Guam Power Rates Could Increase Amidst LNG Transition

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$650 million conversion hoped to save $900 million over 30 years

By Michelle Conerly

HAGÅTÑA, Guam (Pacific Daily News, Nov. 14, 2013) – Power customers could see an increase in their power bills after the approval of the power agency's plan to transition to liquefied natural gas as a new fuel source for Guam.

On Tuesday, Consolidated Commission on Utilities (CCU) commissioners approved the Guam Power Authority's plan, which brings the possibility of an increase come February in the Levelized Energy Adjustment Clause, or LEAC, which represents the cost of the fuel portion of ratepayers' power bills.

Joaquin Flores, general manager for the Guam Power Authority (GPA), said the agency will utilize an existing contract with R.W. Armstrong to conduct project management services, which are critical for the implementation of LNG.

The Power Authority negotiated the $3.9 million contract, which is a "LEAC-eligible expense," that is subject to approval of the Public Utilities Commission (PUC) due to its potential impact on the rate of fuel costs.

Simon Sanchez, the chairman of the CCU, said the intent always has been to fund this contract through the LEAC, stating that there was no other fund from which GPA could draw for this.

While the impact could be little to none if fuel rates were to continue to decrease, an increase of 1.6 percent on the LEAC, which results in a total bill increase of 1.05 percent, could be the result if the market for fuel were to keep the status quo.

Flores also assured commissioners that the scope of work in the contract, which includes supporting GPA in contracting activities and developing program policies and procedures to manage capital improvement projects, will be completed within a year's time.

According to the execution plan, commissioners recognized that the $650 million conversion to LNG could result in more than $900 million in savings over 30 years and that this plan also would help the power agency comply with federal clean air standards by burning a cleaner fuel.

The retirement of specific baseload generators as new, dual-turbine generators come online in the next few years also is included in the implementation plan.

The retirement of the Tanguisson power plant is scheduled for sometime within the 2015-2017 timeframe.

While the retirement of Cabras 1 and 2 depends on how quickly the dual-fuel-burning generators can come online so as not to interrupt power generation during the interim, Flores said if the agency were to begin next year and continue with the five-year plan, the earliest GPA would see the new units producing energy would be 2019.

He also said that if it came down to GPA burning diesel at a higher cost until LNG could be implemented, due to the efficiency of the new generators, the cost would be equivalent to that of burning heavy oil.

Several amendments were added to the resolution, including a clause that requires Flores to report to the CCU quarterly on any developments on the plan in addition to monthly reports to commissioners from both the CCU and PUC.

The Guam Power Authority must seek PUC approval of this plan on Nov. 27 before any work can be done. While commissioners told GPA on July 30 to proceed with caution on the execution strategy, a more detail-oriented version is due by the end of the month.

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