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JPS CEO faces twin challenge: Energy market in transition and customers in revolt

Published:Friday | April 27, 2012 | 12:00 AM
Kelly A. Tomblin
Newly installed president and CEO of JPS, Kelly A. Tomblin, will have a lot to mull over in her bid to make the utility company more efficient and profitable. - Rudolph Brown/Photographer
Kelly A. Tomblin

Correction & Clarification

Communications Manager Winsome Callum was incorrectly quoted as saying, with respect to discussions on building a coal plant, that the company had an ethanol agreement with the Chinese and were about to start around 2000. What Ms Callum said was that the company had entered an agreement. We regret the error.


McPherse Thompson, Assistant Editor - Business

The Jamaica Public Service Company (JPS) is willing to consider coal as an alternative fuel source for electricity generation, but it first wants to execute plans to develop the LNG plant to which the Government finally gave the green light just over a week ago.

A University of the West Indies think tank has conducted research which shows that LNG was a less expensive option to oil, but a more expensive alternative to coal-generated energy, which they found was the most efficient source in powering a light bulb.

JPS chief executive officer Kelly Tomblin - a 25-year veteran of the utilities business in the United States and other markets and who took up the position at the light and power supplier three weeks ago - said the company and its shareholders were interested in investing in any long term solution for Jamaica, including coal.

However: "As an outsider, if I look to where we are, I would encourage us to execute on the plans that we've all agreed to as a first step," Tomblin said.

"We believe that long-term fuel diversity is a number one issue," Tomblin told the Financial Gleaner in an interview at her New Kingston offices last week. She noted that JPS would be interested in evaluating coal as an option in the second phase, "because I believe that even if we have gas ... as a fuel source now, that in the future looking at and evaluating our fuel source makes sense."

Government's decision

Winsome Callum, the JPS' communications manager, said coal has been on the table for more than 10 years as an option, but it was the Government's decision to go LNG at this time.

"We were on the verge of building a coal plant in 1999," she said. "We had an agreement with the Chinese and were about to start around 2000, and then the Government decided that we shouldn't go ahead. So you have to look at the context in which the LNG plant is being pursued," Callum said.

Last week, Tomblin and other representatives of the JPS met with officials from the Ministry of Finance, the Ministry of Science, Technology, Energy and Mining, among other government officials.

"What our conversation was about was how to bring this plant online quickly and efficiently, using the best technology," said Tomblin.

At the same time, JPS brushed aside suggestions of a conflict of interest that might arise from JPS buying capacity from itself and therefore having the ability to dictate price.

"Prices are not set by the JPS," said Callum, explaining that the plant would be owned and operated by an independent power provider, with the ownership split among the Government and shareholders Marubeni and Korea East West Power.

Consequently, "while we will buy from ourselves we won't be negotiating with ourselves," she said.

JPS is expected to own 20 per cent of the plant, giving the Jamaican Government about four per cent ownership by virtue of its one-fifth holding in JPS. The utility, which holds a monopoly on electricity distribution, will operate the plant under a 20-year licence.

The plant is expected to be built in time for commissioning in early 2015.

Bigger stake

The energy ministry is said to be negotiating for a bigger stake in the plant. It wants 20 per cent.

Tomblin said that at this point the cost parameters are not certain so it would be difficult to determine the estimated payback period on the US$614-million plant.

As to guarantees that JPS will start billing at savings of between 30 and 40 per cent once the LNG plant is commissioned, assuming that the Government meets its commitment to deliver the infrastructure and supplies of LNG, Tomblin said the estimate is based on the difference in fuel prices.

"Obviously, the final number will depend on a number of factors - financing costs, cost of the LNG facility, cost of the gas supply,"