Power supply watchdog cites declining demand and delays for cancellation
The Electricity Regulatory Authority on Monday cancelled February’s Dart Realty agreement to supply 36 megawatts of electricity by next summer, pleading declining consumer demand for power and ongoing delays.
The move marks the second cancellation of a bid by an independent power producer to generate electricity for the Cayman Islands, preserving Caribbean Utilities Company’s effective monopoly on both generation and distribution of power in Grand Cayman.
Monday’s decision, according to ERA Managing Director Louis Boucher and Chairman of the ERA Board Sherri Bodden-Cowan, came after “unavoidable and unforeseen delays”.
“We looked at the timeline,” Ms Bodden-Cowan said, for a July 2014 commissioning date. “It was not achievable by anyone because of the passing of time.”
She did not elaborate on the delays, saying only that CUC’s annual “certificate of need”, projecting electricity demand three-to-five years in advance, had been amended, forecasting little growth.
“CUC predicted the need for electricity in 2011 and 2012, but we had negative growth,” she said. “We have to look at that certificate of need. Is 36MW needed by the island? If CUC adds that much to its grid, its capacity, it hurts the whole Cayman Islands.
“The timeline was not achievable for CUC and it was not in the interests of consumers,” she said.
On 9 February this year, the ERA awarded Dart Realty’s engineering company DECCO the 36 megawatt bid, the request for proposals for which was launched on 23 March, 2012, and scheduled for initial commissioning of 18 megawatts in July 2014, followed by the another 18 megawatts in 2017, “with timing dependent on economic growth and development of the Grand Cayman economy and the related growth in demand for electricity”.
DECCO subsequently created a company that contracted in Europe for diesel generators to supply the power.
On Monday, DECCO released a statement saying it was comfortable with the cancellation.
“Further to the ERA’s press release announcing its decision to cancel the 36MW solicitation for additional generating capacity scheduled for a commissioning date of July 2014; DECCO confirmed it was aware of, and has no objection to, the ERA’s decision.”
CUC President and CEO Richard Hew said on Monday that “CUC remains committed to providing a reliable electricity service to Grand Cayman. The need for additional firm generating capacity remains and, in light of the ERA’s decision to cancel the solicitation, we will explore all cost-effective options with the ERA, including temporary generation solutions, to meet reserve margin requirements for the summer of 2014 and until those firm capacity needs can be met”.
In September 2009, the ERA cancelled a bid for 32 megawatts of electricity, also citing a declining economy and reduced consumer demand. Both CUC and Kingston-based Jamaica Energy Partners had tendered for the contract, based on CUC’s predictions only six months earlier that Cayman required the additional power by 2013.
The cancellation, Jamaica Energy Partners said at the time, damaged consumer interests and the opportunity for cheaper, more efficiently produced electricity.
Mr. Boucher said on Monday that a still-pending August 2012 request for bids to supply 13 megawatts of renewable energy had not been part of the decision to cancel the Dart award. Two bidders for wind and solar power, due for commissioning in December 2014, are negotiating with both the utility and the authority.
“We don’t count renewable in the full load because they are not ‘firm power’,” Mr. Boucher said, indicating reliability issues with alternative energy.
Ms Bodden-Cowan said the ERA would re-tender the contract, although she did not name a date or say if it would be for the same 36 megawatts.
“We are looking for a new certificate of need” from CUC, Ms Bodden-Cowan said. “CUC is a commercial company, and the ERA is there to protect consumers. Our ultimate goal is to make sure that the public is protected and that there is a reliable service.
“We are looking at future load projections and the existing fleet [of generators],” she said. “It depends not just on growth, but also on the engines that are retiring. We are thinking we will issue this pretty soon, because [CUC] will have some additional needs: There will be the Shetty hospital, the Ritz-Carlton, WaterColours [a new commercial development on Seven Mile Beach] and other developments”.
DECCO did not respond to a series of follow-up questions, including whether it might re-tender the project.