Sat | Feb 29, 2020

JPS submits Bogue plan to OUR for sign-off

Published:Friday | March 13, 2015 | 12:00 AM
File The JPS power station in Bogue, Montego Bay.

Ansord Hewitt, director of regulation, policy, monitoring and enforce-ment at the Office of the Utilities Regulation (OUR), said Tuesday that the regulator is currently reviewing a proposal from Jamaica Public Service (JPS) Company Limited on the planned conversion of its combined cycle plant at Bogue in Montego Bay from diesel to gas.

Neither JPS nor OUR would disclose details of the proposal, but the power utility is expected to argue that much more than the US$15 million to be collected from consumers over 12 months - previously approved by the regulator - will be needed to finance the Bogue project.

Two years ago, JPS had signed an agreement with a consortium led by Fueling Technology Inc to retrofit the Bogue plant for compressed natural gas. The closing of a deal with the Fueling Tech group, the utility said then, was dependent on the price at which it could deliver the gas. The Jamaican utility had the option to walk away from the agreement if the price of the gas to be delivered exceeded the originally proposed price by 10 per cent.

This week, JPS' head of corporate communications, Winsome Callum, told the Financial Gleaner that Fueling Tech was just one of several companies currently bidding to retrofit the plant.

JPS has previously telegraphed that the Bogue project may cost about US$80 million. Callum said Monday that the financing would be determined by the winning bid.

Asked whether the selected bidder would be putting equity into the project, and whether the same company would also develop the proposed 190MW plant at Old Harbour, Callum declined comment.

Later on Thursday, she said more information would be revealed today, Friday.

In its latest rate determination, the OUR made allowance for the US$15-million Bogue Plant Reconfiguration Fund (BPRF), which took effect January 8, 2015, the date of the determination notice.

The JPS is expected to collect equal monthly instalments of US$1.25 million, through the fuel rate applied to customers' bills.

JPS was required by the OUR to submit to the Office by February 28, 2015 a complete proposal for the implementation of the project, inclusive of a credible feasibility study, procurement strategy, project costs and a project implementation schedule.

The OUR said any portion of the BPRF remaining after the execution of the reconfiguration of the Bogue plant could be used to support capital projects aimed at improving the efficiency of other JPS-owned generating facilities.

However, from statements issued by the JPS after the determination notice, the US$15 million will leave a big gap in funding for the target project.

JPS senior vice-president for generation and project development, John Kistle, said in February that the conversion might be more than five times the OUR's estimate of US$15 million - closer to US$80 million.

The converted installation, he said, is likely to include new pipelines and storage facilities constructed by fuel suppliers, who will want to recover their costs.

The new infrastructure is also likely to require new terminal facilities for offtake and supply of gas.

JPS has previously described the project as involving the construction of a receiving and storage infrastructure that "provides sufficient diversity to accept different fuels in the short term (three to five years) and ultimately receive delivery from the Old Harbour terminal."

It remains unclear what elements are captured in JPS' current proposal to the OUR, including whether the developer of the infrastructure will also be the supplier of gas, or even what type of gas will be used.

JPS itself has formerly floated the idea of propane initially and a future migration to natural gas.

"They have submitted a plan, other elements of which I am not at liberty to discuss now," Hewitt said.

He said the OUR's focus is on the price at which the retrofitted plant will deliver electricity.

"We are concerned with the fuel cost and the conversion cost. As we have said in the determination, the aim is to reduce the fuel cost and to prevent volatility. The difference between LNG and HFO [heavy fuel oils] is that the price of HFO tends to go up very sharply," said Hewitt.

"We are concerned with efficiencies as well," he said.

The JPS plan for Bogue, as placed before the Energy Sector Enterprise Team last year, is to convert the 115MW gas turbine plant from automotive diesel oil initially to propane by the fourth quarter of this year. The conversion, it projected, will result in an approximate 40 per cent fuel price reduction.

The current plant in Montego Bay consists of three individual units: two combustion turbine generating units with a total capacity of 80MW and one 40MW steam generating unit. The two combustion turbines operate on diesel fuel, but are capable of converting to natural gas.

JPS said, in a February, update posted on its website, that an independent engineer has been retained for the project and that construction is expected to begin by the second quarter of 2015, and that the plant should begin operating on gas fuel by the first quarter of 2016.

"We would like to see the conversion done by the end of the year, so we have an incentive to get back to them very quickly," Hewitt told the Financial Gleaner.

Meanwhile, Callum said financing plans for the Old Harbour project should be wrapped up in six months' time.

The company proposes to replace the existing 292MW HFO power plants at Old Harbour and Hunts Bay with a 190MW gas turbine power plant by mid-2017.

Old Harbour, Callum said, will be funded by equity and debt.

"Details of the debt financing will be finalised over the next six months," she said.

JPS had previously disclosed that it is putting 30 per cent equity into the estimated $50-billion project, with the rest to be raised on the capital market.

Callum declined to discuss the names of the partners being considered for both projects, noting only that it was a competitive bidding process. She also did not say whether a supplier for LNG had been contracted.

JPS is the sole distributor of electricity in Jamaica, currently serving some 600,000 customers.