Many government officials who were in favor of the amended and restated Power Purchase Agreement (PPA) with France-based company Engie EPS had repeatedly expressed that it was the best deal for the country but the vast majority of the Senate begged to disagree, citing major points why they did not approve of the deal.
The deal was previously entered into by the Palau Public Utilities Corporation (PPUC) and Engie EPS in October and was tagged to be part of Palau’s commitment to generate 45% renewable energy by 2025 under the Paris Climate Agreement. The deal, in order to be effective, had to be approved by the Palau National Congress through a resolution which, after bargaining, passed the House of Delegates but had failed to make it out of the Senate.
The Senate, during a special session last week, refused to adopt the resolution in a vote of 11-1.
In the Senate’s standing committee report no. 10-166 prepared by the Senate Committee on Public Utilities, Communications and Housing Development (PUC&HD), the senate firmly stood with the major points that led them to refuse to adopt the restated deal after deliberations that took almost two months following the endorsement of PPA to the Senate on October 12 by President Thomas Remengesau, Jr.
Topping the list of the major points by the Senate was the lack of promulgated regulations by the Palau Energy Administration (PEA), the regulatory body for PPUC.
The senate report stated that PEA did not fully comply with the RPPL 10-23, the law that mandates the body to adopt regulations and procedures in which the PPUC should act on whenever entering any “major business negotiations” relating to power.
“The PEA conceded that, regrettably, it had not yet promulgated regulations governing this approval of a major business negotiation,” the report stated.
The second concern of the Senate was the part of the deal that asks Palau government to waive its sovereign immunity, a legal doctrine that gives state immunity from civil suit or criminal prosecution.
The committee report emphasized that there needs to be a statute in place to be able to waive sovereign immunity and to authorize the president to issue a sovereign guaranty.
It also cited that there never was a case in Palau and even in the United States where a valid sovereign immunity waiver came into place in “any other form than statutes.”
The committee is convinced that the sovereign immunity waiver can be best authorized through a duly-enacted bill.
The committee also pointed out that “sovereign guaranty is not limited such that all trust funds are excluded, especially the COFA trust fund and other local trust funds such as the Civil Service Pension Trust Fund, the Social Security Trust Fund, Medical Savings Accounts and the National Health Insurance funds.
It also noted that under the agreement, the private company Engie EPS will be utilizing public lands and will also enjoy other benefits to be derived from the granting of tax concessions to Engie EPS, among others.
The proposed fixed price of 20 cents/kWh for the purchase of power from Engie EPS for the next 30 years, as stipulated in the agreement, made the committee even more skeptical with the deal, citing that all market indicators showed that prices for generation of solar energy in the coming years is dropping.
The committee said that given the length of the effectivity of the proposed deal, it should be subjected to a periodic review of at least every 10 years.
“Palau should have an opportunity to renegotiate the terms and conditions of the PPA given new market trends, improved technology, and the likelihood of lower Feed-In Tariffs (FIT) more economically feasible and fair for Palau,” the committee report stated.
The Senate emphasized that it supports promotion of clean energy and implementation of the national renewable energy policy but it wanted to ensure that in doing that, substantial reduction of electric bills should be ensured also.
It further stated that Palau still has more time to improve the deal especially that the year to hit the 45% renewable energy generation target is still in 2025. (Rhealyn C. Pojas)