JAMAICAN businesses have long bemoaned the high cost of energy and the deleterious impact it has on both their businesses and the bottom line. Residents too have complained and in many cases it accounts for a third of employees wages.

With oil prices now above US$105 per barrel and geopolitical tensions in the Middle East threatening to send oil prices skyrocketing, the energy situation becomes even more precarious given the fact that Jamaica spends about a third of its foreign exchange earnings on imported oil.

Minister of Energy, Mining and Telecommunications Phillip Paulwell has vowed to oversee the liberalisation of the energy sector resulting in the reduction of electricity costs by as much as 40 per cent by 2014. Here he is supported by some of the biggest names in corporate Jamaica, including CEO of GraceKennedy Don Wehby; Managing Director of WISYNCO, William Mahfood; President and CEO of Jamaica Broilers Christopher Levy, and Managing Director of Jamaica Producers Jeffrey Hall.

Speaking with Caribbean Business Report from the Petroleum Corporation of Jamaica (PCJ) headquarters in Kingston, Paulwell said: “The energy situation in Jamaica today is probably the most critical economic issue facing the country. There is no way businesses can expand and employ more people with electricity prices at US 40 cents per kilo watt-hour, nor can we attract foreign companies to invest here with those prices. Any discussion I have with the business community, the high cost of energy constantly comes up. This means we are at a crisis point.

Solving Jamaica’s energy problem

“I think this can be solved in a number of ways. Firstly, there can be no dispute anymore about the energy policy; both the Government and the Opposition are at one. That policy signals a deregulation of the industry and the diversification of fuel sources and enhancing our own infrastructure.”

The Government has made it clear that it is committed to addressing the country’s energy problem and Paulwell has declared that he is determined to see this through. Already the Cabinet has endorsed the establishment of an Energy Council that brings together all the players in the business. The main purpose of the Energy Council is to implement policy and ensure that there is national participation.

Paulwell has stressed the importance of diversifying fuel sources and has personally signalled his commitment to this by employing solar technology at his own domestic residence. He is of the view that all the fuel sources should contend, including liquefied natural gas. He also sees a future for coal in Jamaica as well as petcoke and in time to come, probably in ten years, nuclear energy can become a realistic option. The minister will be putting particular emphasis on renewable energy and sees solar playing a big role in providing fuel for domestic residences, while wind and hydro will fuel commercial entities. Here he sees these sources offsetting the foreign exchange the country spends on fossil fuels.

“Yes, I am aware of the arguments concerning growing our carbon footprint, but that being said we will be focusing on the next three years on electrical energy. In our manifesto we gave an undertaking to liberalise our electricity grid and we are in the process of negotiation with Jamaica Public Service Company (JPS).

We thoroughly believe that we have a mandate to do so and we are resolute in pursuing that.

“We also have to liberalise the fuel source, and the government apart from re-engaging the LNG project, will allow the private sector to determine its own fuel source going forward. We also intend for the bauxite companies to make their own determination. We should not deprive ourselves of cheaper fuel sources.

“In relation to the government’s own infrastructure, we will be making a major push with the refinery and we have already signalled to the IMF that we want to see the refinery’s capacity extended to 50,000 barrels a day and utilise new technology that will enable lower sulphur in our diesel and petcoke. This should help us generate 100 mega watts of cheap electricity. We want to put this project on the front burner because it will secure growth for the economy, create jobs and lead to cheaper fuel. This is how we will push prices down and it has to be below US 20 cents because that’s where our competitors are. For this I am seeking the support of the entire country.

“I think it is a win-win for JPS. With lower prices it creates a bigger market because people will be coming to establish businesses in Jamaica. They will see an opportunity here with lower energy prices. This doesn’t just apply to Foreign Direct Investment (FDI), but Jamaicans themselves will once again take a chance in investing in the country and that’s want we want to see. This government has sworn to create an investor- friendly climate and we are not wasting anytime in doing so.”

Paulwell added that JPS will be allowed certain leverage in relation to telecommunications because there is the possibility of executing broadband over the power lines. The minister said time is of the essence because if the current situation is allowed to prevail, people will continue to look to circumvent JPS in search of cheaper electricity. This in turn will lead to a devaluation of the government’s share in the company.

Getting the private sector around the table

One of the things that Pauwell has been able to accomplish is to bring the private sector around the table and attain some consensus on the issue. He notes that it is now prepared to move with one accord toward what must bring benefits to the country. He pointed to the notion that exists that it is not appropriate to provide competition on the grid because it is a natural monopoly, but he totally rejects this.

“Once you have the appropriate regulatory system in place and an interconnection arrangement, with people paying to interconnect, then we are going to establish a model in Jamaica that will work for us. Yes, I am glad that the private sector seems unified in finding alternatives to what we have today,” said the minister of energy, mining and Telecommunications.

(Part II next week)