Has the OUR lost its marbles?

Garnett Roper GUEST COLUMNIST

In 2005, then Prime Minister P.J. Patterson convened a meeting at Braco Hotel in Trelawny in order to take steps to replace the ageing and decrepit power plants on which the Jamaica Public Service Company (JPS) relied to supply electricity to Jamaica. Eight years later, the Office of Utilities Regulation (OUR) has announced a successful bid to do just that.

The OUR announced Azurest-Cambridge as the first rank to build a 360MW plant at a cost of US$690m. According to the OUR, the preferred bidder will deliver electricity to the national grid at a cost of US$13.89 cents per kilowatt-hour and would be an LNG facility.

However, before assessing the believability of the outcome with which the OUR has left Jamaica, allow me to discuss two policy points:

The first is the idea of the shift of the responsibility for this matter, of ensuring that Jamaica has a reliable supply of electricity, from the Cabinet of Jamaica to some unelected body.

I believe that the manner in which the just-concluded bidding process has been handled by the OUR raises important questions about whether the national interest is secure in the hands of bodies such as its.

CABINET ON PERIPHERY

To put the matter into perspective, a project of the size of US$690m is the largest single investment project in the Caribbean, if not also in Central America. There is no single project in Jamaica's history that had a higher price tag. Yet legal process for handling a project of this scope and significance leaves no role for the Cabinet, the highest executive body of the country, except for the courtesies extended to it by the officers of the OUR.

I suggest that not only does this approach marginalise the people's representatives, but it does the same to the people of Jamaica who elected them. It is, therefore, in dereliction of its duty to the people and the Parliament to exclude the Cabinet from this process.

Going forward, the minimum that ought to be entertained in relation to matters of this nature is for the law to be amended and a cap placed on the size of the projects over which the OUR or any such body can have final jurisdiction.

The second issue is the absence of a provision for the actions, processes and decisions of the OUR to be reviewed. Throughout the 2013 bidding process, the actions of the OUR have seemed capricious, arbitrary and unaccountable. The OUR initiated a process for unsolicited bids in February 2013. Those bids were ranked and a determination made.

Having received the results of that process, the OUR abandoned them and announced a new process without reference to the first. Both the timelines and the requirements set by the OUR at the start of the second bidding process have been altered and adjusted arbitrarily and in a manner that did not include or ensure the agreement by all parties involved in the bid process.

It is one thing to have the OUR as the ultimate arbiter of these matters that so profoundly determine Jamaica's future; it is another matter to allow the OUR the option of the arbitrary and capricious use of its powers.

In what way is it in the national interest for the OUR to have made a determination to remove the requirement for bidders to post a one per cent bid bond on July 22 after the deadline for such changes had passed and, further, to extend the deadline? No explanation that is worthwhile has been offered. The OUR has the power to do so and it has done so. The OUR is not accountable to the Parliament, the Cabinet, the contractor general; it is accountable only to itself.

SCRUTINISING AZUREST

We come to the fundamental issue, therefore, and that is award and decision made by the OUR. The OUR has declared that Azurest-Cambridge has emerged as the preferred bid.

It may be argued that despite the foregoing, if a credible award had been made by the OUR, we could conclude that all is fair in love and war, the proof of the pudding is in its eating, and that all's well that ends well.

The choice made by the OUR is not credible, even if one takes into account the scores awarded by the OUR itself in assessing the bid. The OUR scores indicate that it does not believe that Azurest-Cambridge is capable of raising the equity and debt to finance this project. (US$690m is a lot of money.)

It is preposterous to think that in a cash-starved economy, a company of recent vintage like Azurest-Cambridge will be able to find equity of US$50m from cash just lying around in the Jamaican economy. Azurest has said that it intends to raise the money for the project locally.

A source tells me the OUR itself has given Azurest-Cambridge a score of less than three out of a possible 10 in assessing its potential to raise equity. It does not think it has a 10 per cent chance of raising the money, yet the OUR still regards Azurest-Cambridge as the best option, and in doing so rejected a Fortune 500 company that supported one of the other bids.

It gets worse. If one uses the record of Azurest-Cambridge, it also does not suggest that the company is likely to be able to implement this US$690m project. Cambridge, as in Azurest-Cambridge, won a bid to build a US$60m waste-to-energy plant in 2009. Nothing has been done since getting that licence to build. If it did nothing with a US$60m energy