23.04.15

Lack of Regulation on Net Billing and Wheeling Stymieing Growth in Renewable Energy - (Part 2)

Lack of Regulation on Net Billing and Wheeling Stymieing Growth in Renewable Energy - (Part 2)

As the price of fossil fuels sky-rocket or fluctuate, so do the cries of local industries, firms and households. The price of oil and, by extension, the price of electricity drives the cost of almost all goods and services. Industry experts, policymakers and their advisors have long declared that harvesting electricity from renewable energy sources is a critical component of Jamaica's economic viability and sustainable development.

A regulatory framework for net billing and wheeling are important drivers for the renewable energy sector. I am happy to see that the recently circulated Electricity Act Bill includes provisions that address these two issues. However, it's time to move from having proposals for the regulatory framework to implementation. The Office of Utilities Regulation ("OUR") Determination Notices on Wheeling and Net Billing have been available for public consultation and review for several years now, but are both delayed in being promulgated.

The current regulatory framework, including the All-Island Electric Licence issued to the Jamaica Public Service Company Limited ("JPS"), does not prohibit or restrict self-generation. Self-generation occurs where a person generates electricity exclusively for his/her own use. Therefore, persons who acquire solar panels for generation of electricity for domestic use, or a firm which sets up the world's largest solar mill for its own commercial use (as Myers, Fletcher & Gordon my firm recently did) access renewable energy within the purview of the law.

Self-generators often remain connected to the JPS grid because the supply of electricity from renewable energy sources may fluctuate, or their facility is simply not adequate to meet 100% of their needs. However, they benefit from savings on their total electricity cost.

Net billing would permit and regulate an arrangement whereby JPS would credit the self-generating entity or person for excess electricity generated at any particular point in time and supplied to the JPS grid, and JPS would bill for the JPS electricity used by the self-generating entity. The net electricity bill provided by JPS to the self-generating entity would be the difference between the charge for use of the JPS electricity and the total price paid by JPS for the electricity supplied to the JPS grid.

There is currently no law to govern net billing. The OUR has started the process of trying to bridge the gap between what is required in the market and the significant lag or deficit in the regulatory framework. The OUR's "Revised Determination Notice in relation to Standard Offer Contract for the Purchase of As-Available Intermittent Energy from Renewable Energy Facilities up to 100kW", which is intended to regulate net billing has been under consideration for a few years now but is yet to be delayed in being brought into effect.

While the Determination Notice is being deliberated on, excess electricity from self-generating entities go to waste. It is possible that we are also stymieing opportunities for self-generating entities to take advantage of economies of scale which would allow them to generate more than they need for marginal additional cost; thus contributing to diversification of the national energy mix.

I am aware that there are several and complicated considerations involved, including technical issues related to the running of the transmission system, but it is time that we move from long drawn out consultations to meaningful action.

As with net billing, there is currently no regulation in place to dealing with wheeling.

Wheeling is the transportation of electricity across the JPS grid by a party other than JPS. This would be beneficial to the self-generating entity who owns more than one property that he wishes to supply with electricity from a single source. For example, a manufacturing operation that has factory houses on separate parcels of land (even on adjoining lands) would need access to a distribution line to transport the electricity generated at point A to points B and C.

Again, the OUR Determination Notice in relation to Electricity Wheeling Framework has been under consideration for close to 2 years but has not yet been promulgated.

Having a well-defined legal and regulatory framework for net billing and wheeling is likely to improve the environment and the pace at which renewable energy projects come on stream. In the meantime, the savvy entrepreneurs or investors in the renewable energy sector should press on and take advice from a commercial attorney regarding transaction structures that are compliant with current laws, while satisfying their clients' needs for cheaper and cleaner electricity.