The Jamaica Public Service Company (JPS) has cautioned the Government against major legislative changes that could create uncertainty and adverse consequences in the power generation market.

The light and power company told a joint select committee of Parliament reviewing the 2015 Electricity Act, last Thursday, that the current market design is in harmony with the rights of the single buyer (JPS) to its obligations and duties, and that it is important that this balance be maintained especially for its most vulnerable customers.

President and CEO of the JPS, Michel Gantois, told the committee: “We recommend against any major changes in the Act that could upset the balance of different parties and stakeholders, that has been the explicit social construct in Jamaica for many years by choice — and especially if those changes have not been fully or comprehensively analysed models”.

He pointed to suggestions, for example, to modify market design, which requires more analysis and transparency.

According to Gantois, removing, or diluting, rights will reduce the ability of the JPS to meet obligations, as it has no freedom over who, or at what price, it can sell electricity.

Gantois said the right of first refusal (ROFR) should be left untouched, as it is one of the rights granted to the JPS as a measured consideration of the multiple obligations it must fulfill.

“The heavy regulated context around the ROFR with the need to meet the avoided cost, and the dominant role of the ministry (of energy) ensures control by the Government, and full transparency. It is not under our control,” said Gantois.

He argued that touching the ROFR would be unfair, as it is a contractual right, and interference could signal that those rights are not always respected.

The JPS boss contended that there is full transparency surrounding the terms of the ROFR, that pricing is competitive, and must fit within the Government’s road map to a sustainable electricity future.

Senior vice-president of generation at the JPS, Joseph Williams, emphasised that the processes that led to the company being awarded the ROFR surrounded the projected calculation of an avoided cost of energy over a period, based on internationally accepted principles.

“Clearly, there is no place there for maintaining any inefficiency in operations,” he stated.

Key players in the energy market have been clamouring for the ROFR clause to be terminated, insisting that it unfairly stifles competition.

At a previous sitting of the committee, Jamaica Energy Partners (JEP) had argued that the ROFR should either be discontinued or the same right should be awarded to other players in the market.

“There should be no right of first refusal in the sector as it does not promote competitiveness — however, if the Government, in its wisdom, decides it’s necessary — give the ROFR to all generating asset holders as at the date of the Act in 2015,” said Kevin Francis, the company’s director of strategic planning, and facilities.

Prior to that head of WRB energy Robert Blenker told the committee that as a participant in the energy market, his fear was that unless very carefully managed, the ROFR granted to the JPS would fail to mobilise and capitalise on the competitive and innovative nature of the market, to provide the lowest cost electricity with the most advanced technology available.

Blenker argued that if the ROFR remains, any resultant pricing for energy should be done through a synthetic competitive process, as the traditional competitive process would not work with the ROFR, because players are unwilling to bid, where the outcome is predictable.

Under the Electricity Act, the JPS has the right of first refusal to replace its generation units when they become due for retirement, according to the schedule determined by the portfolio minister.