EDITORIAL - What Paulwell must do

When Phillip Paulwell addresses Parliament today, his backbone will, hopefully, not require stiffening by constituents baying intimidatingly at legislators. Which is how some of his political colleagues interpreted events on Sunday when female constituents turned up at the fringes of a meeting of the National Executive Committee of the People's National Party in a supposedly spontaneous show of support for the beleaguered energy minister.

Today ought to be different; not one for political machinations. What we expect from Paulwell is a clear strategy for extricating Jamaica from the mess in which we now find ourselves over the developing of new, and cheaper, electricity-generating capacity.

If the Government has been sensible, the former ought to be easy. In which case, Mr Paulwell will announce that he was instructed by Prime Minister Portia Simpson Miller to rescind the licence he granted to Energy World International (EWI) for the development of a 381-megawatt power plant.

He will also disclose that the process will start anew, either by way of competitive bidding or the sole-sourcing method, with the project under the direct purview of the prime minister, but with oversight support from a public-private-sector enterprise team as proposed by the private-sector groups that met with Mrs Simpson Miller on Friday.

This approach has merit for three important reasons: to return credibility to the project; to rescue Jamaica's image as a place where government is transparent and rules are followed; and to provide the economy with the best opportunity to get the most competitive price for energy. And there is the fact that EWI has not only failed to meet the deadline for posting its performance bond, but has been far too evasive with information critical to the project.

Having joined the process after it started, EWI's participation in this venture, at the behest of the Cabinet, has been controversial from the start. The contractor general insists that procurement rules were breached. The Office of Utilities Regulation (OUR), which was in charge of the exercise, disagrees. Importantly, however, the Inter-American Development Bank (IDB), whose view will influence other financial agencies, says the management bid was counter to its own governance arrangements. So the IDB won't lend to this project.

IDB stance changed the circumstances

So far, we have cascaded downwards as preferred bidders have failed to meet the criteria for executing the project, but the IDB's stance has materially changed the circumstances, including the fact that any concession to flaws in the original bidding process cannot be cured by moving to the next bidder in line.

In any event, the next best bidder's current advertised price for a gas-fired plant at 16.7 cents per kilowatt hour (the OUR quotes their bid price at nearly 10 per cent higher) remains too expensive to significantly impact the cost of electricity. Moreover, that rate would not be applicable for at least two years - until natural gas comes on stream. In the meantime, their plant would burn heavy fuel oil at a cost of 21.5 cents per kWh, or two-thirds more expensively than EWI would generate electricity from the start, using natural gas.

Circumstances and competitive pressures could very well have changed the market dynamics, making it propitious to restart the bid. That is what we expect Mr Paulwell to say today. And that he won't be meddling in the process.

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