Multiple reviews, as well as requests for investigations, are being launched in connection with a 25-year power purchase agreement that has a “guaranteed price” of $190 million, at a time when the deal's major architects-Gov. Benigno R. Fitial and former attorney general Edward T. Buckingham-are thousands of miles away from the CNMI.
The power deal with Saipan Development LLC is among the most expensive government contracts in CNMI history, signed by Fitial and Buckingham on Aug. 3.
That was Buckingham's last day of work, a day before leaving the CNMI with armed police and ports police escorts to the airport allegedly to help shield the AG from being served a penal summons in connection with criminal charges filed against him.
Fitial and Buckingham shunned Commonwealth Utilities Corp. officials from participation in the contract formulation and negotiations with Saipan Development LLC starting on or about July 10, acting CUC executive director Alan Fletcher told lawmakers yesterday.
Acting governor Eloy S. Inos asked for an independent full economic analysis on the matter.
The Office of the Attorney General is also looking into the matter.
The Public Utilities Commission was poised to conduct its own oversight, but Inos extended the emergency declaration for CUC, therefore suspending PUC's regulation of CUC.
The Senate Committee on Public Utilities, Transportation and Communications is now reviewing the matter, and so will the House PUTC Committee and the House Committee on Judiciary and Governmental Operations.
Some lawmakers are also going to ask the Office of the Public Auditor and possibly a federal agency to review or investigate what they described as a questionable sole-source contract and the circumstances leading to the agreement.
Lawmakers also said yesterday they want to put a stop to the contract implementation without a full review of the contract provisions, the circumstances leading to the governor and the former AG's decision to approve the deal, as well as a determination whether the contract is a form of public indebtedness that needs the Legislature's approval.
Inos said yesterday he has asked for an independent examination of these matters as “there seems to be considerable difference in opinion on the total costs and impact on utility rates.”
The acting governor said the Commonwealth continues to examine the specific facts and circumstances of the identified power plant project. Inos saw a copy of the power purchase agreement only on Wednesday morning.
“I do not want to get into specific details at this time as we are having ongoing discussion with the parties that were involved in this project. I will have more definite information once our examination is completed,” Inos said in a brief statement to the media yesterday.
Inos released the statement while Fletcher was being asked by members of the Senate Committee on PUTC chaired by Sen. Juan Ayuyu (Ind-Rota) and other Senate and House members regarding the power contract.
Fletcher said Inos requested a “full economic analysis.”
He said many of the lawmakers' questions can only be answered by CUC once that full economic analysis is completed.
Among the lawmakers' questions-will the multimillion contract result in lower utility rate for CUC customers and will it be less costly for CUC?
Acting press secretary Teresa Kim said such independent review will be conducted by a private firm. Kim and Fletcher also said the OAG is also looking into the agreement.
The Senate PUTC meeting with CUC was scheduled for 2:30pm yesterday. Initially, it was a closed-door meeting at the request of OAG, senators said.
Senate President Paul Manglona (Ind-Rota) said because OAG later on decided not to participate, they opened the meeting to the public. Prior to that, Fletcher also got a go-signal from Inos about the meeting that's open to the public.
More reviews
Public Utilities Commission chair Joseph C. Guerrero, during the lawmakers' meeting with CUC's Fletcher, said PUC will have full oversight of this contract as the executive order placing CUC under a state of emergency expired on Aug. 15.
Guerrero said PUC was poised to conduct its own oversight hearing on the contract.
Hours later, the Legislature received from Inos a new executive order, No. 2012-10, again placing CUC under a state of emergency, placing CUC under the direct control of the governor.
In the Aug. 16 EO, Inos said all provisions in the Commonwealth Code and Public Law 17-34 concerning PUC regulation of CUC and its actions are “suspended under this Order.” Such includes potentially, any oversight of renewable energy contracts.
The Senate PUTC Committee has started its separate review, and so will the House PUTC Committee and the House Committee on Judiciary and Governmental Operations.
House Speaker Eli Cabrera (R-Saipan), in a separate statement, said the House will be asking the PUTC Committee, chaired by Rep. Stanley Torres (Ind-Saipan), and the House JGO Committee chaired by Rep. Ralph Demapan (Cov-Saipan) “to look into the contract” and “report back to the House as soon as possible.”
“Personally, I have not seen the contract and my colleagues have not seen it. So until we review it, we cannot decide on the merits of the contract by relying solely upon what the media reports. I want to actually see the contract first-then after we review it we can form an educated opinion,” Cabrera said.
Both the Senate and the House did not have prior knowledge about the power purchase agreement prior to its signing by the governor and the former attorney general.
Public debt
Of particular concern to the House speaker is the issue of whether the 25-year power purchase agreement is a form of public indebtedness that under the constitution requires the Legislature's approval.
“If the reports are accurate, that the governor and the former attorney general both signed the contract, it would appear that the full faith and credit of the CNMI would be involved. Usually, a governor signs a contract, as opposed to the agency alone, when there is a major undertaking such as a public debt,” Cabrera said.
The speaker said it's one thing if CUC signed off on the contract by itself, and CUC did not pass on the debt to the ratepayers.
“However, we have not heard anything from CUC regarding this specific contract and CUC had every opportunity to tell us that a deal like this was in the works. If this power plant will be financed by the ratepayers, then any way you look at it, it is public debt and two-thirds of both the House and Senate would need to approve the deal. As a constitutional matter, the House and Senate will need to approve the contract before, not after, the deal is done,” Cabrera said.
Rep. Frank Dela Cruz (R-Saipan) said he's drafting a letter to OPA to investigate the matter.
While the power deal's “guaranteed price” is $190.8 million for 25 years, it could actually cost the CNMI way more than $200 million because taxpayers also have to pay for fuel, operations, and maintenance fee, among other things.
There's no telling yet whether the contract is now being fully executed.
The 41-page power purchase agreement grants Saipan Development LLC an “exclusive right to develop a diesel-generated electric power plant” on Saipan.
Delegate Gregorio Kilili Sablan (Ind-MP) earlier said Fitial declared a CUC emergency and using his emergency powers, “he signed us all up to pay over $200 million over the next 25 years.”
“How can a project that likely won't be shovel-ready for years, be considered a solution to a so-called 'emergency' and circumvent the normal CNMI procurement process?”
Senators and House members repeated this sentiment yesterday as they asked CUC's Fletcher about the contract.
Under the PPA, CUC will pay Saipan Development LLC “300 consecutive, equal monthly installments of $636,091.”
Three hundred months is equivalent to 25 years. If the monthly payment is $636,091, then the yearly payment is $7.63 million. That is equivalent to $190.8 million in 25 years.
Payment of the guaranteed price “is not subject to alteration, adjustment, setoff, counterclaim, abatement, or Force Majeure.”
In addition to the guaranteed price, CUC shall pay Saipan Development LLC an operations and maintenance fee of 0.0191 per plant-produced kWh per month.
CUC shall also pay a production fee of .0153 cents per plant-produced kWh to cover the costs of lubricant oils consumables and spare parts.
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