Senate committee chair lays down OEK’s issues on PPA

Senate committee chair lays down OEK’s issues on PPA

  23 Oct 2018

Senate’s Committee on Public Utilities Chairperson Rukebai Inabo has laid down several concerns raised by the Olbiil Era Kelalau (OEK) on the Power Purchase Agreement (PPA) entered into by the Palau Public Utilities Corporation (PPUC) and the Engie Eps.

In an exclusive interview with Island Times on Friday, October 19, Inabo said that the “sticking point” of the OEK is to make sure that the people of Palau are going to pay a power bill at a cost that is fair.

“We don’t want this company to take too much money from the pockets of our people just as a profit. We want to be treated fairly, that we pay for them to run this solar power plant at a cost that’s fair and not taking too much from us and I think that is our job as senator, representing everybody and looking at this,” Inabo said.

Inabo said that there was no disclosure about what possible cost, revenue and net income that the company will make out of the project.

Among the concerns on the agreement is the waiver to exempt the company from local tax, which according to Inabo, does not “feel right” for the lawmakers especially that they do not know how much income the company will make once the project is in place.

“We believe that they are not going to lose money. They are going to make money like every business so they should pay tax like all the businesses that run in Palau,” Inabo said, explaining further that the national congress is ensuring that this will not serve as a precedence of businesses waiving taxes in the future especially that the company is a profit-making entity and not a government entity.

Inabo also said that the rate set under the agreement is not going to reduce the power bills that Palauans are going to pay in the next 30 years but only makes it steady.

“If it (power rate) stays the same for the next 30 years – that is a very long time so we ask for the reduction of that rate and we ask for a 10-year interval review of those rates,” Inabo said, referring to the agreement terms where PPUC is going to pay 19 cents per kilowatt hour (kWh) from Engie Eps in the first five years of the project’s operation, 20 cents per kWh from the sixth year to the 20th year, and 20.5 cents/kWh from 21st year to the 30th year.

“We don’t know how much is really the reasonable cost for this project because there were no other bids, no other offers so it is like we are making a decision in the dark,” Inabo said in the latter part of the interview.

In our previous report, PPUC Board member Brian Melairei claimed that there will be no electricity price hike as based on the PPUC’s calculation, Palau will save money with the setup.

Melairei explained that 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.

Another concern raised by the OEK is that the Palau Energy Administration(PEA), as a regulatory body for PPUC, has not yet promulgated the regulations.

The PEA officially became a full regulatory authority over production, purchase or sale of energy in the country when it was passed by the national congress and eventually signed into law by President Tommy Remengesau, Jr. last April.

Through the Palau Energy Act, PPUC is required to get PEA’s approval first before entering into “major business negotiations” involving energy production, purchase or sale.

Although the deadline set by the Engie Eps for the congress’ ratification of the agreement had lapsed on October 17, the agreement states that Palau can extend the compliance date.

Inabo said that Public Infrastructures, Industries and Commerce Minister Charles Obichang has informed them that the Engie Eps has agreed to a 10-day extension for the compliance to ratify the agreement.

Inabo, however, said that they do not know whether 10 days will be enough to do the thorough evaluation of the agreement, given also that PEA has not promulgated regulations for PPUC to observe. (Rhealyn C. Pojas)

 

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