Despite the Fitial administration's assurance it will still pursue renewable energy projects to lower utility costs for consumers, it has not conducted an analysis on, and ignored warnings of “roadblocks” to, integrating alternative energy into the no-bid $190.8-million power purchase agreement that is now among the subjects of the first impeachment hearings in CNMI history.
At the same time, Special Committee on Impeachment chair Rep. Joe Deleon Guerrero (R-Saipan) said yesterday the panel wants the Office of the Attorney General to clarify whether Gov. Benigno R. Fitial had the authority to sign the 25-year PPA with Saipan Development LLC and whether the PPA constitutes a “public debt” and needed the Legislature's approval.
Fitial placed CUC under a state of emergency, thereby suspending CUC's procurement rules.
Yesterday marked the sixth day of the impeachment hearings.
Fitial's special legal counsel, Jim Stump, said in his testimony before the panel that the PPA with Saipan Development LLC has not been fully examined so there's no telling how it will impact any renewable energy project being planned.
Deleon Guerrero, during the hearing, pointed to a July 22 email from Commonwealth Utilities Corp. acting executive director Alan W. Fletcher to Stump, warning of “some roadblocks to integrating renewable energy” into the then proposed PPA.
“If left as is, they could make even the Solar #1 financially hard to implement due to the 'take or pay' provisions. This, coupled with the possibility of a Midland deal, which you and the Lt. [Gov. Eloy S. Inos] referred to, means we may [have] opposing projects,” Fletcher told Stump.
When pressed by impeachment panel members, Stump said he brought up these concerns with the Office of the Attorney General but not to the governor.
Rep. Tony Sablan (R-Saipan) said if the CNMI is required to buy power from Saipan Development LLC's 50MW diesel power plant for 25 years under the PPA and the peak demand for power is about 30MW, where does renewable energy come in?
A California-based investor for $40-million solar photovoltaic power plants called American Capital Energy or ACE, for example, has been waiting for a year now for a contract award from CUC after being selected as the best bidder among those that responded to an RFP.
A copy of a July 4 meeting summary at the Hyatt Regency Saipan among individuals involved in the PPA negotiations stated that Stump had “71 issues” about the then proposed PPA. Stump was not among those in the meeting and was not part of the negotiation team.
The meeting summary also stated, “If anyone sees an issue that would be FATAL to the project, they will notify others as soon as possible.”
A month later or on Aug. 3, Fitial and then attorney general Edward T. Buckingham signed the $190.8-million PPA.
Stump told the impeachment panel that he didn't know there was no full economic analysis done prior to the PPA's signing.
Stump confirmed what Fletcher told the impeachment panel last week, that Stump was tasked by the Fitial administration to lead the conduct of a full economic analysis on the PPA.
He also said it's speculative at this point to say whether the PPA may pose a problem in the future with regards to renewable energy projects, in response to Deleon Guerrero's question.
Stump cited the reasons: the full nature of the documents has not been determined, trying to project what the future demand for power will be, a lot of utility users in the CNMI are not in the CUC power system, and the specific nature of alternative emergencies has not been clarified (solar, for example, is limited because it can only be produced during daylight).
Stump also told the panel that a current temporary restraining order granted by the court prohibits the expenditure of public funds relating to the $190.8 million PPA.
He said this is prohibiting the administration or CUC from having experts do a full economic analysis on the PPA.
Deleon Guerrero said if this is the case, then how would the administration issue a request for proposal for a full economic analysis?
Stump later said this could be done through issuing an RFP for a general economic analysis of CUC, which is done regularly anyway, and within that general contract, the contractor could make an analysis of the PPA with Saipan Development LLC.
A full economic analysis would help determine whether the sole-source, 25-year PPA is in the best interest of CUC, its customers, and the CNMI as a whole.
Impeachment committee members have received personal and professional opinions from witnesses pointing to the need for a full economic analysis “prior” to the signing of the PPA.
Stump told the committee that the administration earlier received a proposal from economists.com to conduct a full economic analysis on the PPA for $50,000, a price that Stump said is “inappropriate” given that economists.com as CUC consultant has already done extensive study on CUC.
Moreover, economists.com has already done preliminary and cursory review of the PPA.
Stump said the administration thinks the $50,000 proposal is already equivalent to the annual income of three households in the CNMI.
“It was the opinion of the executive office that the cost should be somewhere around $10,000 to $15,000,” he told the panel.
The impeachment hearings will continue today.