EDITORIAL - If we are to break the JPS monopoly

We are, by instinct, anti-monopoly. That instinct is bolstered by the mostly good returns that competition delivers to markets.

Nonetheless, this newspaper believes that there is value in the suggestion of Mr Darron Thomas, who teaches marketing at the University of Technology.

"It is not, at this stage," he recently told fellow panellists at a forum hosted by The Gleaner, "about monopoly or no monopoly."

"It is about analysing the issues to see what the optimal choices are, (and) which set of options are feasible," Mr Thomas said. "We cannot be emotional about these things."

Mr Thomas' comment was in reference to the deepening debate over whether the Jamaican government should break the monopoly enjoyed by the Jamaica Public Service Company (JPS) for the generation and distribution of electricity.

Unfortunately, in our view, this discussion is in danger of descending into a shrill demonisation of the light and power company, rather than a serious, analytical discourse on what is the country's most critical economic question: how to deliver energy at a price to improve the competitiveness of the Jamaican economy

At around US$0.40 per kilowatt-hour, electricity in Jamaica is among the highest in the region, eating up a substantial and increasing portion of household incomes.

Energy is also a large, and mostly uncompetitive part of the input of Jamaican manufacturers, accounting, in some cases, for over 20 per cent of price of products, or more than double that of many of their regional counterparts.

It is perhaps true that JPS abuses its monopoly privilege, helped, as some argue, by less than effective regulatory oversight. In that regard, the economy might extract value from a break-up of its monopoly if, as was the case with telecommunications a dozen years ago, competition enhances efficiency and leads to price reductions.

But arriving at a decision requires rigorous analyses, taking into account all the factors that contribute to Jamaica's high energy cost.

Expensive oil

Not least of these is the expensive oil used to generate upwards of 90 per cent of the energy we consume. It is urgent, therefore, that policymakers and other stakeholders re-engage on the matter to quickly arrive at consensus on a mix of fuels that will reduce the cost of power and drive the competitiveness in the economy. That mix, as this newspaper has argued before, need not be limited to liquefied natural gas (LNG), into which the administration had locked itself. Perversely, the Government's clunky handling of that project provides an opportunity for a reassessment of options and how these may be structured.

But a declaration about fuels will not of itself lead to lower energy costs. That has to be followed by investment in new, efficient plants, like the 480 megawatts of generating capacity for which the Government invited tender earlier this year. The first 360 megawatts, with projected delivery by 2014, will, without any of the associated infrastructure such as the LNG terminal, require capital outlay of around US$500 million.

The bottom line is that the big efficiency gains, whether in the use of cheaper fuels, burning that fuel more efficiently, and reducing losses during the transmission of electricity will require significant investment.

In that context, a discussion about energy can't be driven by emotion. It has to be fact-based, serious and rigorous.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.