2016/17 State of the National Debate in the Senate.

He said that the Electricity Act of 2015 grants JPS the right of first refusal, to replace generating plants that are due for retirement. However, before the granting of the licence, JPS was required to compete with other interested entities for the provision of additional generating capacity, as required by the system, to simultaneously replace plants that are scheduled for retirement as well as to provide for demand growth.

He stated that the new approach is inconsistent with international trends, and would tend to entrench the company’s “near monopoly”.

“That monopoly-like approach is inconsistent with Jamaica’s National Energy Policy 2009-2030 which, among other things, seeks to have an energy sector that is driven by private investment within a policy and regulatory framework that fosters investments, competition, efficiency, a level playing field and transparency,” Senator Hill said.

“The new JPS licence has effectively removed some of the critical incentives for the utility company to operate as an efficient power provider and distributor,” he stated.

Senator Hill noted that, among the changes contributing to this were: an effective guarantee of the rates of return to JPS; application of The Z-factor has been changed to ensure that JPS would always achieve a rate of return within a specified band, apparently, regardless of how poorly the utility may be managed.

“The indication is that an increased amount of losses will be passed through to consumers,” he noted.

Hill said that there is a strong move afoot, among some of JPS’s biggest corporate customers, to create their own renewable energy supplies, or much more efficient hybrid fossil-renewable energy sources, and remove themselves from the JPS grid. He said that this meant that the individual Jamaican consumer would be asked to pay more and more, as corporations disconnect themselves from the expensive JPS electricity supply.

“Replacement of the price cap regime with the revenue cap regime means that the JPS target revenues are no longer tied to grow the business, which would normally be consistent with growth in the wider economy. This approach could be expensive to JPS’s customers and could dampen economic growth,” he insisted.

Hill said that a good argument could be made that the revenue cap approach blunts any incentive on JPS’s part to support the expansion of renewable sources of energy, or to improve efficiencies in their current business.

Turning to the expansion of energy sources, he said that it has become almost a dull refrain to hear that Jamaica must expand its sources of energy.

He said that high-growth countries, such as India and China, are adding solar energy at exponential rates, while Jamaica continues to buy expensive fossil fuel that makes oil-producing countries richer and provides employment for their citizens.

“We tend to take the short-term view that prices are relatively cheap now — pretending that they would always remain cheap — and even when our prices were high we were often told that the payback period took too long. Often that payback period was between three to five years. And, even if it were to be seven to 12 years, the life of these installations run between 25 and 30 years, and so a long-term view would help us understand that, after the payback period — short or long — the Jamaican individuals or businesses which installed these energy-producing facilities would, in effect, own their own energy production units,” Hill said.

“Instead of paying monthly bills to a provider of energy without getting anything back in terms of ownership, those monthly payments — often less than what is paid to a utility company — could and should be going to owning equity in the installations they use their savings, or borrowed money, to buy,” he stated.

“Many Jamaicans believe that it is time for a dramatic shift in government policy to use more renewable energy, in order to reduce the amount of foreign exchange now being utilised to buy expensive and generally dirty fossil fuel — while at the same time putting pressure on the Jamaican dollar.

“We will never be entirely free from buying some quantity of fossil fuels, at least not for the near term, but we can take the policy steps to relieve the pressure on our local currency. Building renewable sources of energy in our own country will produce thousands of new jobs for Jamaicans who need them,” Hill added.

The debate will resume in the Senate today.