Fri. Feb 28th, 2020

Funds for PPUC assured, pending clarification of costs

Members of both houses of OEK assured Palau Public Utilities Corporation (PPUC) of financial support to avoid major disruptions to power services at the PPUC’s congressional oversight hearing yesterday, in response to PPUC’s letter to national congress warning of possible cash depletion by April of this year if no additional subsidies are provided.

OEK assured funding assistance with amount to be determined after costs have been clarified to OEK and the needed amount agreed upon.

“The issue of PPUC running out of funding is not a minor issue and one we take seriously and we want to make sure that it does not happen,” stated Senate President Hokkons Baules at the opening of the hearing yesterday.  “We want you to help us help you by explaining exactly what the situation is and how we can help you insure that the services are not disrupted or stopped,” added Hokkons.

Senator Rukebai Inabo, Chairwoman of the Senate Committee on Public Utilities, Communications, & Housing Development (PUC&HD)said OEK will seek funds needed to assist PPUC once both sides agree on the amount specifically needed by the corporation.

PPUC’s Acting CEO and Chairman Greg Decherong reiterated that PPUC was dipping into its financial reserves, which are set aside for emergency situations, in order to maintain operations. He added that the law prohibiting increase in tariffs to offset the operating expenses is crippling PPUC’s ability to remain financially solvent.  PPUC was suffering an income loss of $3.4 million as result of the prohibition even with government’s current fuel cost subsidy.  PPUC’s power point presentation showed an additional needed subsidy of $2.5 million to cover April 2018 to December 2019 plus an additional $2.5 million for 2020, a total of $5.0 million in subsidies to cover PPUC’s costs.

Senator Kerai Mariur questioned PPUC’s report saying that during the discussion of the bill to place prohibition on tariff, fuel cost subsidy was raised and PPUC recommended the current amount of government subsidy.  He said he did not understand why PPUC now says it’s a problem.

Chairwoman Inabo added that the letter saying PPUC will run out of money by April is not true citing PPUC’s 2019 audit report that stated PPUC had $8 million cash at the end of the year.  Furthermore, she added that the audit showed the cost of fuel only went up by $800k dollars over previous year and with the government subsidy of $500k, the shortfall should only be $300k.

In addition to fuel cost subsidy of $500K, government provided a $1.6 million subsidy for water and sewer.

PPUC board member Brian Melairei expressed that the fuel cost affect services across the board and that the restriction placed on tariffs impact PPUC’s ability to fully address its operational needs such as foregoing its capital acquisitions among others.  The fuel subsidy is only applied to fuel cost only.