Business
Be cautious in liberalising energy distribution, says UTech lecturer
A UNIVERSITY of Technology lecturer has urged caution on any possible move to liberalise the distribution of energy. Darron Thomas, a specialist in competition in markets, told a Gleaner Editors’ Forum last week…
“We have to sit down and have detailed analysis of how the process will work on the ground. It is not about monopoly or no monopoly, at this stage. It is about analysing the issues to see what the optimal choices are, which set of options are feasible. We cannot be emotional about these issues.”
Phillip Paulwell, the opposition spokesman on energy, has been leading the charge for an end to the Jamaica Public Service Company (JPS) monopoly.
Paulwell said such a move would reduce the high cost now being paid for electricity on the island.
“When you move towards monopolising distribution, it is going to enhance competition on generation. You are going to be able to attract people to generate electricity and be able to sell it by way of an interconnection arrangement with the grid,” Paulwell said during the forum.
Proposed access fee
The opposition spokesman has proposed that an access fee be paid for the grid. “You will also have to recognise that there are areas in Jamaica that are uneconomic for persons to participate, so JPS would continue to have a universal service obligation, and there has to be a charge for that,” Paulwell said.
He said all the suppliers of electricity would be required to pay the access fee, which will fund the uneconomic areas.
Winston Hay, former head of the Office of Utilities Regulation, and past managing director of the JPS, said Paulwell’s suggestion represents the “closest” he has heard as to how competition in the distribution of power would work.
But he, too, has urged caution in the area, and has suggested that, if the Government moves to break the monopoly, the JPS be also stripped of ownership of the grid.
“If the competition was to be allowed in the supply of electricity to the end consumer, it is my opinion that JPS should also be relieved of all responsibility for transmission of distribution, because they will continue to have monopoly power over it,” Hay said.
The former head of the public-service company argued, “It would be incorrect to allow JPS to own the system if it is in competition with others.”
Meanwhile, Damian Obiglio, CEO of the JPS, has maintained that the transmission and distribution of power in Jamaica is a natural monopoly.
Noting that the transmission-and-distribution aspect of electricity generation is 20 per cent of the business, Obiglio said the Government would have to make a decision as to the future of the electricity system.
“There are some tariff arrangements that can make it work or not, but the way it is structured could have serious implications for all the people of Jamaica. So it is important we have a straight debate on how we go,” Obiglio said
Energy Minister Clive Mullings, who has said it would be unwise to liberalise the grid, told those attending the forum that the issues involved were complex and “we cannot glibly speak about just breaking up a monopoly”.
Mullings said: “What we have is a lack of investment in equipment, a lack of attention to details; and so, when the price of oil climbs, we talk about breaking up a monopoly. That, I respectfully say, is not the way to go about it.”
Source: The Gleaner
