DISCUSSIONS among members of the joint select committee reviewing the Electricity Act, 2015, raised concerns regarding the regulation of the liquefied natural gas (LNG) sector and which entity should provide this oversight.

At its meeting on Thursday, Opposition member of the committee Anthony Hylton questioned the unregulated nature of the LNG market and sought from the Office of Utilities Regulation (OUR) its perspective on the matter.

Deputy director general at the OUR Cedric Wilson explained that the entity does not have responsibility for regulating LNG.

“What we do is to regulate electricity and, therefore, the connection with LNG comes about from the fact that we have to regulate the contracts. We have to look at the contracts that the Jamaica Public Service company [JPS] has with its fuel suppliers — and that is how we get involved with LNG,” he said.

He explained that the LNG market is now in its early stages, “and when a market is in an embryonic stage…you [would need to] look at the market properly before you come to a decision, and I think that is the phase Jamaica might be in now”.

Government committee member Tova Hamilton questioned whether steps are being taken towards some type of regulation of the sector.

“There have been talks about it but as to where that authority rests, it is still a question that should be decided by the Government,” Wilson said.

Another OUR Deputy Director General Cheryl Lewis explained that, while the LNG market is not currently regulated, there has been draft legislation which the OUR has commented on for a few years now regarding the possible regulation of the LNG market itself, which is yet to come into fruition.

The matter of LNG had come up as the committee deliberated on the OUR’s proposal that there should be specific provisions in the Electricity Act for the reporting of transfer prices charged for transactions between the single-buyer business (JPS) to that office and for the conduct of audits by the office.

It explained that transfer prices refer to the accounting value assigned to the product or service in a transaction between divisions of a company or companies belonging to the same corporate group. The intent, it said, is to ensure that there is transparency in the business transactions of a licensee so as to ensure that there are no cross subsidies between regulated operations, and that the unregulated business is kept financially separate from the regulated.

Hylton had questioned whether LNG operations would factor into this OUR proposal but Lewis explained that when it comes to the LNG market, in terms of regulatory accounting, that would not be relevant as the LNG facilities are not owned by JPS, “so therefore a regulatory overlapping perspective…really doesn’t exist. The LNG is something that should be given a separate focus and is not exactly related to the issue of account separation”.

“It would not apply in the circumstances because what we are looking at is the accounts of JPS for its various activities regulated, as opposed to unregulated business. So, the LNG business is not owned by JPS so we would not be demanding accounts from them in terms of any business that they are involved in — at least we are currently unaware of them involved in any LNG business,” she said.

Hamilton further queried if the JPS was involved in LNG activities, “it would appear as though you would still not be interested in those operations because it is not regulated at this time”.

“We would only be interested in so far as ensuring that the accounts for the regulated business is not subsidising any unregulated business that JPS is undertaking. But, as we currently know it, we are not aware of them involving in any LNG business, so from that perspective it would not apply to them,” she said.

Lewis further noted that if, for some reason, JPS goes into that business, and it formed under the JPS umbrella or they have a subsidiary, the OUR would seek to ensure that that business is not impinging on the regulated business, “because the whole purpose of this provision is to ensure that costs are properly aligned and allocated and there isn’t any cross subsidies happening”.

New Fortress Energy is currently the only natural gas supplier to Jamaica. The Florida-based entity ships gas in liquid form (LNG) to its floating storage regasification unit (FSRU) just off the coast of St Catherine, where it is converted to gas again before it is fed into power plants to burn in the generation of electricity under a 20-year licence, since 2016.