Diesel, Legislation, Pacific Islands

Coal power plant proposed: new bill to allow companies to compete with Guam Power Authority

January 8, 2008 (Pacific Daily News) – The proposed 12-percent increase next month to the biggest item on your power bill — the fuel recovery charge — might just be the beginning of more increases to the cost of keeping your refrigerator, lights and air conditioners on this year. When the Guam Power Authority proposed the higher fuel surcharge, oil was around $90 a barrel on the international market.

But recently, a Goldman Sachs forecast states oil could hit $130 a barrel this year, and if that occurs — possibly in about eight months — island businesses and consumers and the local government face further financial strain, said Guam businessman Pete R. Sgro Jr. Sgro represents investors based in Japan and Manila who are considering a power plant project on Guam that will be fueled by what he called low-sulfur, “clean coal” from an Indonesian mine.

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Other factors that could further increase the cost of the power bills of everyone on Guam, Sgro said, include:

The weakened U.S. dollar, which is encouraging some nations to call for a shift from U.S.-currency-based pricing of oil in the international market to one that uses the Euro.

“There is a strong movement toward valuating oil using the Euro, which would be … catastrophic, especially on Guam,” Sgro said.

If the U.S. military bases on Guam decide to get their electricity from sources other than the Guam Power Authority, that would mean a 17-percent increase in the cost of electricity for customers who are left with GPA, Sgro said.

Simon Sanchez, chairman of the Consolidated Commission on Utilities, does not dispute that when oil prices rise further, the cost of electricity on Guam also goes up.

“Unfortunately, we are married to oil,” Sanchez said of the decision by the island’s policymakers and community stakeholders to go for power plants that run on now-expensive fuel oil.

That decision was made more than a decade ago to get Guam out of rolling blackouts, he said.

GPA also stated last year that if the military bases were to “delink” from the agency’s power supply, the rest of the ratepayers would see the cost of their electric bills increase because the number of people paying for the cost of fuel would be smaller.

What the community must focus on, Sanchez said, is to work together on finding alternative ways of fueling power plants on island.

Public hearing
But the question of how to go about building power plants that do not rely on fuel oil has split island policymakers into different viewpoints.

And the debate is expected to be amplified at a legislative public hearing this afternoon on Bill 122, “The Power Bill Reduction and Stabilization Act.”

Whether the bill’s consequences would live up to its title is one of the issues that’s expected to touch off differing opinions.

But no matter the outcome of Bill 122, some business establishments on Guam are beginning to explore options besides getting their electricity from GPA.

Power without GPA
Sanchez has confirmed that a solar energy provider has approached Tumon Bay establishments about possibly providing hotels with electricity.

And an application filed with the Guam Environmental Protection Agency shows another company, PowerSource Energy Services Inc., proposes to operate diesel-run generators to provide electricity to the Agana Shopping Center.

Guam EPA has yet to decide on PowerSource’s application.

At the request of Guam EPA, the applicant has provided a model of the expected air quality that would result from the proposed operation of diesel-run engines, according to documents submitted to the local agency.

Today’s public hearing on Bill 122, said its author, Republican Sen. Jesse Lujan, would essentially allow additional public comments on legislation that has twice had public hearings.

The bill also incorporates similar legislation from Democratic Sen. Rory Respicio.

The overall goal of the bill, Lujan said, is to open up the power generation business to competition to bring down the cost of power on island.

Competition
Proponents of the bill envision a marketplace that’s open for competition, similar to the way phone companies on Guam now can give the former government landline phone monopoly competition.

The bill would allow private companies to generate their own power and then use GPA’s transmission lines — for a fee — to bring the power to the customers.

Sanchez said the bill’s goal is “honorable” but will have unintended consequences that could lead to higher costs for ratepayers in the long run.

The bill, he said, would allow companies to “cherry-pick” areas and customers — leaving GPA with customers that private businesses don’t want to serve. And when that happens, the cost of power goes up even more for those customers.

What Sanchez said Guam should work on is a “unified” approach to finding alternative sources of energy and a mechanism that allows for cost savings to be shared by all power ratepayers.

Efficiency
Sen. Lujan said the bill would result in lower power costs in general because private businesses are able to better maintain their power plants, resulting in cost savings that can get passed on to customers.

“That’s what this is about: You have to have the mechanism to supply efficient power to the customers,” Lujan said.

Sgro’s investors plan on obtaining low-sulfur coal from an Indonesian mine that will supply only to the group’s power plant project in the Philippines’ Mindanao region and the Guam power plant, if it becomes a reality.

Having a dedicated source of coal that’s not traded in the international market insulates the coal’s price from international price spikes, Sgro said.

In the public discussions about the future of Guam’s power infrastructure and the costs to ratepayers, Sgro said, “It’s important that there not be any effort to divide our community between the government and the private sector.

“The government of Guam is being hit just as hard with these rising costs of power as every family, as every business on this island” has experienced, he said.

Sanchez, however, warned that after an initial honeymoon period of low rates, ratepayers could see their power bills rise under privately-run power plants, an experience he said some states have seen.

“California is a mess and they are looking to repeal their ‘Bill 122.’ It has not worked for them,” Sanchez said.

He said GPA and CCU would bring experts at today’s public hearing.

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