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Monopoly is best

Published:Wednesday | August 15, 2012 | 12:00 AM
Kelly Tomblin: Small markets, breaking it up usually adds to cost.
Carlton Davis: The biggest priority is to get cheaper fuel in this country. - Photos by Ian Allen/Photographer
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Daraine Luton, Senior Staff Reporter

Davis says properly regulated sole energy provider the ideal option for Jamaica

DR CARLTON Davis, a special adviser to Prime Minister Portia Simpson Miller, yesterday said the breaking up of the Jamaica Public Service's (JPS) monopoly on the transmission and distribution of electricity was not a position of the Government.

Davis, who was yesterday a guest at a Gleaner Editors' Forum in his capacity as head of the liquefied natural gas (LNG) steering committee, said "people must listen to what the whole government is saying" in order to be informed about state policies.

He disclosed that he has been asked to sit with a subcommittee of Cabinet - comprising Transport and Works Minister Dr Omar Davies, Finance Minister Dr Peter Phillips, and Energy Minister Phillip Paulwell - which will discuss issues relating to LNG and Jamaica's energy policy.

Contrary to the desire of Paulwell to break the back of the JPS monopoly on the transmission and distribution of electricity, Davis said a "properly regulated monopoly" was perhaps the best option for the country.

SMALL MARKET

"I do not myself believe the market is sufficiently large," said Davis.

Noting that a huge chunk of the market is self-generated, he said that the alumina sector uses more barrels of oil than the entire electricity-generating sector of Jamaica.

Earlier, Kelly Tomblin, president and CEO of the JPS, said based on her experience, it would not be sensible to break up a transmission and distribution business in a small market like Jamaica's.

"Small markets, breaking it up usually adds to cost," the JPS head said.

Tomblin noted that the generation side of the electricity business, which represents 80 per cent of electricity business, was already liberalised.

At the same time, Davis said Jamaica's priority should not be to seek to break up the JPS monopoly at this stage.

"The biggest priority is to get cheaper fuel in this country. I believe that when you analyse any objective data, the thing comes down to the price you will be paying for the fuel, and the efficiency with which we convert that fuel to electrical energy," Davis said.

He added: "To me, overcoming those problems exceeds all the other things about transmission and distribution. I am not persuaded as to the gains you would make in terms of breaking up transmission and distribution."

ONE GRID, MULTIPLE PLAYERS

Dr Maurice McNaughton, from the University of the West Indies, Mona's energy think tank, said liberalising does not necessarily mean having several parties operating various grids.

"I don't know that when we think about having multiple players it leads to this single scenario where you have a broken-up grid and different people operating pieces of the grid. I think what it means is access to the grid where you could have multiple players where there is a single operator of the grid," he said.

McNaughton said the scenario would allow for power wheeling and interconnection, and warned that the correct structure must be in place to ensure its success.

In its 2011 election manifesto, the People's National Party (PNP), then in opposition, said a PNP-led administration would give effect to the policy to liberalise the energy sector.

DIFFERENT INTERPRETATIONS

Yesterday, Davis said there appears to be different interpretations about what is meant by unbundling.

"I am of the view, in this whole energy thing, to get my priorities right. My highest priority is a fuel that is reliable over the long term and is, in the long term, likely to be less expensive than we are with oil," Davis said.

He also argued that the second major priority should be to replace outdated equipment, especially in the bauxite sector.

The Government is hoping that the introduction of LNG will reduce Jamaica's energy costs by 40 per cent.

daraine.luton@gleanerjm.com