Guam Utility Commission Conditionally Approves New Power Plant

Cost of proposal could exceed $420 million

By Gaynor Dumat-ol Daleno

HAGÅTÑA, Guam (Pacific Daily News, Oct. 28, 2016) – The island’s rate regulatory commission on Thursday night approved — under certain conditions — Guam Power Authority’s proposal to begin the initial process toward building a new power plant, which could cost about $424 million.

After initially turning down GPA’s new power plant proposal in early 2015, when GPA had a comfortable supply surplus, the Public Utilities Commission changed its mind. The explosion and fire that severely damaged major power plants Cabras 3 and 4 more than a year ago have led to recurring outages, and that’s the main reason for PUC’s new stance, said PUC Administrative Law Judge Fred Horecky.

The commission’s approval attached provisions that GPA would still need to go back to the PUC for approval on whether GPA needs a new power plant as big as 180 megawatts, as GPA suggested, or whether a smaller scale power plant would suffice.

PUC also would like GPA to get step-by-step approval from the PUC, including on the selection of a private developer. GPA plans to open bids from developers to finance, build and run the proposed power plant.

Horecky also noted that based on a consultant’s findings, GPA has a history of poorly maintaining its power plants.

Cabras 1 and 2 should still function for another 20 years, had they been maintained properly, but because of poor maintenance, the two plants would need millions of dollars worth of repairs and upkeep to continue to function over the next five years, Horecky said, citing a consultant’s findings.

The cause of the Cabras 3 and 4 explosion hasn’t been determined, and GPA consultants’ analysis might take six months from now to reach a finding, said Joey Duenas, chairman of GPA’s governing board, the Consolidated Commission on Utilities.

Investigators for the insurance company and its adjusters are also conducting their own process of trying to find out the cause, Duenas said.

An earlier GPA estimate for the new plant was more than $300 million, but the estimated cost of land acquisition in Harmon which Duenas said would be about $12 million, and the cost of transmission lines from the power plant to the nearest substation near the Micronesia Mall, would push the cost to about $424 million, according to information presented to PUC.

Guam’s Public Utilities Commission hadn’t decided as of press time Thursday whether to authorize Guam Power Authority to start the process of seeking a power plant developer.

The commission started meeting around 6:30 p.m., in the GCIC building in Hagåtña, but still hadn’t made a decision as of press time.

As the rate regulator, it’s also the commission’s job to weigh how the project might affect the cost of electricity for homes, businesses and government entities. GPA once estimated the cost of a 180-megawatt power plant at more than $300 million.

The new power plant proposal, initially proposed in 2014, is now being viewed with a sense of urgency following the August 2015 explosion and fire that shut down Cabras 3 and 4 indefinitely. The cause of the explosion hadn't been fully explained, and GPA has yet to finalize an amount for its claims for the damage to Cabras 3 and 4, a document filed with the PUC shows.

GPA lost 80 megawatts following the explosion and has made the island vulnerable to outages and power rationing.

“The Cabras explosion has accelerated the need for the new plant urgently,” according to GPA General Manager John Benavente’s presentation to local lawmakers on Oct. 26.

As recently as Thursday morning, major residential and business areas on the island — including Tumon, Tamuning, Harmon, Hagåtña, Dededo and Yigo — lost power for about 11 minutes because Cabras 2 shut off unexpectedly. The 60-megawatt Cabras 2, which is 44 years old, had a control system problem Thursday morning, said GPA spokesman Art Perez.

Thursday’s outage didn’t last long because GPA was able to activate backup power generation, combined with other sources that were already running when Cabras 2 shut down, such as the 25-megawatt solar farm in Dandan and the 40-megawatt rented power generators from Aggreko Plc. Aggreko is internationally known, has provided power to international events and is publicly listed in the London Stock Exchange.

Ratepayers won’t pay for higher power rates because of the new power plant, said Joey Duenas, chairman of the Consolidated Commission on Utilities, which functions as GPA’s board.

An earlier version of GPA’s plan would increase the cost by 1.8 percent of a customer’s total power bill in 2024, 1.7 percent in 2025, and 4.6 percent in 2026.

GPA will seek a private developer that can finance the project on its own, without seeking GovGuam’s help to borrow money from the bond market, Duenas said.

GPA envisions an “independent power producer” concept in which the agency would commit to buy supply from the new power plant.

Duenas said potential insurance proceeds from the Cabras 3 and 4 damage could also help offset the cost to ratepayers of the proposed power plant.

If the plan goes smoothly, the island would have a new power plant that can produce up to 180 megawatts four years from now, Duenas said. Islandwide demand peaks at about 250 megawatts, between 6 p.m. and 10 p.m.

The island's first utility scale solar farm can produce up to 25 megawatts, but during cloudy days, its production drops by half, and it can't supply power at night, GPA has acknowledged. GPA plans to buy a battery storage system to stabilize the power supply fluctuations from the solar farm, but the system still wouldn't allow for solar to be stored for nighttime use, GPA has stated.

GPA’s power plant plan was initially formally proposed in 2014, but certain sectors of the community were concerned about the cost, which neared $600 million at the time, in part because of the lack of pipeline and seaport infrastructure for liquefied natural gas.

The revised plan shifts the fuel focus from liquefied natural gas to ultra-low sulfur diesel. GPA also wants a power plant that has the capability to use either diesel, or natural gas.

Pacific Daily News
Copyright © 2016 Guam Pacific Daily News. All Rights Reserved

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