Editorial | Many JPS questions

The Government’s timing, and public posture, in announcing that it won’t continue Jamaica Public Service’s (JPS) existing electricity generating and distribution licence when it expires in two years poses significant questions not only about the administration’s negotiating strategy, but of the fate of investment projects already announced by the light and power company.

The most significant of the capital projects is the 171.5 megawatts of solar generating and storage capacity, for which JPS exercised its first right of refusal, to replace aged heavy fuel oil generators, at Hunts Bay, in Kingston. Earlier this year JPS said that it would spend US$300 million on this scheme.

But whatever may be the answer to these questions, it is urgent that the administration, if it hasn’t done so as yet, establish a high-level technical team to map the medium- to long-term contours of Jamaica’s electricity sector, including power demands and least-cost financing for its infrastructure. They must engage in robust, though time-bound discussion and debate with key stakeholders and the public.

It was hardly a surprise that the Government decided against renewing, at least in its current form, JPS’s existing operating licence, under which it is not only the largest generator of electricity, but the monopoly distributor. JPS is majority owned – 40 per cent each – by Marubeni of Japan and the South Korean company, East-West Power (EWP). The Jamaican Government owns little less than 20 per cent and the remainder by the public.

COMPLAINED

Indeed, Jamaican consumers have long complained about the price of electricity, for which they paid an average US$0.36 per kWh in 2024. And after Hurricane Beryl side-swiped the island’s southern coast a year ago, Daryl Vaz, the energy minister, regularly publicly harangued JPS about the apparent fragility of its distribution infrastructure and how slow the company was at recovery.

In announcing the Government’s decision last week, Mr Vaz disclosed that the administration had acted under Condition 27 of the JPS’s operating licence, which, on its face, obligates the Government to acquire the business as an ongoing enterprise at a “fair market value ... determined by a mutually agreed team of independent valuation experts”. In the absence of agreement on the price, either party can call for arbitration.

At the end of last year, JPS, on its books, had total assets (including shareholders of US$634.13 million in holdings) of US$1.734 billion.

But Mr Vaz has made it clear that the Government has no intention of renationalising JPS, and seems to suggest that the administration, even as it is prepared to find new owners, is open to negotiations with the Marubeni-EWP consortium.

In those circumstances, and given the absence of options in Condition 27 (which spells out the terms for acquisition), this newspaper is perplexed that there appears not to have been prior, in-depth negotiations between the Government and JPS well ahead of the start of the two years of notice the administration has to give of its plan to acquire the company, if only for a short period. For unless the existing owners of JPS were recalcitrant and inflexible, it seems possible that an early start to negotiations might have settled the outlines of a new licensing regime, in keeping with what the administration intends to achieve. Moreover, Condition 30 allows for the modification of the licence “at any time during the term by agreement between the licensee and the minister”.

URGENCY

Indeed, it was in this context that The Gleaner insisted on urgency in completing a new Electricity Act and an upgraded Integrated Resource Plan, so as to provide a new framework for the power sector.

The Gleaner’s concern, if indeed there has been no such substantive negotiations, is that Jamaica may have ceded tactical advantage to JPS, or to any investor who may now bid for the company. Over the next two years, the Marubeni-EWP partnership will likely be extremely reticent with respect to the amounts, and for what they commit capital to JPS.

Additionally, any environment of uncertainty will possibly strengthen the negotiation hand of potential new investors.

Of course, if the Government felt that the JPS wasn’t being operated in Jamaica’s interest it could, as per Condition 29, revoke its licence. Or as per Condition 31 step-in and run operate the business. But that, too, could become a tangled, messy affair.

For the public, there are many unknowns on this matter. What is clear, however, is that the specialist group proposed by this newspaper must get to work doing, among other things:

. Working with development finance institutions for green concessional financing for the energy sector;

. Ensuring the completion of a serious overhaul of the Electricity Act;

. Fashioning a mechanism to address energy poverty and penalising electricity theft;

. A reviewing and refining of the current framework for wheeling.