July 09, 2012

By Bill Jaynes
The Kaselehlie Press

July 2, 2012 Pohnpei, FSM- A May 23 committee report by Pohnpei State Legislature's Committee on Public Works, Transportation, and Communication (PWTC) indicates that the committee does not entirely agree with Governor Ehsa's Pohnpei Utilities Corporation bill (LB 42-12). In its current incarnation (LB 42-12 LD 1) the bill bears very little resemblance to the bill that the Governor proposed.

The committee report says that the amendments it made to the Governor's bill essentially accomplish four main tasks. They allow for the renewal of the board. They establish due diligence procedures to be followed by PUC when it enters into power purchase agreements. They establish a new system of utilities rates reviews to replace RPPU (Residential Properties and Public Utilities board). Lastly, they establish a system of renewable energy tariffs so that PUC customers can reduce their power bills by installing their own renewable energy systems.

Plans for PUC Board

Uncomfortable with the Governor's plan to allow him or any future Governor to replace the entire sitting PUC board by virtue of an Executive Order, the committee report says its plan is for "renewal" of the Board in a "systematic and logical manner."

The Governor's stated wish to remove the entire current board is incorporated into the committee's amendments to the bill but it is a one-time removal of the board and does not allow for the Governor or future Governors to remove future boards by Executive Order. If the bill passes in its current form, the terms of all of the current board members will essentially expire upon passage of the bill. Rather than accepting the Governor's plan for selection of new board members the bill would instead require the Governor to submit to the Legislature, two nominees to serve one year terms, two to serve two year terms, two to serve three year terms and one to serve a four year term. The implication of the pending bill is that each of the nominees would require the advice and consent of the Pohnpei State Legislature.

It also adds requirements regarding the composition of the board saying that four members should be from the public sector and three members from the private sector. It sets up standards prohibiting members to serve who have delinquent bills at PUC of over three months.

Outsourcing of power generation

The committee was additionally concerned with the Governor's plan for outsourcing of power generation. "The (Governor's) bill provides for a general grant of authority, but is silent on the procurement processes and is without language requiring transparency in the selection of independent power producers or decisions to enter into partnerships, joint venture and 'creative' financing arrangements with other entities," the committee report said.

The bill outlines systems that require an independent feasibility study before any power purchase agreement can be entered into by PUC.

It also requires that any plan to enter into a power purchase agreement must first be approved by the Governor. If an agreement between PUC and the governor cannot be reached within 180 of the original submission of the feasibility to the Governor's office "the issue may be transmitted to the Legislature by either the Office of the Governor or the Board of Directors of PUC with a recommendation for statutory action."

It says that the independent generator of power must have demonstrated the capability of consistently delivering not less than two megawatts of reliable electric power to the PUC grid within one year of the date of the signing of the power purchase agreement. The bill does not say what would happen if that standard is not achieved.

It says that the purchase price of power from the independent generator of power cannot exceed the current costs incurred by PUC for the production of the same amount of electricity, inclusive of production operating expenses and the depreciation of generation equipment. The calculation would not include the costs incurred by PUC in the distribution and transmission to the general public of the power whether purchased or produced by PUC.

Residential Properties and Public Utilities board to be replaced by a "process"

The committee agreed that the Residential Properties and Public Utilities board which is empowered by law to set tariffs for power should be abolished. But the committee report said that the Governor's bill left a vacuum in terms of checks and balances and recommended that a rate review "process" should fill the void.

The rate review process that legislators have written into the bill could require as much as 210 days before any tariff change recommended by PUC could be implemented. The bill also would suspend any rate increase implemented by PUC in calendar year 2012 until after a rate review is conducted as described in the bill.

The tariff the bill to which the bill refers, is a separate issue from the fuel surcharge which is figured based as a function of the cost of fuel over the number of kilowatt hours sold.

The tariff "process"

Within 30 days of a PUC tariff increase announcement the Governor would be charged to establish a selection panel consisting of the Administrators of the Office of Transportation and Infrastructure, and the Office of Economic Affairs, the Director of the Department of Treasury and Administration, a prominent member of the business community recommended by the Pohnpei Chamber of Commerce, and a representative of the residential population appointed by the Governor after consultation with the chief executives of the local governments of Pohnpei.

Once formed the panel would put out a call for proposals for independent contractors to evaluate any proposed changes in the tariff rate. The panel is required to make a report to the Governor within 10 working days following the deadline for the submission of proposals. The report must include a description of the panel's method of selection for the recommended contractor.

The selected contractor would then have 90 days to submit a preliminary report of their findings to the Governor, the Legislature, and to PUC.

Of the many factors that the contractor would need to study, the public's ability to pay for any increase in the tariff is at the top of the list in the bill. Actual costs and effectiveness of service are also on the list.

Within 30 days following the submission of the preliminary report the firm or organization, with the assistance of the Office of the Governor, will be required to hold one or more public hearings on the report. "The purpose of the hearings shall be to solicit comments on the preliminary report for possible modifications to the final recommendations of the firm or organization…"

After the public hearings are completed the firm or organization will then have yet another 30 days to submit its final report to the Governor, Legislature and PUC. The cost of financing the reviews by independent firms or organizations would be borne "jointly and equally" by the Governor and PUC.

Alternative power stimulus

Lastly, the bill sets up statutes to encourage the development of renewable and sustainable power sources at the consumer level.

The bill defines a renewable energy source as "solar, hydroelectric, wind, methane gas produced from organic or animal wastes, bio-mass, bio-diesel, ocean waves, and tidal flows."

Essentially, the bill says that a home or business that generates power provided by renewable energy systems not exceeding 50 kilowatts of power generation capacity, could earn power credits for power provided to the PUC power grid. Those credits could be used to pay for power that the customer consumes.

The outward and inward bound power would be measured by a "feed-in meter" which, according to the pending bill, PUC would be required to install at the customer's expense within 90 days of a customer request. Renewable power generators are not free and batteries to store power generated by renewable energy systems are a major portion of the expense. Emanuele Taibi of the Secretariat of the Pacific Community says that batteries can cost upwards of $2000 each and some systems require more than 20 batteries in order to be self sufficient.

He says that a renewable energy system can be connected directly to a "feed-in meter" without the use of batteries. The trade off is that when the PUC grid is off, as happens when their generators are down, power could not upload to the grid nor download from the grid.

In other words, an independent power producer without a battery would be in the same boat with the rest of us when the power is down. However, without the expense of batteries a renewable energy system could pay for itself pretty quickly considering that PUC is currently charging close to 56 cents per kilowatt hour.

At press time the "PUC bill" was still in its first draft stage and could change substantially before and after this article is release on Monday, July 9, 2012. The legislature will begin to consider it on Thursday July 5.