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Minutes of the Honourable Jamaica House Of MINUTES OF THE HONOURABLE JAMAICA HOUSE OF REPRESENTATIVES At a meeting of the Members of the House of Representatives held pursuant to adjournment at Gordon House in the City and Parish of Kingston on Tuesday, the 19TH DAY OF JULY, 2011 The House met at 2:24 p.m. o’clock PRAYERS Prayer was offered by the Reverend Ronald Thwaites. CALL OF THE ROLL PRESENT WERE: Hon. Marisa Colleen Dalrymple Philibert, MP, Speaker Mr. Tarn Andrew Peralto, MP, Deputy Speaker Hon. Andrew Michael Holness, MP, Minister of Education and Leader of the House Hon. Orette Bruce Golding, MP, Prime Minister & Minister of Defence Hon. Lester Michael Henry, CD, MP, Minister of Transport & Works Hon. Rudyard Conrad Spencer, OD, MP, Minister of Health Hon. Delroy Hawmin Chuck, MP, Minister of Justice Hon. Clive Arthur Mullings, MP, Minister of Energy and Mining 1 Hon. Daryl Wesley Phillip Vaz, MP, Minister without Portfolio in the Office of the Prime Minister, with responsibility for Information and Telecommunication Hon. Robert St. Aubyn Montague, MP, Minister of Agriculture and Fisheries Hon. Shahine Elizabeth Robinson, MP, Minister of State in the Office of the Prime Minister Hon. Laurence George Broderick, MP, Minister of State in the Ministry of Energy and Mining Hon. Desmond Gregory Mair, MP, Minister of State in the Ministry of Education Mr. Noel George Delano Arscott, MP, Clarendon, South Western Mr. Peter Murcott Bunting, MP, Manchester, Central Mr. Roger Harold Clifford Clarke, MP, Westmoreland, Central Mr. Colin Alfred Alexander Fagan, MP, St. Catherine, South Eastern Dr. Fenton Rudyard Ferguson, MP, St. Thomas, Eastern Dr. Morais Valentine Guy, MP, St. Mary, Central Ms. Lisa Rene Shanti Hanna, MP, St. Ann, South Eastern Mrs. Sharon Merle Hay-Webster, MP, St. Catherine, South Central Mrs. Maxine Antoinette Henry-Wilson, MP, St. Andrew, South Eastern Mr. Joseph Uriah Hibbert, MP, St. Andrew, West Rural Mr. George Anthony Hylton, MP, St. Andrew, Western Mr. Derrick Flavius Kellier, CD, MP, St. James, Southern Dr. Kenneth Wykeham McNeill, MP, Westmoreland, Western Mrs. Natalie Gaye Neita-Headley, MP, St. Catherine, East Central Mr. Dean Alexander Peart, CD, MP, Manchester, North Western Mr. Michael Anthony Peart, MP, Manchester, Southern Dr. Peter David Phillips, MP, St. Andrew, East Central 2 Mr. James Rudolph Edward Robertson, MP, St. Thomas, Western Mr. Derrick Charles Smith, CD, MP, St. Andrew, North Western Rev. Ronald George Thwaites, MP, Kingston, Central Mr. Clifford Everald Errol Warmington, MP , St. Catherine, South Western STATEMENTS BY MINISTERS The Minister of Energy and Mining, the Honourable Clive Mullings made the following statement regarding the Jamaica Public Service Company (JPSCo.) Shareholding: The House is being advised that Cabinet yesterday granted consent to Marubeni Corporation to transfer 40% of the shares in the Jamaica Public Service Company (JPSCo.) to Korea East-West Power Company Limited, commonly referred to as EWP. Following the transfer, Madam Speaker, the Government of Jamaica will own 19.9% of the shares in JPS, Marubeni will own 40% and EWP will own another 40%. Some three thousand shareholders own the remaining 0.1% of the shares. Madam Speaker, EWP is expected to significantly improve the operations of the JPS. The company is wholly owned by the Government of South Korea and ranks as the largest thermal power company in the Republic of South Korea, owning and operating in excess of 9000MW of power generation facilities in the country. It provides 11.5% of Korea’s electricity on a nationwide level. As a power generator, the company has experience in the use of all fuel types. Quite significantly, it provides 24% of the electricity supply by the use of Liquefied Natural Gas (LNG) in South Korea, that is, some 2,100 MW of electricity from LNG. By contrast, Madam Speaker, the total electricity demand for Jamaica currently stands at 800 MW. EWP, Madam Speaker, is a member of the Korea Electric Power Corporation which transmits and distributes power to almost nineteen million customers throughout South Korea. EWP also operates power facilities in the US, Haiti, Phillipines, South America and throughout Asia. The company reported assets of United States Four Billion Dollars in 2010 and carries an A1 rating from Moody’s Investors’ Service. Madam Speaker, the House is to know that, notwithstanding the impressive resume´ of EWP, the Government deliberated long and hard on the application by Marubeni to sell 50% of its shares to EWP, as all factors had to be carefully considered. The main purpose being to aggressively pursue the best strategy to significantly reduce the high prices local consumers have to pay for electricity. Among the factors, Madam Speaker, was the need by EWP for the Government to formally include in the JPS licence, the extension of six years granted by the last administration in July 2007 to the term of the JPS licence. The House will recall that, in July 2007, when Mirant sold its 80% stake in JPS, certain operational measures were agreed, in principle, with the details to be worked out between JPS and the Office of Utilities Regulation (OUR). In exchange the then 3 Government contracted the JPS that the licence was to run until 2027 instead of 2021. The OUR has implemented a number of these operational measures and has agreed timelines for the implementation of the others. Madam Speaker, this is not a blame game, the provision of electricity services is a capital intensive business that demands substantial investments. An investor usually requires, and receives, a contract for twenty years as it allows for the recovery of the investment to be spread over a reasonably lengthy period. This reduces the sum to be recovered annually. A shorter arrangement, Madam Speaker, would mean that the sum to be recovered each year could be so high that most consumers could not afford the services. It is against this background, Madam Speaker, that Marubeni and EWP requested that the Government honour the commitment given by Mr. Paulwell and the then Cabinet. After careful consideration, Cabinet decided that it was in the best interest of the country to honour that commitment. The JPS was the sole respondent to a Request for Proposals, issued by the OUR, for the generation of the 480MW of new generating capacity. The generation of electricity, as we all know, must be undertaken by way of a competitive process that is administered by the OUR. At this point, Madam Speaker, I must say to all the Members of this House and every citizen of this country, that the only real solution for significant and meaningful reduction in the price of electricity lies in the use of modern, efficient generating plants to generate the bulk of our electricity (that is base load) from cheaper energy sources other than the Heavy Fuel Oil. The dependence on oil over several decades without the necessary investments, to install modern efficient plants, is the source of our energy crisis. The generation of electricity takes up to 80% of the total cost to generate, transmit and distribute electricity island-wide. Hence, Madam Speaker, the replacement of these plants by modern efficient units, burning natural gas, is the strategy that has been adopted by this Government and commands our primary focus. Madam Speaker, I do believe that there was a suggestion in some quarters that the Government should have used the circumstance of EWP’s desire to invest in JPS to negotiate for competition in the transmission and distribution of electricity throughout the island. Such a suggestion, Madam Speaker, would offer no real savings or reduction in price to consumers, since the transmission and distribution of electricity only accounts for twenty percent (20%) of the cost of electricity. We do not have the time to undertake risky experiments and are obliged to consider the following factors: ● JPS, and its shareholders, have committed to install the 480MW of urgently required electricity, without a Government guarantee. There is need for a degree of certainty that the electricity to be generated will get to a sufficient number of customers in a reliable and consistent manner to make the project affordable for consumers and feasible for JPS. No company is likely to risk the substantial investment, by being dependent on other transmitters and distributors to reach paying customers, without requiring Government support (Guarantee) or indemnity. 4 ● The JPS also, Madam Speaker, would likely require substantial compensation for giving up or foregoing investments in the transmission and distribution system to lessen service interruptions and blackouts that plagued the supply some years ago. The recovery of those investments would have been projected over the remaining term of the licence, including the six years extension granted in July 2007. ● There are many communities or residential districts that have few customers spread over a relatively large area. At present, these customers are able to afford a supply of electricity because they are not required to bear the total cost for the transmission and distribution system that supplies their electricity. To break up the distribution and transmission network could result in these communities being left stranded without service. Investors are not likely to consider them attractive. Alternatively, the cost of electricity to these communities could become so high that it is totally prohibitive, much worse than the prices that they now have to pay. ● Significantly too, the OUR has advised that the breaking up of the transmission and distribution network would not likely lead to a reduction in the price of electricity. Rather, given smaller pools of customers who would be required to absorb the cost of different transmission and distribution systems, it could actually result in an increase in electricity prices. It should be recalled that the transmission and distribution network of the country is a continuous physical infrastructure and not wireless technology.
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