Tomblin: LNG plant unaffected by JPS monopoly ruling

Steven Jackson, Business Writer

Kelly Tomblin, president of Jamaica Public Service Company (JPS), said that its shareholders would push ahead with the investment in the 360 megawatt LNG plant regardless of an initial Supreme Court ruling invalidating its monopoly status.

The project investment, to cost about US$614 million, affects the generation of electricity while the monopoly affects a separate side of the business - transmission and distribution, she argued.

"It should be unrelated. The only caveat is our shareholders," said Tomblin on Tuesday following the company's annual general meeting at its New Kingston head office regarding how shareholders would take to a possible change in the rules.

The Office of Utilities Regulation (OUR) offered a terse statement on the implications of the court ruling on Tuesday.

"The regulator will offer no comments on these matters," the OUR said via email to Wednesday Business.

JPS is owned 40 per cent by Marubeni Corporation, 40 per cent by Korea East-West Power (EWP) and 19.9 per cent by the Government of Jamaica. The other 0.1 per cent is held by individuals.

The 360 MW plant set to begin construction this year will become the heart of JPS power grid once completed in 2016. The plant, for which its partners are currently seeking external debt financing, will include LNG and diesel as back up.

The court ruling released Monday invalidated the 'exclusivity' of the JPS licence to distribute electricity, but did not strike down the licence itself, saying it was within the portfolio Cabinet minister's power to issue a licence to a single party.

JPS' current contract for electricity distribution and transmission runs to 2027.

Tomblin said the LNG plant is a separate operation from JPS, but has common ownership.

"We answered a request for proposal that was made by the state agency OUR and we participated in a competitive process to build the plant. The shareholders who are subject today (to the court ruling) are the same shareholders who are participating in the 360 MW but really the two things other than that are unrelated," she said.

JPS expects its 360 MW project to deliver savings of 30-40 per cent on electricity bills, but has warned that the savings are dependent on the Jamaica government following through on its plans to deliver the infrastructure and supplies of LNG. Otherwise, it would use the more expensive diesel as fuel source.

Hypothetical question

In May, Tomblin reasoned that if the Jamaican government wanted to break the monopoly on electricity distribution, the best way to do it is to buy out the majority owners of JPS. Yesterday, she said that talks of compensation were too early, then contextualised her earlier comments in May as a response to a hypothetical question from the audience at a Jamaica Chamber of Commerce meeting.

"We haven't reached that point yet," she said Tuesday on compensation. "It is an option, but that is not the conversation we are having now. JPS applauds the improvement of the energy landscape from that end, we want to be a part of the way forward. What we are trying to do legally right now is to protect the contract and property rights of the shareholders who made a deal that said they got an exclusive licence."

On Monday, Tomblin presented several recommendations to the OUR to aid in liberalising the market, which included an economic development rate, wholesale rate, wheeling and prepaid metres.

She said her team is examining the full implications of the ruling.

"We are pouring over the case and looking at the ruling. The ruling says that the all-island licence is valid but it also says that the exclusivity is not valid. We are not sure what that means. For us we are trying to decipher what that means from a practical standpoint," she said.

JPS will appeal Monday's Supreme Court decision that its exclusive licence to transmit and distribute electricity is invalid.

Justice Bryan Sykes ruled that the energy minister did not have the power to grant the licence to JPS on terms which prevent consideration from other applicants. Sykes, however, ruled that the company's all-island licence was valid.

The licence was renewed last year amid a change in the ownership structure that saw EWP gaining shareholding in the company. The Government utilised that opportunity to include clauses that would allow for wheeling and other concepts fostering competition.

The utility is one of the largest companies in Jamaica, with total assets valuing US$1.05 billion.

steven.jackson@gleanerjm.com