360MW project's bidding process was transparent

Below is commentary by the Office of Utilities Regulation (OUR).

Dr Densil Williams' intervention in The Sunday Gleaner of October 6, 2013 rightly underscores the vital importance of reducing Jamaica's energy cost in the shortest possible time. The OUR is at one with him on the imperative and seriousness of this pursuit.

Indeed, the OUR has been at pains to indicate that for every one US cent increase in the cost of electricity from a 360MW plant operating as baseload, the Jamaican consumer is required to fork out just under $3 billion annually.

This is precisely the reason the OUR has made as its chief focus in the electricity sector, regulatory initiatives aimed at driving down the cost of energy. In this regard, it has pursued a deliberate strategy aimed at facilitating multiple participants and offers with the expectation that this will ensure the best possible solution at the most attractive price.

It is, therefore, unfortunate that Dr Williams, in dealing with such an important matter, could not resist the temptation to simply echo unfounded, even if oft-repeated, claims; make speculative statements and unsubstantiated inferences; and resorting to a tried and failed recommendation.

The article claims that the process employed by the OUR in making a selection lacks transparency. Nothing could be further from the truth. The fact is that the OUR has, by numerous news releases, publication of paid advertorials, and appearances before the Jamaica Energy Council, clearly laid out both the details of its process and the considerations that have informed its decisions.

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Subject to limits of confidentiality related to proprietary information, the OUR has also made public the assessment and recommendations of international consultant Mott McDonald. In addition, the OUR provided both the Office of the Contractor General (OCG), with which it has a fundamental disagreement, and the National Contracts Commission (NCC) with regular updates and any other information they requested on the project.

Notably, the OUR did not undertake the assessment of the proposals in-house, but rather recruited the services of a reputed international consultancy firm to conduct the review of the bid. The suggestions, therefore, that the OUR made the selection without indicating that it obtained the recommendation of an expert third party is, to say the least, economical with the truth.

Perhaps had Dr Williams taken the time to acquaint himself with the facts, he might have also seen that the issue of financial ability to undertake the project was addressed by both the OUR and Mott McDonald upfront. To this end, the report indicated that none of the four entities which submitted bids demonstrated decisive capability to finance the projects they proposed. A deliberate decision was taken, however, to continue the process rather than starting over from scratch, as it was determined that there would be ample opportunity for a bidder to demonstrate unambiguous proof of its ability to finance the project prior to financial closure.

In short, if an entity is unable to finance its proposal, this will become evident very early in the process and we move on to the next in line. That is precisely what happened in the case of Azurest-Cambridge, and the OUR demonstrated its seriousness by refusing the request for an extension.

SHABBY CONSPIRACY THEORY

The insinuation that the OUR was so prescient as to name the Azurest-Cambridge consortium the preferred bidder so that there would be resort to EWI, the entity it was intended to make the award to in the first place, is a slur upon the good name of the OUR and its staff and is unworthy of Dr Williams. This is nothing more than a shabby conspiracy theory, and Dr Williams has no basis for such a claim.

Given the structure of the evaluation process, this would have required an elaborate scheme of deception on the part of the OUR, as well as the complicity of Mott McDonald, in what would essentially be a corrupt exercise. The OUR rejects this suggestion.

It is also asserted that the process is taking too long and that an apparent solution is for the political directorate to step in. Dr Williams might want to consider this. If this process successfully results in an award to build the required facility, this would represent a record in Jamaica and in many other countries in terms of the speed of a solicitation process.

Typically, this kind of selection takes from 180 to 360 days. By contrast, the screening process for the current selection started in March 2013 and was formalised at the end of May 2013 when the instructions for final proposal (IFFP) was issued, with a preferred bidder named in September 2013.

In this regard, the suggestion that this particular solicitation has been unduly long is just not supported by facts, experience, or industry norm.

As regards the suggestion that it is time for the political directorate to step in and take control of the process, it might be sufficient to point out that for more than a decade prior to the OUR's assumption of responsibility for generation procurement, the political directorate tried in vain to secure fuel for additional capacity. In this regard, Dr Williams' recommendation to revert to the political directorate is neither novel nor credible.

The OUR wishes to reiterates for those interested in the facts that:

1. The economic rankings were done in a standardised manner based on the impact of the proposed tariff schedule of each bidder on the system over the expected 20-year contract period. The result of that modelling is indicated in the inset table.

Rank BidderStandardisedFuel TypeBid Price

(US c/kWh)

1Azurest/Cambridge13.90Natural gas2EWI14.56Natural gas3Azurest/Cambridge16.35HFO4Energize Jamaica18.27Natural gas5Optimal18.30Natural gas6Energize Jamaica21.54HFO

Notably, the OUR calculations show that every one US cent reduction in the price of electricity from a 360MW baseload plant translates to just under J$3 billion in savings annually to consumers at the current exchange rate.

2. The formal process which began with the issuance of an IFFP document on May 27, 2013 allowed all the entities, including EWI, to compete on the same basis, subject to the same rules and assessed on uniform criterion.

3. That at every relevant point in this procurement process the OUR has had as its major focus the need to reduce the real cost of electricity to Jamaican consumers; in the fastest possible time via a credible process that could withstand scrutiny; and one which allows as much participation as possible.

The OUR reaffirms its adherence to the rule of law, and its commitment to diligently uphold the integrity and transparency of the procurement process, in the face of external pressures from stakeholders.

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