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OUR action disappoints JPS

Wednesday, February 06, 2013    

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JAMAICA Public Service (JPS) last night expressed disappointment at the Office of Utilities Regulation (OUR) decision to cancel the 360 megawatt request for proposal (RFP) process, which would have facilitated the construction of a power plant to use liquefied natural gas (LNG) as its main fuel source.

"It is disappointing, as the new power plant would have contributed to a significant reduction in electricity rates. The termination of the process means that our customers will have to wait longer to see a real reduction in electricity charges," said JPS President and CEO Kelly Tomblin.

"We do expect the project to go forward, even outside of the original RFP process, as Jamaica is depending on this to spur economic growth," Tomblin said in a news release. "We continue to have discussions with the energy minister, and we look forward to receiving feedback from the OUR regarding our latest proposal by this Friday, as they've promised."

Yesterday, the OUR said in a news release that the JPS was informed of the decision to terminate the process after it missed another deadline on Friday and had requested a 30-day extension.

"The advisory came after JPS and the project company, South Jamaica Power Company Limited, missed another deadline which was granted to facilitate the provision of project agreements, identify the supplier of natural gas for the project and provide a renewed bid security," the OUR said.

But last night, Tomblin explained that the project scope changed significantly since 2011 when JPS was granted approval to proceed with construction of the plant.

"JPS' role initially was simply to construct the plant, but late last year the company was asked to take on the additional responsibility of identifying a supplier and managing the process of procuring the LNG," she said, adding that JPS has not participated in fuel procurement in the past.

Tomblin said that, despite her company's best efforts, the market is not supporting earlier estimates of LNG prices as low as $8.50 mmbtu. "We have received indicative prices of upwards of $12.50 mmbtu for LNG and the related infrastructure, which we estimate would result in a reduction of approximately 20 per cent in electricity costs," she explained.

"Given the uncertainty of the gas supply, and the project in general, JPS was not in a position to get further credit support to allow us to provide the required bid bond of US$6 million," she said. "Also, the gas suppliers were requesting credit support of more than US$100m to supply the gas. The changes in project scope and credit requirement necessitated further discussions with our creditors and, as a result, we needed more time. Despite this setback, we remain committed to doing all we can to bring fuel diversity and lower prices to Jamaica."

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