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OUR role reduced, but still kingpin of renewables

Published:Friday | October 24, 2014 | 12:00 AM
Ansord Hewitt, director of regulations, policy, monitoring and enforcement, Office of Utilities Regulation. Ian Allen/Staff Photographer

Avia Collinder, Business Reporter

Jamaica's decision to appoint an energy czar has led to changes in the job functions of the Office of Utilities Regulation (OUR), a portion of whose responsibilities have fallen to the Electricity Sector Enterprise Team (ESET).

ESET was created by the Simpson Miller administration earlier this year, with Dr Vincent Lawrence, a known dealmaker with ties to the administration, as head of the team to deliver results on previously failed attempts at the reconfiguration of the electricity grid.

OUR says its role remains largely intact, except for negotiating power supply deals.

"The only role that has changed for the OUR is that it is no longer responsible for procurement, so, no, we will not negotiate the PPA [power purchase agreement] but we will need to approve the rates," said Ansord Hewitt, OUR director of regulation, policy, monitoring and enforcement.

"Enforcement powers remain those in the OUR Act: rate setting, licence enforcement, quality of service standards, etc," Hewitt told the Financial Gleaner.

Still, he confirmed that OUR does not have a representative on ESET and is therefore left out of the decision-making process, but says there is "continuous consultation" between Lawrence's team and the utilities watchdog as well as energy interests.

No changes for renewables

As for renewable-energy projects, however, it appears nothing has changed. The OUR will still recommend licences for granting by the energy minister and monitor compliance with the terms of their licences, said Hewitt.

ESET has laid out a number of energy projects proposed by different companies that, if they pan out, will develop new and convert existing capacity to cheaper fuel sources by 2018.

The individual projects under consideration would, based on information released by ESET, add just under 460MW of 'new' capacity fired separately by liquefied natural gas, coal or natural gas liguids, and inclusive of renewables. But it would also retire 249MW of oil-fired steam capacity. Additionally, more than 300MW could potentially be converted from diesel to gas.

The new capacity includes the energy plans of two bauxite companies.

Hewitt, while noting that it was still unclear how definitive each proposal was, said the OUR was wedded to its role of ensuring that power providers toe the line in relation to pricing agreements, once deals have been struck with the Government.

"The OUR's role in implemen-tation and commer-cialisation is essentially in respect of ensuring that there is adherence to the power purchase agreements and licence conditions. In this regard, we would be monitoring such things as schedules, compliance with milestones, prices, etc, throughout the life of the agreement," he said.

With Jamaica having abandoned the plan to build a 381MW facility fired by LNG, ESET is now

weighing proposals for the conversion of JPS' 120MW Bogue plant from diesel to propane initially by 2015; addition of 190 MW of gas-fired generating capacity at Old Harbour/Hunts Bay/Caymanas by 2017 to replace old steam capacity; the possible conversion of the Jamaica Energy Partners' 66MW west Kingston plant and 124MW diesel-fired barges to burn gas; addition of a 140MW ethane plant at Alpart; and a coal or gas-fired plant at Jamalco.

OUR made at least three attempts to get the large project off the ground, with 360MW proposals from Jamaica Public Service Company and Azurest-Cambridge, and latterly the 381MW project by Energy World International.

Hewitt said the change of strategy to multiple projects was "simply a function of the kind of options that ESET sees as available to it" but was not outside the boundaries that the OUR itself would have considered.

"In this regard, it is important to note that the OUR did not have a policy of insisting that all the needed capacity should be done in one block or provided by one entity, for that matter. The selection of 381MW was therefore simply a function of what was on offer at the time," said the policy director.

"It is also helpful to keep in mind that almost two years on from the last process, and four years since the last competitive tender for capacity, there would have been significant changes in the electricity environment," he said.

With specific reference to projects intended for execution by December 2015, Hewitt said the OUR's major concern would be the price implications.

The 381MW project by Energy World was predicated on delivering generating capacity to the national grid at 12.88 US cents. The prices built into the current project proposals have not been disclosed, outside of the suppliers of renewables who have quoted prices of 13.5 US cents for wind and 18.8 cents for solar.

"Procurement, as we understand it, is no longer within our remit, but the OUR will need to approve prices since these will be passed through to consumers," said the policy director.

For projects with timelines extending to 2018, once again the OUR's concern would be the price implications, he said.

"The OUR has a mandate to ensure the best price. These prices go directly to the ultimate consumer. It cannot therefore simply be assumed that JPS and the IPP [independent power provider] will arrive at the best rate for the consumers."