Mon. Mar 30th, 2020

OEK to continue subsidy plan discussion with PPUC 

The Olbiil Era Kelulau  (OEK) is reportedly conducting another congressional oversight hearing to continue hearing this Thursday as lawmakers and the executive branch continue to look into options to save Palau Public Utilities Corporation (PPUC) from going broke by April 2020.

PPUC is urging both the Executive Branch and Congress to bail out the agency or it runs the risk of shutting down in two months.

According to  PPUC Chairman and Acting CEO Greg Decherong said that without a subsidy or increase of power rates, PPUC would go broke by April 2020 despite austerity measures.

It is also urging Congress to lift the prohibition to increase its AFPAC tariff rate at $.286 (.109 for energy and .177 for fuel) will put PPUC to have an estimated net loss of $3.9 million this coming year.

Last year, Congress has prohibited the PPUC in increasing its fuel rate costs to avoid burdening consumers.

But PPUC said the inability to increase rates is affecting its financial capabilities.

“We are appealing to the Palau Energy Administration for a tariff review or any help that will encourage the OEK to revoke the postponement of the tariff up to October 2020, or if not, give PPUC subsidies in order for it to survive.” Decherong said in a letter to PEA last month.

He said the $500,000 that the government is giving PPUC “cannot suffice the total losses that we have accumulated to date.  It is an understatement of the costs that we are incurring every year to operate.”

In a press conference Feb. 5, President Tommy Remengesau Jr. said both Congress and his branch would look into ways to assist PPUC.

PPUC will need at least $4 to $ 5million to cover its projected losses.

According to the USA Graduate School economic review, last year said that although PPUC has received subsidies in the past or has improved its financial performance,  it was still inadequate to cover the cost of operations and it continues to suffer income loss.

The report said in order for PPUC to get out of net loss, doubling of rates is needed.

“The weak financial performance of the PPUC is attributed to a variety of interrelated factors. Most important, the utility has not been allowed to operate at full cost recovery. Political considerations have resulted in the establishment of a suboptimal tariff structure, which has constrained setting aside a reserve for plant replacement. This, in turn, has led to increased costs for more frequent maintenance,” the report added.  (Bernadette H. Carreon)