The Senate formally asked Gov. Benigno R. Fitial yesterday afternoon to “cancel” the 25-year power purchase agreement that has a guaranteed price of $190 million, until a comprehensive economic analysis is made to determine the fiscal impact of the deal on the Commonwealth Utilities Corp. and ratepayers.
But some lawmakers are also worried that if Saipan Development LLC has already signed the contract, a suit for breach of contract may be forthcoming.
By a vote of 7-0, the Senate adopted yesterday Senate Resolution 17-94, “objecting” to the “sole-source” PPA between CUC and Saipan Development LLC, which remains a mystery firm except to only a few including Fitial and former attorney general Edward T. Buckingham.
“This resolution asks the administration to hold off further action on the contract until there's proper study,” Senate President Paul Manglona (Ind-Rota) said.
House minority leader Joe Deleon Guerrero (R-Saipan), in an interview yesterday, said the minority bloc is expected to pre-file a similar resolution, although they might ask Lt. Gov. Eloy S. Inos as acting governor, instead of Fitial, to “cancel” the contract.
Inos has already requested an independent full economic analysis on the matter. Inos was not informed by Fitial that a 25-year contract was about to be signed or was already signed.
The acting governor knew about the signed contract only after it was reported in the media this week.
'Reeks of corruption'
Deleon Guerrero said he deems Saipan Development LLC as only a “broker.”
“They are getting this contract and getting a guaranteed price. They can secure a loan, and pay somebody to do it [perform contract requirements]. That's a possibility with this kind of arrangement,” Deleon Guerrero said in an interview at his office yesterday.
He said the CNMI or CUC built power plants in the past but it went directly to the manufacturers. “So how is it in the best interest of the CNMI to execute a contract with a middleman?” he asked.
“The way this contract was crafted and the manner in which it was executed reeks of corruption,” Deleon Guerrero said.
Fitial and Buckingham signed off on the contract on Aug. 3, a day before Buckingham left the CNMI with the help of armed police and ports police officers.
Fitial is currently on a three-week off-island trip and is not expected to be back at least until Sept. 4.
Sen. Juan Ayuyu (Ind-Rota), chair of the Senate Committee on Public Utilities, Transportation and Communications, separately said yesterday there are a lot of unanswered questions about the contract, that even CUC could not provide the answers.
“The $190-million contract is not stipulated in the governor's emergency order. Having that contract does not address the emergency situation now,” he said.
'Under the guise of state of emergency'
The four-page Senate resolution says it is impossible to support the PPA “which was executed by circumventing procurement laws, CUC, and PUC [Public Utilities Commission] laws and regulations, and under the guise of 'state of emergency' at CUC in order to implement renewable energy projects.”
Prior to the execution of the PPA, Fitial issued executive orders stating that a renewable energy crisis exists at CUC and that “CUC has gone through the RFP process for several renewable energy projects which would bring some relief to high utility rates.”
Fitial's EO's said these renewable energy contracts must be brought to completion as soon as possible or customers will continue to suffer from high oil prices.
But the Senate said Fitial's emergency orders were instead used to execute a “diesel” PPA.
Diesel PPA, the Senate said, has placed CUC in anticipatory breach of its agreements to award contracts to those renewable energy proposers, including KUTh Energy which responded to an RFP and followed the procurement rules and submitted winning proposals intended to benefit the CNMI and lower the cost of electricity.
“In fact, none of the Executive Orders previously executed by Governor Benigno R. Fitial, especially the Executive Order dated July 16, 2012, which the Governor used as authority to execute the PPA for CUC, expressed any emergency situation at CUC that warranted executing a sole-source 25-year fixed payment diesel PPA without the proper review and procurement process,” the Senate said.
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 also “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.
All these were also enumerated in Senate Resolution 17-94, signed by the seven senators present during yesterday's session. The only ones absent were Sen. Luis Crisostimo (Ind-Saipan) and Sen. Henry San Nicolas (Cov-Tinian).
Still little is known
The Senate PUTC Committee held a committee hearing on Thursday afternoon to probe the sole-source contract. The panel invited acting CUC executive director Alan Fletcher and acting attorney general Viola Alepuyo, who declined the invitation and did not allow any assistant attorney general to attend.
“At the PUTC meeting, it was disclosed that there was no comprehensive economic analysis of the PPA terms and conditions conducted to determine whether or not the PPA is in the best interest of CUC and whether the PPA will result in lower power rates for the ratepayers,” the Senate said.
Little is also known about Saipan Development LLC, the power producer guaranteed to receive $190.8 million in a 25-year period pursuant to the PPA.
Saipan Development LLC and the CNMI executed a Power Plant Development and Management Agreement dated March 27, 2012.
That was barely five days after Saipan Development LLC was incorporated in Delaware on March 22, 2012, based on the state's Division of Corporations records. There is no information yet as to Saipan Development LLC's local partners or representatives.
Besides Inos' request for a full economic analysis of the PPA, the Senate PUTC Committee, the House PUTC Committee, the House Judiciary and Governmental Operations Committee, and the Office of the Attorney General are also looking into the contract.
House Speaker Eli Cabrera (R-Saipan) wants to know whether the PPA is a form of public indebtedness that under the constitution requires the Legislature's approval.
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