Minister Clive Mullings retrogade step on Energy Sector Liberalization - JPS Co's Monopoly An Inconvenient Truth

Age cannot wither her, nor custom stale

Her infinite variety: other women cloy

That appetites they feed; but she makes hungry

Where most she satisfies

Shakespeare, Anthony and Cleopatra, II, 2

Energy Minister Clive Mullings has done something that looks strange not only to political pundits’ pre-2012AD General Elections, but also to Engineering folk as well. This as the Ministry of Energy and Mining, of which he is the Minister, has given tacit rubberstamp approval to Marubeni Corporation to transfer its shares to Korean-based EWP (East-West Power Company Limited) as stated in the article “Korean company will improve operations at JPS — Mullings”, published Wednesday, July 20, 2011 BY ALICIA DUNKLEY Observer senior reporter, The Jamaica Observer.

Even stranger, is that the OUR (Office of Utilities Regulation) has now effectively advised that breaking up the JPS Co (Jamaica Public Service Company’s) monopoly on Energy Distribution will most likely result in power increases as stated in the article “Energy Flip-Flop - Government Backtracks On JPS-Monopoly Policy”, published Wednesday July 20, 2011, Daraine Luton, Senior Staff Reporter, The Jamaica Gleaner. Effectively, the JLP (Jamaica Labour Party) is taking an about face on what should be a bipartisan issue that has long term implications for Jamaica’s competitiveness as a manufacturing force in the Caribbean.

This as expressed in the shocking words of Energy Minister Clive Mullings, quote: “Bearing in mind the size of Jamaica, while no RFP (request for proposal) has gone out, studies and enquiries have shown that there won't be takers to go into transmission and distribution because you are not guaranteed any rate of return on either thing - either generation or transmission and distribution”.

His words come at the advisement of Washington DC-based Energy consultant Castalia, who said of the Liberalization of the distribution Network:

1. Increase in rates for residential and small commercial customers
2. No reduction in costs to Small and Medium Enterprises and Industry customers

A complete reversal from the words spoken by Former Minister of Energy and Mining James Robertson, some two (2) years prior, quote: “We believe that it is now necessary to reconsider the value of maintaining a monopolistic structure with respect to distribution and transmission of electricity. As such, similar to power generation, power transmission and distribution must now be open to competition.”

Japanese owned Marubeni Corporation transfer of 50% shares creates some interesting statistics in terms of share ownership:

1. Government owns 19.9%
2. Marubeni owns 40%
3. EWP owns 40%
4. Three thousand (3000) independent shareholders own the remaining 0.1%

Of EWP, Minister Clive Mullings speaks, saying: “EWP is in the business of generating electricity from various fuel types, including Liquefied Natural Gas, and it is anticipated that with the project at the stage that it is at, we will be able to bring everything on line by the last quarter of 2014 in terms of the operations of the 360 megawatts to tie that in with the provision of LNG. So, it is very important that we get all these factors aligned so that we can deliver to the consumer lower energy prices.”

There is truth about LNG (Liquid Natural Gas) and lower prices, as it will make the Bauxite Industry cheaper and more economically feasible and resilient to external Economic shocks due to its perennially lower prices and relatively high abundance as noted in the article “LNG will always be cheaper for Jamaicans, says Colombian firm”, published Wednesday, October 06, 2010 by STEVEN JACKSON, Business Observer writer, The Jamaica Observer.

The People Republic of Trinidad and Tobago had been our First choice for LNG as my blog article entitled “Alternative Energy and LNG - Is Energy Sector Liberalization necessary?”

However, recent events as described in my blog article entitled “Alternative Energy and Trinidad and Tobago - Strange Encounters of the Third Kind” have revealed that The People’s Republic of Trinidad and Tobago only has ten (10) years of LNG left as stated in the article “Ten years left of LNG in T&T”, published Friday, July 16, 2010 BY RENUKA SINGH, The Jamaica Observer. Thus our attention turned to other suppliers, inclusive of the Colombians.

Former Energy Minister James Robertson suggested as much as per announcement at a luncheon celebrating Noranda Jamaica Bauxite Partners' first anniversary of operations in Jamaica as mentioned in the article “US$3-B infrastructural upgrade coming with Natural Gas - Robertson”, published Sunday, October 03, 2010, The Jamaica Observer. The benefits of that US$3 billion deal to the Bauxite Industry and Jamaica National Grid as noted in my blog article entitled “Alternative Energy and Distributed AEPP - The GoldenEye Talk Shop” would have seen:

1. Six hundred million dollars (US$600,000,000) for the LNG Infrastructure
2. Eight hundred million dollars (US$800,000,000) laid out to retool an make more efficient the Five (5) operational Alumina/Bauxite plants
3. Seven hundred million dollars (US$700,000,000) going to increasing the use of Renewable Energy sources, with the excess spillover capacity power going to the National Grid in one million
4. Two hundred thousand dollars (US$1,200,000) worth of investments

Thus, under Ministry of Energy and Mining Clive Mullings the expected improvements that EWP brings to the table are also a delight to Power engineers everywhere:

1. 360 Megawatts by 2014AD
2. 120 Megawatts by 2016AD

A grand total of 480 Megawatts of power, as promised originally by former Minister of Energy and Mining Senator James Robertson, most of which was to come form Renewable energy Resources as stated in the article “Robertson bats for renewable energy sources”, published Sunday, December 05, 2010, The Jamaica Observer! This is in addition to the 65.5 Megawatts of power that JEP (Jamaica Energy Partners) will add to the National Grid at a cost of  US$112 million in a deal the OUR (Office of Utilities regulation) approved in April 2010AD as stated in the article “JEP lands power deal”, published Friday April 9, 2010, The Friday Financial Gleaner.

This diversification of Energy Resources into Renewable Energy is a necessity, as World Old Prices are set to rise after 2015AD, now largely accepted as the year when Global Oil Supply will equal Demand and trigger Peak Oil Crisis, setting off economic upheavals in a world dependent on Oil for its Energy as stated in my blog article entitled “Alternative Energy and the Caribbean - Peak Oil in 2015 and The Day After Tomorrow”. LNG and upgrading the Old Generators that JPS Co owns should realize significant improvements in generating capacity as well as energy efficiency at the now antiquated Power Plants.

But this backpedaling on  what is clearly a bipartisan issues of Energy Sector Liberalization, specifically of the Distribution Network is based on arguments that are really those of JPS Co speaking through the OUR, which is supposed to be defending Jamaicans against price gouging Utility Companies as pointed by JLP (Jamaica Labour Party) Senator Everald Warmington as stated in the article “JLP MP lashes Gov't - says JPS monopoly hurting the poor”, published Wednesday, July 20, 2011 BY ALICIA DUNKLEY Senior staff reporter, The Jamaica Observer.

Especially after the bipartisan show of support for Energy Sector Liberalization this year as noted in the article “Massive JPS bill sparks outrage in the Senate”, published Sunday, July 10, 2011 BY RHOMA TOMLINSON Sunday Observer writer, The Jamaica Observer and the video “VIDEO: End JPS monopoly now, says PNP”, published Friday, July 15, 2011, The Jamaica Observer. Not to mention the appalling electricity usage of the Government Ministries as stated in my blog article entitled “GOJ and Government Ministry's Energy Usage - Senator Audley Shaw and the Langoliers”.

My blog article entitled “Ad Valorem Gas, 10 percent GCT on Electricity and Alternative Energy - Night and Day” and more recently in my blog article entitled “EU, USA and the Second Recession - Economist Dennis Chung's Andromeda and The Long Night” points out how dangerous this bickering and political grandstanding is over what should be a bipartisan political issue, especially as a Second Recession is now very possible and is even at the gate.

It is clear why the JPS Co is averse to Net Metering as opposed to Net Billing as described in the article  “Want to sell light back to JPS?”, published Friday, March 18, 2011, The Jamaica Observer and the article  “The Truth about Net Metering”, published Sunday March 20, 2011 by Dan Theoc, Contributor, The Jamaica Gleaner. Net Billing involves giving discounts to people who produce their own electricity [solar panels, wind turbines] as per my blog article entitled “Alternative Energy and Residential Solar Power - The Social Network” and redistribute the excess back into the National Grid.

This as opposed to Net Metering in which Cash payments are made to the customer for this extra electricity generated as JPS Co loses the bulk of its electricity generated at source on its antiquated Distribution Network as stated in my blog article entitled “Nuclear Power and Net Metering - Paulwell's Energy Sector Liberalization Chess Game”.

As for the Electricity becoming more expensive due to the lack of Economy-of-scale and thus justifying a monopoly by the JPS Co due to the islands physical size, it is good to note that Economy-of-scale requirements the size of an island indicates the level of inefficiency of JPS Co.

After all, if you are running a PUC (Power Utility Company) and you have to have three million customers (3,000,000) customers to be efficient compared to a more efficiently run operation involving Wind Turbines and Solar Panels in a Distributed Network in order to be profitable, it speaks volumes as to the amount of power your Distribution Network or older Equipment must be wasting before money comes into your PUC for the Electricity used.

Large multi-nationals are never very efficient and often argue for large numbers of customers and monopolies in order to maintain control and thus justify their expenditures without seeking to capitalize on gains from efficiency upgrades.

JPS Co fears that should the Distribution Network be Liberalized as PNP (People’s National Party) Senator Phillip Paulwell, Opposition Spokesman on Energy, Mining and ICT stated quote: “the current cost [electricity and fuel] is astronomical, especially for businesses. What is needed at this time is competition in the sector,” in the article “'Follow my blueprint' - Paulwell still pushing for breakup of JPS monopoly”, published Friday April 30 2010, Mark Titus, Business Reporter,The Jamaica Gleaner, they will become unprofitable.

This as in such a Liberalized Energy Sector Scenario, the price on Alternative Energy Gear would be lowered to encourage Energy Sector Liberalization and Local Investors and Foreign Direct Investors to set up Distributed Alternative energy Power Plants and bill customers for usage as per my blog article entitled “Alternative Energy and Residential Solar Power - The Social Network”. Homeowners and businesses would disconnect themselves from the National Grid in droves and JPS Co would see their profit margins plummet.

But sensing their coming demise, JPS Co appears to have at least agreed to renegotiate certain terms of their exclusive Energy Distribution license as stated in the article “Korean company will improve operations at JPS — Mullings”, published Wednesday, July 20, 2011 BY ALICIA DUNKLEY Observer senior reporter, The Jamaica Observer as well as Net Billing, hoping to placate the Jamaican Busineses who blame them for the high level of inflation in Jamaica.

JPS Co and the OUR are not concerned about the customer’s experiencing higher Electricity prices, despite the soothsaying of Energy Minister Clive Mullings’ US based advisor; they fear themselves losing profitability due to customers opting to generate their own power, An Inconvenient Truth (2006) that they refuse to admit to the Public.

For our Survival post-Peak Oil 2015AD and a possible Second Recession, Energy Sector Liberalization is a must and Energy Minister Clive Mullings must act on this bipartisan issue to secure our Energy Future!