As OUR quibbles, power monster nibbles

Garnett Roper, Guest Columnist

I am indeed grateful to the Office of Utilities Regulation (OUR) for taking the trouble to respond to the suggestion made by my article in The Sunday Gleaner ('Jamaica's energy conundrum', November 4, 2012) that the OUR has been less than diligent in approving that the Jamaica Public Service Company (JPS) build a 360MW plant for electricity generation. I note, by contrast, that the JPS itself has not found it necessary to respond.

However, the OUR, in its response, has all but confirmed the view that it is bedevilled by lack of experience in handling complex energy matters: Note below how the article titled 'OUR role in power play' (Sunday Gleaner, November 18, 2012) contradicts itself, majors on the minors and leaves the main points of my article without a fulsome response.

The quotation below shows how the OUR is seeking to hide behind words and make a distinction without a difference: "Rev Roper's reference to the OUR issuing a licence to the Jamaica Public Service Company (JPS) for the construction of a new plant is incorrect, as the regulator does not issue licences, but instead makes recommendations to the minister for the issuance of a licence. In fact, to date, no such recommendation has been made. The OUR does, however, have responsibility for electricity-generation procurement, and it is in exercise of that responsibility that the approval for the 360MW plant was given."

NO DISTINCTION

The majority of us cannot identify the distinction between the OUR giving approval and making a recommendation for a licence to be granted. Furthermore, though the OUR states that "in fact, no such recommendation [for granting a licence to JPS] has been made", the gist of its article in The Sunday Gleaner was to offer every justification for the granting of the licence or approval that has been given. The OUR stated that it has not as yet given a recommendation to issue a licence for the 360MW plant. Why, then, has a licence been granted without the OUR not giving a recommendation? Given the importance of this matter, and given all the information available today, what would the OUR's recommendation be now to ensure the best outcome for Jamaica's energy situation?

More substantially, however, the OUR has failed to respond to the two most significant observations contained in my original article, that the approved cost (US$600 million for a 360MW plant vs the alternative US$1M per MW) and the single location of the plant (Old Harbour) were both inappropriate. To the former, the OUR states:

"We are unable to comment on Rev Roper's assertion as to the availability of cheaper options, as for whatever reasons they chose not to offer bids. The OUR's consideration was, therefore, limited to what was on the table."

With this statement, the OUR is admitting it is not up to the task of regulating the energy sector. Allow me to illustrate what I mean by referring to the contract to build the North Coast Highway, the phase from Ocho Rios to Port Antonio. When the bids were first received from the original tender process, Bouygues' was the only bids received and its estimates were 50 per cent higher than the engineer estimates of the cost to complete the highway. The European Union, financiers of the project, rejected the sole bids, and new bids had to be received and new awards made. In the instant case, the OUR simply did not do the cross-referencing with international standards, as it said it accepted the only bid which it prequalified and which was on the table. As the young servant girl said to Peter in the account of the crucifixion, "Your speech betrays you - you are a Galilean."

Reopen JPS talks

The manufacturer of the competing technology, Wartsila, published an article that appeared in The Gleaner titled 'Is JPS telling the truth on choice of technology?' on May 13, 2012 (jamaica-gleaner.com/gleaner/20120513/focus/focus5.html), in which it stated that the capital cost of the competing reciprocating technology would be $348m! The article also corrected important technical information that was assumed by the OUR in its analysis in comparing the two technologies. This is grounds enough for Energy Minister Phillip Paulwell to reopen negotiations with JPS for a new basis on which to proceed; the prices cannot hold.

The other substantive point which was not adequately responded to by the OUR relates to the location of the power plant in Old Harbour. To which the OUR explains: "As regards location in one geographical place, it is important to observe that this must be balanced against the consideration that the transmission infrastructure to evacuate the power from the current location in Old Harbour is already in place and needs only minor modifications to accommodate the new plants."

JAMAICA VULNERABLE

Common sense suggests that the power supply for Jamaica would be particularly vulnerable if 360MW of a regular demand of 450MW is located in even three plants located in a single place - Old Harbour. It would be more advantageous if the plants were distributed in more than one place.

Second, it is also to be borne in mind that the Corporate Area is the place of highest demand for electrical power. Line losses increase the further the distance to be travelled in order to distribute electrical power to the end-user. It is more advantageous to the end-user that a power plant of, say, 120MW-140MW be proximate to the Corporate Area.

Third, the OUR, in its better moments, would have to concede that substantial upgrade of the transmission lines between Old Harbour and Kingston would be necessary to transmit 360MW of power from that location.

The response of the OUR was poorest on the question of technical losses. There it claimed inaccuracy on my part and suggested that the losses which amount to 24 per cent are capped by tariff at 17.5 per cent. This is where the OUR has been most economical with the truth, the whole truth and nothing but the truth.

OUR MUST COME CLEAN

The OUR failed to disclose that there are other factors in the tariff that allow the JPS to pass on more losses to the consumer, such as the heat-rate bonus, the recovery of the letter of credit to the private power providers, and costs associated with JPS combating theft. The OUR must come clean and show exactly, in dollar terms, what percentage of the losses JPS is absorbing and what is being passed on to the consumer. The OUR must also disclose if it has performed an in-depth technical analysis to determine the proportion of the 22-24 per cent of losses that are attributable to theft versus technical and line losses in JPS's infrastructue.

The OUR does not help anyone by saying that the JPS proposal calls for a 24-month construction period for the 360MW plant, without also informing the public that it has no idea when construction will start, or when the plant will be commissioned. All the public wants to hear is exactly when it will start benefiting from this plant, and by how much; no other half-truths matter.

The truth is that JPS will not start construction of this plant until it secures the liquefied natural gas (LNG). What is the status of the LNG procurement? Could the public begin to benefit earlier using the competing reciprating technology which uses three different fuels, ADO, the cheaper HFO and LNG. Is this not a better technology to attain real fuel diversification?

The OUR is the body that the consuming public relies on to keep the exclusive power provider honest, and which should be competent and vigilant in regulating the JPS. The public has been deceived for too long, misled with all the fancy jargon, and it is time the whole truth be put on the table. The best energy strategy must be assembled based on all current information so Jamaica can begin to benefit from the most optimal diversification of technology in the shortest time possible.

The Rev Garnett Roper is president of the Jamaica Theological Seminary. Email feedback to columns@gleanerjm.com and garnettroper@hotmail.com.