COMPANIES migrating from the grid to generate electricity at their operations using liquefied natural gas (LNG) could find themselves forking out more for the fuel in the form of a fee to help pay for the regasification infrastructure from which the gas is supplied.

The issue of the payments was raised by Opposition Spokesman on Energy Phillip Paulwell in the recently held Joint Select Committee reviewing the Electricity Act 2015.

“When [New Fortress Energy] was creating the [LNG] infrastructure, [it was agreed that] the JPS customers would pay for that [in their electricity bills]. But with new customers being supplied by this supplier, that is, those persons who are coming off the grid, [it was also agreed] that they would contribute to all that capital infrastructure that was put in place,” Paulwell pointed out.

“Are they doing so or is it still the burden of the Jamaican consumers alone, through the JPS, to be paying for this regasification plant that was established?” he asked as he noted, “All I am saying is that that was never ever the intention, that it was only JPS customers who would pay for that. Those large customers who are getting natural gas from that same facility must also pay and the minister must insist that that is so.”

Energy Minister Daryl Vaz, who chairs the committee reviewing the Electricity Act, acknowledged that he did not know much about the arrangement but said he would speak to Paulwell for information about the issue and give a response “within 60 to 90 days”.

In recent years, several large manufacturers, including Red Stripe, Wisynco and Rainforest, left the grid to start generating electricity using LNG as a means to cut the cost of electricity on their operations. The Jamaica Public Service Company (JPS) has often noted that such grid migration means the cost of generating electricity would have to be shared among those customers who remain – typically, those who can’t afford to leave – which is one of the reasons that electricity prices have not declined as fast as they could if those customers had remained.

New Fortress Energy spent significant sums setting up its infrastructure under a 20-year deal, including a US$1-billion regasification plant about three miles off the coast of Old Harbour Bay, St Catherine.

Paulwell’s concern comes as Brian Richardson, chief technical director for energy in the Ministry of Science, Energy and Technology, raised concerns about the impact of grid defection by large customers of the JPS causing what is called a utility death spiral.

“The JPS has shown in its annual report that there’s a five-year increase in the per kilowatt unit rate for electricity, and we are seeing where that is not trending downwards because we are in this spiral. We’re seeing where customers with the most capability to pay for their electricity, they’re thinking of having solar on a roof. So, they’re looking at that utility in a box solution and they’re taking that demand off the grid,” he pointed out.

“So if you say, for Jamaica, if 50 per cent, for example, take that demand off the grid, and 50 per cent remain for whatever reason, and they’re usually persons who have the least ability to change your income, so pensioners, so fixed income earners, that cost gets shifted to that 50 per cent. The only way the price can go is up.”

He said the additional concern that the customers who leave to generate their own electricity remain connected to the grid, so they keep that connection, but are not paying for the grid.

“So you have a problem, which is growing for Jamaica. Our huge demanders are taking their demand after grid. We have a structure which incentivises it, but we are not looking at what then happens to the remaining customers who are unable to provide a utility in a box for themselves.”

“Jamaica’s utility death spiral has likely already begun leading to self-reinforcing upward pressure on electricity prices,” Richardson said. He pointed out that demand forecasts led to a build-up of electricity infrastructure to now around 1,041 MW while peak demand hovered at around 632 MW in 2021, down from the record 667 MW consumed in 2017.

“So we have a situation where we are providing electricity for which there is no demand,” he said.

“The reason why I’m raising this here is to point out that [all that electricity that is being generated]… has to be paid for by the residents, the commercial, the industrial users. The rate they pay is based on everything added up and basically divided by all of those paying customers,” he added.

Richardson added that the situation made it quite urgent for the country to move quickly to bring more renewable energy solutions on the grid to improve energy security and secure lower electricity prices for consumers. The Government has set a target to get that number up to 50 per cent by 2030. Currently, renewables account for 13 per cent of the total energy generated for the grid.

“If we are to get to 50 per cent renewables by 2030, it has to be done in an aggressive way to get to that point. That’s seven years away and every day it goes, it’s ticking down,” Richardson outlined.

“Otherwise, we are not going to get to a state where we can have lower prices due to less fossil fuel being imported and balance the retirements that we have coming up as well on the grid. So we are at the opportune time now to do the appropriate steps and I think having renewables being the dominant fuel should be the pathway that Jamaica goes on.”

At least 371 MW of renewable energy infrastructure is now being planned for the grid of which 171 MW will be the JPS replacing one of its fossil fuel plants with renewable energy, the committee was told. The other 200 MW will be new renewables.

However, with the excess capacity on the grid already, Paulwell asked about the prudence of adding more generating power when the demand is not there.

Richardson said the plan is to replace old fossil fuel plants with renewables, but added “we have to ensure that the timing is aligned with that retirement structure and when we get new renewables on the grid”.