Compliance date not met as OEK scrutinizes PPA

Compliance date not met as OEK scrutinizes PPA

  22 Oct 2018

Due to a number of concerns raised by Palau’s national congress on the signed Power Purchase Agreement (PPA) between the Palau Public Utilities Corporation and the Engie Eps, the contract term indicating a compliance date for the congress to ratify the agreement was not met, hence, calling for apparent extension if Palau is to achieve its Nationally Determined Contribution (NDC) of generating 45% renewable energy by 2025 under this setup.

The agreement term setting the compliance date for the ratification did not earn favorable comments from some members of the national congress who viewed it as an act of underestimating their review capability.

PPUC Board member Brian Melairei, during a press conference held on October 17, said that a clause of the signed agreement has indicated October 17 as its deadline for ratification but he quickly added that the clause also has an extension that states that the date set can be extended.

“The Engie put in the October 17 date which they wanted the joint resolution to be approved [by the national congress] but apparently that will not be the case as in the hearing [on October 16], there were concerns, issues raised by the joint houses on the agreement,” Melairei said.

Melairei, however, did not elaborate what are the specific concerns raised by the members of the national congress during the hearing for the ratification of the agreement on Tuesday, October 16.

Article 15.2 of the term of agreement provides that Engie Eps “may unilaterally extend the date for compliance with this obligation by each of the government and the utility (PPUC) by written notice to each of the other parties.”

The same section of the agreement further added that Engie Eps must also consider the national congress’ suggested amendments to the agreement.

During the joint hearing by both houses of the national congress on Tuesday, October 16, a number of issues were raised by the lawmakers surrounding the “sovereign guarantee” terms and also the possibility of having more expensive electricity rate for consumers despite the use of renewable resources in the future, among others.

The scheduled date for the government’s compliance on the ratification of the agreement by the national congress as indicated in the contract was also questioned by some members of the OEK.

“We’re continuing to work with both houses of the OEK to refine the sovereign guarantee language to meet their requirements,” Melairei explained.

As for the concern over the possibility of having electricity price hike, Melairei explained that based on PPUC’s calculation such will not be the case as Palau will actually save money with it.

According to Melairei, PPUC is currently purchasing fuel from two companies at a cost of 20.6 cents to generate one kilowatt hour and that they are projecting that this will increase to over 21 cents in the coming year.

Under the PPA with Engie Eps, PPUC will buy 19 cents per kilowatt hour in the first five years and this means 1.6 cents savings per kilowatt hour for Palau, According to Melairei. Given also that they are projecting that the current price of fuel will go over 21 cents next year, Melairei said that this means 2 cents savings for the country.

Savings in the generation cost translate into lower electricity cost for the consumers, Melairei explained.

Under the Paris Agreement, Palau vows to generate 45% renewable energy by 2025. (Rhealyn C. Pojas)

 

 

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