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Saturday, April 19, 2014

WITH OAG DECLARING $190M PPA ‘VOID’
RFP for power plant being drafted
Lawmakers caution administration

Saipan Development LLC and other investors could have another shot at building a new—or refurbish the existing—power plant on Saipan following Lt. Gov. Eloy S. Inos’ announcement Friday that a request for proposal is being drafted for a 40-megawatt base load power production. This comes days after the Office of the Attorney General declared void and unenforceable a sole-source $190.8 million power purchase agreement with SDLLC.

The proposals could be for diesel or alternative power production, or a combination of both, Inos said. All proposals submitted would be thoroughly reviewed, he added.

Some lawmakers, including incoming House speaker Joseph Deleon Guerrero (IR-Saipan) and vice speaker Frank Dela Cruz (IR-Saipan), are cautioning the Fitial administration against rushing to put out an RFP because of possible legal challenges from SDLCC, which bagged the PPA that Gov. Benigno R. Fitial and former attorney general Edward Buckingham signed in August.

Inos said an RFP is being “refined” to invite proposals from investors “willing to provide baseload power production.”

“It would be through the bidding process as opposed to a no-bid contract, that’s the purpose of that,” Inos told reporters during Friday morning’s proclamation signing on Capital Hill.

Inos said he’s drafting the RFP.

Dela Cruz hopes the administration will get the input of the Commonwealth Utilities Corp. on the RFP.

Deleon Guerrero said it would be better if the administration addresses first the issues with SDLLC before putting out an RFP. He said it’s not yet known whether SDLLC will challenge the OAG’s declaration on the 25-year PPA.

SDLLC has been taking a view different from Attorney General Joey Patrick San Nicolas’ opinion but Inos is hoping that SDLLC “would consider that chapter closed.”

The Fitial administration acknowledges that the current power generation system is costly and reaching the end of its cycle.

“We need to think about future expansion but that’s what we’re going to be asking for—the baseload, which would be essentially at least maybe 40MW… We hope [it] to be modular so that if we need more demand, they can add more,” Inos said.

He reiterated that the proposal doesn’t necessarily involve diesel.

“We’re out on the streets. The jury is out basically. If you have a solution for baseload… it doesn’t have to be diesel. Give it to us and we will take a look at it. And if it satisfies the need, is it sustainable, is it affordable? That’s what we’re going to go for,” Inos said.

He said the proposers will have to do a lot of legwork.

“We are going to draw the parameters. They are going to come in and say, ‘alright, we propose to just utilize your existing power plant, we’ll refurbish.’ Or another proposer could come in and say that ‘it [existing power plant] has limited life already, we want to come up with a new power plant and so forth. We would do it on this side.’ So the proposer has got to do a lot of legwork. …The field is wide open. We’re basically saying we need a 40MW base power. If you’re interested, let us know of your interest and tell us how you want to proceed with it,” Inos said.

The administration is hoping to finalize the RFP by the end of the month.

Inos said SDLLC can participate if it wants to.

“We’re not barring anybody from participation,” he added.

He also said the burden is on the administration to review the proposal, which should include an economic analysis as to whether or not the proposal is economically feasible.

It could also be a build-operate-transfer type of undertaking.

“There is no risk for the CNMI. We’re going to go out and we’re going to ask for some BOT operation…or any of that combination. But it’s really power production and when we ask for a proposal…the proposer will come back and say, ‘we’ll do this and we’ll take care of fuel and something like that.’ Some folks would say ‘no, were going to construct it at our cost, you have to pay us so much, but fuel is your responsibility’,” he added.

Dela Cruz said he would reserve further comments until he sees the RFP “given the fact that CUC made statements with regards to the longevity of the present engines at the power plant.”

“They stated it can take anywhere from seven to 10 years. If we are to put out an RFP now for diesel power plant, then what will we be looking at in terms of alternative energy?” he said in an interview with Saipan Tribune.

He hopes “CUC plays a part in the drafting of this RFP.”

“And at this point in time, I cannot really comment on such an RFP because I don’t have a clear picture as to the intent of the RFP, whether it is baseload diesel or baseload diesel and alternative energy, or just alternative energy,” Dela Cruz added.

Deleon Guerrero raised two more points of consideration.

“One is the issue of the PPA that has just been considered null and void. It has to be resolved. I think from what I’ve been reading in the paper, from the contractor standpoint, they haven’t decided yet whether they are going to sue or what. I think that has to be resolved before we think of this next step. Somehow that has to be clear. And as a matter of fact, they may sue whoever gets the contract if they feel that they have been deprived, wronged,” he told Saipan Tribune.

The second issue is that the administration has to look at existing public laws.

“We have already set direction, what our priorities are for energy. That’s spelled out in public laws, we have several. One that says we’re going to be [producing alternative energy by a certain percentage] by a certain date. The other one says we’re going to move toward an RFP for alternative energy. These public laws have to be taken into consideration in this decision-making process,” the incoming speaker said.

Press secretary Angel A. Demapan earlier said that the Fitial administration expects the OAG to communicate the AG’s legal opinion to SDLLC that the power purchase agreement is void.

In his opinion, San Nicolas said Fitial is not liable for any cause of action related to his signing of the PPA with SDLLC as he merely relied on the certification of then attorney general, Edward T. Buckingham, that the agreement was proper as to form and capacity.

San Nicolas, however, determined that Fitial did not have the authority, pursuant to Executive Order 2012-17, to enter into the power purchase agreement with SDLLC.

The governor’s signing of this sole-source PPA was among the issues contained in the defeated resolution impeaching him last year. The incoming House leadership has promised to introduce a new resolution to impeach the governor.

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