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Senators pushing to raise power rates; several officials concerned

By Eric Rosario

Our power bills will rise if senators pass a bill by Sen. Joe San Agustin, according to the chairman of the Public Utilities Commission and the general manager of Guam Power Authority.

Senators Thursday night will vote on Bill No. 219, which will convert Guam's public education institutions power supply to solar sources of energy, while crediting the education agencies for the power supplied back into the GPA transmission and distribution system.

The action creates two problems that residential ratepayers will absorb directly. The first is that those education agencies - among which Department of Education is one of GPA's biggest customers - will no longer be paying millions of dollars a year in power bills. According to GPA general manager John Benavente, that's about $12 million annually. Residential ratepayers will have to pay to make up that amount in lost revenue so that GPA can continue to supply the island with electricity.

But that's not all ratepayers will have to foot. The electricity the schools will feed back into the system may mean ratepayers will pay even more for this public policy, if enacted.

"There will be higher power rates as a result of this bill," stated Jeffrey C. Johnson, PUC chairman, in testimony to senators opposing Bill No. 219. "By authorizing these arrangements, the Legislature negatively impacts the rate subsidies provided by government customers to the residential class. The impact will be an increase in residential rates."

Mr. Johnson effectively called the legislation short sighted and lacking a responsible study to back up its intent to lower power costs. He said the solar energy that would be produced by the schools "would be three times the cost of utility scale solar energy produced by GPA. Even if reduced fuel costs are deducted, net metering energy is more than twice as expensive as GPA produced utility scale solar energy."

GPA already is on track to convert the islandwide power system to 50 percent renewable energy sources by 2030, or five years ahead of schedule. In less than five years, a quarter of the power system will be derived from renewable energy sources.

The agency is in the midst of investing nearly $1 billion in power production, transmission, and distribution infrastructure upgrades, all tied to its Integrated Resources Plan that includes the conversion to renewable energy production.

The investments are tied to revenue bonds GPA already has secured and will secure. Guam's creditors rely on those bonds's covenants, or contracts, for the security of their investments over the repayment terms of the bonds. If the bond covenants are broken by the Guam Legislature (and they will be, if Bill No. 219 becomes law), Guam may face default on the revenue bonds. This will cause rates to go up even further, not just for power bills, but also for the cost of the rest of the government, as other bonds would be in jeopardy.

Sudden deviations from GPA's IRP, especially ones caused by political entities such as the Guam Legislature, can throw the financial integrity and the goals of this $1 billion investment out of place. The ratepayers will be left to hold the proverbial bag.

"The proposed bill, if enacted, would limit the power and independence of the [Guam Public Utilities Commission] as a rate-making authority and would be a breach of the Government's covenant in GPA's indenture," wrote John Wang, who is managing director of the government of Guam's bond counsel, Orrick in San Francisco. "The Government would have breached its own contractual obligation in a manner that could be a default under the GPA indenture. Indenture defaults can result in the acceleration of the bonds, and the Government might find itself liable for significant damages."

The concerns raised by Mr. Johnson, Mr. Benavente, and Mr. Wang are contained in full testimonies and letters to Guam's leaders prior to the senators's debate last week on Bill No. 219. Despite these concerns, the senators voted to send the bill into the legislature's voting file to be voted on Thursday night.

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