The economic downturn has led the electricity regulator to abandon plans to build more power generators on Grand Cayman.
Electricity Regulatory Authority managing director Philip Thomas said in a letter dated 24 September to two bidders that the regulatory body’s board of directors came to the unanimous decision to cancel the planned 32 megawatts of additional capacity by 2013 at a board meeting held Thursday.
‘The downturn in the economy of the Cayman Islands is having the effect of reduced demand for energy,’ Mr. Thomas said.
Local power company Caribbean Utilities Company had calculated in March 2009 that the island needed to see a 1.8 per cent annual increase in demand for power by 2012 to justify the additional capacity.
‘The medium-term forecast for future demand is that there will be no growth in demand for 2010 and 2011, and a considerably reduced demand for 2013 and 2014 from that originally forecast when the Certificate of Need was prepared by CUC,’ Mr. Thomas said.
CUC and Jamaica Energy Partners had both bid to produce the additional 32 megawatts of generating capacity – 16 megawatts by 2012 and a further 16 megawatts in 2013. A decision on who would be awarded the bid had been due at the end of this month by a new ERA board of directors appointed last month.
Mr. Thomas said CUC’s forecast on demand for electricity had been independently verified.
‘Should the Cayman Islands’ economy recover significantly and by mid-2010 renewed forecasts for future energy demand indicate that additional capacity would be needed in say 2013 and 2014, then the ERA will conduct a new solicitation and will advertise internationally and locally for new bids, for that additional capacity,’ he said.
Asked if the CUC forecast of future capacity had taken into account proposed developments such as the government schools, Government Office Accommodation Project, the Water Colours, Island Resort and Developments, and Camana Bay shopping plaza, the company’s corporate secretary Doug Murray responded that none of the projects were yet on line, but had been examined when CUC made its forecast.
‘We take a look at everything projected on the island,’ he said. ‘We maintain close relations with any party that may have input, such as the Planning Department and other government departments. We also keep a close eye on developers’ announcements and future plans.’
He added that government projects, such as schools and the GOAP had been considered as offsetting other consumption, rather than new additional usage. ‘Plus, we would expect those new facilities to be more efficient than the others,’ he said.
Mr. Murray said the economic downturn and the reduced capacity forecast were not expected to impact CUC’s call for bids to generate 10 megawatts of energy by wind power.
CUC’s president and chief executive officer, Richard Hew, said the power company would ‘monitor key growth indicators and endeavour to secure additional capacity in a timely manner to meet customer demand’.
The regulatory body informed CUC and its Jamaican competitor of the decision on Thursday.
Wayne McKenzie, general manager of Jamaica Energy Partners, said he was disappointed in the decision, and insisted that Cayman had missed an opportunity to access cheaper electricity.
‘It would have put on the ground units whose efficiency and reliability are better than what you have now,’ he said by phone on Monday. ‘In the absence of demand, the units would have been a more cost-effective solution.’
He added that he felt the decision to cancel the bidding process benefitted CUC, but not the electricity users of Cayman. ‘To my mind, this would have augured well for electricity rate payers,’ explaining that his company had planned to use a cheaper fuel source than CUC and his generators could have replaced others currently being used.
A press release from CUC stated: ‘While the current economic uncertainty makes precise forecasting difficult, CUC believes that, based on Grand Cayman large project starts and the general state of the Cayman Islands economy, growth during the period will not meet thresholds necessary to warrant capacity expansion in the near term.’
Five companies submitted proposals for the additional generating capacity. The board rejected one and certified four as qualified to submit bids. These were CUC, Jamaica Energy Partners, Marubeni and Wood Group. Marubeni and Wood Group advised before the April 30 deadline that they would not be submitting bids.
This was the first time CUC has faced competition to generate electricity. A new licensing arrangement put in place last year retains CUC’s exclusive rights to transmit and distribute electricity, but it would no longer have a monopoly on generating electricity.
Under the licence agreement, CUC remains responsible for determining the need for future generation based on load growth, generation retirements, and operating reserve requirements.