Competition for CUC

An important milestone in giving Caribbean Utilities Company a competitor in the electricity generation business in Grand Cayman was reached when the Electricity Regulatory Authority selected DECCO Ltd. to develop and operate 36 megawatts of new power generation capacity on the island. 

The results of the competitive bid, which were formally announced on Monday, will mean that for the first time since CUC was established in 1966, it could have competition in the generation of electricity for resale. 

The Electricity Regulatory Authority issued a statement on Tuesday announcing that on Saturday, 9 February, its board of directors unanimously accepted the recommendations of management to select DECCO, a subsidiary of Dart Management Ltd., to commence negotiations with CUC on a power purchase agreement in relation to the new electricity generation capacity. In its 2012 fourth quarter and 12-month report issued Friday, 8 February, CUC said the need for new generation was “driven primarily by the upcoming retirements of some of the company’s generating units”. 

For the first 42 years of its existence in Grand Cayman, the utility provider never faced the possibility of competition. When, after lengthy negotiations, CUC renewed its operating licence in 2008, provisions were included for a competitive bid process for the installation of new generating capacity. 

“This process, as required by law, affords consumers a price of electricity obtained on a competitive basis,” the Electricity Regulatory Authority’s statement read. “While this is one part of the two major costs, fuel being the other, it is imperative that this process be used to benefit the consumers.” 

Although those competitive provisions were never used before, Electricity Regulatory Authority Managing Director Joey Ebanks said CUC’s need to retire some of its generators provided an opportunity. 

“When CUC determined it needed to replace the generators in 2014, it afforded the country a once-in-a-decade opportunity to introduce competition in the electricity generation arena,” he said. “The ERA took this opportunity to test the market through the [request for proposals] issued last year and explore whether the conditions were right to facilitate competition to what is essentially a monopoly.” 

In addition to CUC and DECCO, a third company called Navasota also submitted a bid for the new electricity generation capacity. DECCO ranked first in the bid process – which was protracted because of a number of board personnel changes – followed by CUC and then Navasota. 

“While it is still early in the process, we were pleased to see two other potential new entrants responded to the [request for proposals] and that a local company, DECCO earned the first-place ranking,” Mr. Ebanks said. “The decision by the ERA to introduce competition in the generation of electricity is an important first step forward for the country.” 

CUC’s President and CEO Richard Hew confirmed that his company would now enter into negotiations leading to a long-term power purchase agreement with DECCO Ltd. 

“We look forward to reviewing the winning bid and entering into discussions with DECCO Ltd. leading to a power purchase agreement,” Mr. Hew said. “CUC remains committed to offering a safe, reliable and efficient service at least cost to our customers.” 

The bid submitted by DECCO reflected a partnership between it and Finland-based Wärtsilä, a global power plant firm. DECCO said in a statement issued Monday that it will provide the land and financing and Wärtsilä will provide the expertise and equipment. 

“Wärtsilä is one of the leading global providers of flexible power plants for utilities, [independent power producers], municipalities and industry, operating throughout the Caribbean, Latin America, Asia Pacific, Europe and Africa,” DECCO’s media release stated. “The power plants are designed for efficient, economical and environmentally sound power production coupled with uncompromising reliability.” 

Assuming successful power purchase negotiations between CUC and DECCO, the 36 megawatts of generating capacity will be delivered by two 18-megawatt generation units, the first of which will be required to be operational by 2014. The second unit might not be required until as late as 2017, with the timing dependent on growth in demand for electricity, CUC stated. 

DECCO stated that the generation units would consist of two Wärtsilä reciprocating diesel engines that burn ultra low sulphur diesel fuel and that the new electricity generation units would be operated on a yet-to-be-disclosed site in Grand Cayman’s industrial park, subject to planning approval and a permitting process that will be carried out during the period of its negotiations with CUC. 

On its web site, CUC states that it has 151.230 megawatts of combined generating capacity. The 36 megawatts of total generating capacity awarded to DECCO represents almost a quarter of CUC’s existing generating capacity and with some of that scheduled for retirement, would represent an even higher percentage of Grand Cayman’s total electricity generation capacity.  

Mr. Ebanks said that electricity consumers could expect to see more developments in the future. 

“In addition to the traditional methods of fuel based electricity generation, the ERA is working on many fronts to facilitate alternative energy options for commercial and residential consumers,” he said.  

“This historical event is the beginning of much more to come as capital costs for various forms of renewable energy continue to fall and with technological changes to the industry well on their way, 
I expect we will see even more changes to come 
that will benefit the consumer.” 

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14 COMMENTS

  1. CUC – We look forward to reviewing the winning bid and entering into discussions with DECCO Ltd…., I am guessing this isn’t strictly speaking true.

    I wonder if anyone at CUC has looked up the meaning of the word ‘competition’ yet?

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  2. doesn’t a purchase power agreement just mean that DECCO will produce the power and then sell it to CUC who will in turn sell it to us at an inflated rate?

    CUC’s monopoly lies in the fact they have the power grid in Cayman. No one can produce power and supply it through their grid, so in essence they in still no competition.

    In a country that has 350 days of sunshine, i cant believe that solar power in 2013 in still no an alternative solution. My power bill is about 5 times what I paid back home and would 100% invest in solar for my home if I could sell the excess back to the grid… but as long as CUC is making money for the govt in the form of fuel duties this will never happen.

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  3. The problem with solar criss cross is…..CUC stands to make no money from it.

    INFACT, because they run diesel generators for electricity production.

    Think of it this way. these diesel generators are always running. It runs at a constant speed, and burns a constant amount of fuel. It produces 10 mega watts of power a day. Right now, its’ using 9 megawatts of power a day from the grid from people’s usage.

    Well if CUC buys back the energy we produce from solar. Sure, they can sell it back to their customers. But that diesel generator must keep running, and burning fuel.

    So even though the solar panels throw back 5 megawatts of energy a day. And CUC sells that 5 megawatts of energy. Even if they get that solar energy for free. That diesel generator is wasting 5 megawatts of fuel a day. Because there will be houses with no solar panels.

    So it’s a no win situation for CUC.

    This is why they will NEVER embrace solar. Ever.

    Unless everyone can get on the grid at once. So they can shut down half the generators. And then what happens when the sun is out. You will have rolling blackouts, because the generators will shut down from overload.

    So if we gave CUC our solar energy for free. Even then, they would break even to what they have now.

    What the island needs is mini nuclear power plants. Entirely safe. Housed and sealed in solid concrete. Impossible to leak. And the uranium used is low yield. Meaning, even if the power plant did leak. The radiation will not harm the environment. 3 million dollars a unit. Each unit is the size of a large hot tub. It’s buried under ground. And can power 20K homes, for 5 years. The technology is so stable. Westinghouse among other companies produces them. Now if a fridge and toaster company is making them. They are safe and a viable alternative.

    That is the only way to move forward for cheap electricity.

    Oh ya, it produces 10 cents a kilowatt hour. Now imagine how cheap your electricity bill would be even with CUC putting their overhead on that price.

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  4. Big Berd,
    regarding the Solar.. that is what I was saying.
    For those that have invested in solar, they are not allowed to store the excess power in batteries at night and are forced to be on the grid… complete monopoly. CUC is a publicly traded company and their golden hand-shake with CI govt is to gouge us all…

    As far a nuclear power plan, that will never ever happen no matter how cheap it is… I for one would never what to see it here.

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  5. Please Please Please tell me these generators will use the cleaner diesel fuel! Cayman has one of the worst CO2 footprints because we’re forced to use the dirty diesel 9because that’s what the CUC generators need).

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  6. Crisscross,

    you are not quite correct under the electricity generating law as a residential customer you are allowed to generate and use your own power, secondly you have the option to sell power to CUC who must buy it, thirdly CUC must sell you power if you pay the rate.

    Therefore you can produce off grid power and store it in batteries and use it without that going into the grid by law now. Also CUC must sell extra power you need.

    So the solution is to have two panel boxes and have the low amperage equipment i.e 100v sockets, fans and lights from solar say 2-5 KW system and use CUC for AC, range, dryer, pool pump, etc,etc I’m not saying you have all of those they are just examples.

    The other issue is the way the law is currently structured is that CUC remains still the only retail power provider and the new Decco generation plant has to sell it power to CUC to resell to us. Thus it is unlikely you will see the power costs coming down until the law is changed to allow other firms to sell you power directly and they would have a rental agreement to use CUC lines like telephone firms use Lime’s line for internet, landlines etc.

    Dart probably uses around 18MW of power already so they may strike a deal with CUC for their own property use.If I was them that’s what I do.

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  7. Wrtsil make a great Natural Gas generator, which might well work for syngas. Lets say we had a plasma gasification plant, producing a clean burning syngas, DECCO could buy the gas made from the former dump-mountain and todays waste stream, and turn our garbage into electricity.

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  8. Wind and solar power are unreliable and costly. Therefore you require 100% redundancy with a fossil fuel burning power plant as a back-up. Overall cost is higher and cycling the machines is very tough duty on the equipment. For base load operations a mini-nuke is ideal and use diesels for peak shaving. It’s a classic no-brainer.

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