Lawmakers want JPS preference clause scrapped
Published:Friday | February 18, 2022 | 12:11 AM
Lawmakers reviewing the Electricity Act, 2015 have sent a clear message that they are in favour of removing the right-of-first-refusal (ROFR) provision in the legislation that is seen by some as a barrier to market reforms in the light and power sector where the Jamaica Public Service Company (JPS) is a monopoly distributor.
This proposed change would put lawmakers on a collision course with the JPS, which has declared in the past that the ROFR provision should be preserved.
The ROFR changed the competitive bidding energy policy and grants the JPS the right to replace its generating units when they become due to be retired, according to the schedule determined by the portfolio minister.
Phillip Paulwell, opposition member of the joint select committee reviewing the act, said Thursday that the ROFR was “an anachronism”.
“I was there, so I know how it came about, but I don’t believe that it should be continued at this stage, and I believe it requires some negotiations with the JPS,” said Paulwell, who is a former minister of energy.
Paulwell received strong support from government member Senator Aubyn Hill, who wants the ROFR removed.
Hill, who is minister of industry, investment and commerce, acknowledged that there would have to be negotiations with the JPS to amend the contractual arrangements.
However, he noted that policymakers would have to make legislative changes.
Hill said that from the outset of the negotiations, “the right of first refusal was like one of those pies that people throw in your face that they used to do in college some decades ago”.
“You just can’t get around the right of first refusal and the necessity to remove it if we are going to run our country,” he said.
Last year, a team from Jamaica Energy Partners, which made a submission to the committee, argued that the ROFR provision should be eliminated and that the country return to the open market for all bidding for new generation capacity.
Kadene Campbell, senior legal officer in the Ministry of Science, Energy and Technology, sought to caution lawmakers Thursday, noting that the ROFR was a right that was attached to the licence granted to the JPS.
“The right of first refusal is not only a requirement in the law, but it runs in the licence that JPS has,” Campbell said, adding, “When we considered the right of first refusal, we thought not to disturb it because there is need for time ... .”
Paulwell told Campbell that the committee was signalling that they no longer found favour with the ROFR.
“We can’t labour this hard in this committee and come away with the status quo remaining, It is just not going to be acceptable,” he said.
Committee chairman and Minister of Science, Energy and Technology Daryl Vaz said that members of the parliamentary committee were in agreement that the ROFR provision should be changed.
Last July, Joseph Williams, vice-president of generation at the JPS, said that the right of replacement was integral to the light and power company as the single buyer to fulfil its obligations to its customers.
He said the ROFR is included in the value of the licensed business in which the company’s shareholders invested.
“It’s really equivalent to those contracts rights that are embedded in power-purchase agreements, gas-supply agreements, which enable the company’s IPPs (independent power producers) and fuel suppliers to operate in the market,” Williams told the committee.
“It is integral to our balance sheet and our ability to secure credit, which is key to our survival and the survival of the energy market,” he added.
The JPS executive had conceded that the ROFR was not an unconditional right, noting that based on the legislation, if the JPS “failed to meet the criteria of price benchmark and time to execute this capacity that we would want to replace could be put to tender if those conditions are not met”.
Williams said that the JPS has the unique role of being the generator of last resort to the system.
“This is an obligation that we treat with very seriously, so with that said, we strongly support the preservation of the right of first refusal within the Electricity Act,” he said.