Legal opinions from both OEK legal counsels and Attorney General clash over the legality of the recently executed Power Purchase Agreement between Palau Public Utilities and Engie EPS.
Whilst Senate counsels declare the agreement void, Attorney General states that PPUC complied with the law by obtaining approval to enter into negotiations on the power purchase agreement.
Senate legal counsels issued their opinion to Senate Committee on Public Utilities, Communications and Housing Development Chairman Senator Rukebai Inabo on Wednesday stating that the power purchase agreement recently entered into is void due to “absence of regulatory mechanism for approval”.
Senate counsels argue that Section 408 (a) of the law that gave Palau Energy Administration authority to approve major agreements PPUC enters into, requires that PPUC obtain approval from PEA to enter into negotiations on the purchase agreement. They further argue that the law mandates that PEA establish regulations determining the process of approval and since PEA has not establish those regulations to determine the approval process, the agreement than is void.
Attorney General in her opinion issued to President Remengesau Jr. yesterday, countered the Senate legal counsels’ legal conclusion. The opinion states that PPUC complied with the law by obtaining approval from PEA to enter into a major business negotiation as required under Section 408 (a) and informed President and OEK in writing of these negotiations. Initial approval requirement is for entering into negotiations. PEA had failed to promulgate regulations for their approval process for PPUC to negotiate agreements but PEA still has the authority to approve final contracts under 408(b).
Furthermore, the opinion states that under 408 (b), PEA approves the final contract prior to signing, a process that doesn’t require regulations.
Senate legal counsels’ opinion states that the requirement for regulations is mandated in the law as part of the intent of the law to have PEA regulates PPUC.
AG opines that the law was substantially complied with and that “procedural defect flowing from the failure to issue regulations on such preliminary matter as permission to enter into negotiations of contract would be harmless or inconsequential to the validity of the contract, especially as the ultimate decision to finalize the contract rests with PEA…”.
Statement from the Office of the President on the issue says, “This is not supposed to be battle of lawyers and technicalities. It is supposed to be an open discussion between the people’s elected representatives over the merits of an official government policy that will impact our people for generations. We have to decide.”
The debate rages over the agreement that would allow a majority owned French company Engie EPS to build a solar farm worth around $80 million dollars that would produce 35mega watts of electricity and maintains a battery stock that stores 45mW which will replace 45% of Palau’s energy dependency on fossil with solar energy.
The solar energy farm is projected to reduce energy cost by up to 30% according to research by GridMarket. Currently PPUC generation cost per kilowatt on diesel generators is 19.1 cents per kilowatt. In 2016 it was 15.5 cents, 2017 it was 18.4, 2018 its 19.1 and it 2019 it is expected to be 21.8 cents per kilo watt. Currently residential customers pay as low as 19.7 cents per kilowatt to 32 cents per kilowatt depending on usage. Commercial users pay higher. (L.N. Reklai)