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EDITORIAL - Time for clarity from Minister Paulwell

Published:Monday | April 9, 2012 | 12:00 AM

PHILLIP PAULWELL, the minister with responsibility for energy, has tapped into Jamaica's deep concern for the high price of electricity and has pledged to do something about it. Indeed, when the price was cheaper than it now is, he promised to lower the price of a kilowatt hour of electricity by as much as 60 per cent over three years.

This newspaper supports Minister Paulwell's intent. Indeed ,the proposed cuts need, over time, to be deep if the Jamaican economy is to have a chance at competing with its regional neighbours. However, we are yet to discern a robustly analysed and comprehensively articulated policy or programme for achieving his goals.

For example, Mr Paulwell proposes competition in the transmission and distribution of power, or the breaking of JPS' monopoly in these areas, as his main plank for cheaper electricity. He has broadly outlined how he intends to go about this.

What the minister has, however, not yet addressed publicly, or with any clarity, are the specifics and the options for handling any unintended consequences of throwing the market open.

Jamaica is a small economy with few large consumers of electricity that would be the obvious prime, and lucrative targets, of power generators with freedom to roam the grid.

Tens of thousands of small consumers are more difficult and expensive to service than a few large ones and of lesser, if not little economic value to power generators. In such a circumstance, one potential consequence of liberalisation is that, in the absence of big consumers being there to help subsidise them, small consumers have to be paying real market price for electricity.

Indeed, such a development could be possible in the case of 'wheeling', the arrangement by which a company generates its own electricity to power its operation in one place and pay a fee for the use of the grid to transport excess electricity to another of its facilities elsewhere.

That we raise these issues is not to suggest a bias against the liberalisation of the electricity market. Neither is it to question the potential efficacy of Mr Paulwell's proposal.

build on facts

Rather, it is to ensure that whatever we do going forward is based not on perceptions or hunches, but facts, robustly tested by analysts, such as the Energy Think Tank that is beginning to emerge at the University of the West Indies, Mona.

It is in this same context that we ask for greater transparency on the status of the Government's liquefied natural gas (LNG) project, under which JPS was the sole bidder, and winner, of the tender to build and operate a 360-megawatt, gas-fired generating plant at Old Harbour. This plant will replace one that should have been mothballed a long time ago.

However, after the debacle of its initial effort on this project, the Government is yet to complete the rebidding for a LNG storage or regasification facility. Neither does it have, JPS apart, committed offtakers for natural gas. Nor are there agreements for the supply of LNG.

Should these not happen, the question is whether JPS would move ahead with a US$360- million plant that would now be fired by expensive oil. How would that investment be amortised? Would electricity consumers bear the burden in higher rates?

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