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Friday, April 18, 2014

Telesource’s 15-year extended contract wants revisited

A lawmaker has personally appealed to the Commonwealth Public Utilities Commission to revisit and reconsider a decision made by former commissioners to extend the contract of Tinian independent power producer Telesource.

According to Rep. Frank Dela Cruz, the extended contract approved for Telesource came as a surprise when the CNMI is looking for alternative ways to generate power.

CUC contracted Telesource in September 1997 to build and operate a 10-megawatt diesel power plant for $21.6 million on Tinian. Under this agreement, Telesource was to build and initially own and operate the plant. CUC would then pay Telesource $180,000 per month.

On top of this monthly payment, CUC was also obligated to pay $50,000 monthly in quality and management fee and a production fee of two cents per kWh.

In November 1998, the first change order was adopted, increasing the plant’s output to 20 MW with the installation of two 5-MW units within 14 months and the addition of a 30-MW substation.

Change No. 2 was executed in November 1998 and implemented a more detailed procedure for submission and review of the drawings and technical specifications used in the performance of the work undertaken by Telesource.

Change order 3 was adopted in May 2001, extending the term of the contract to 2020. Change order 4 was executed in April 2003, authorizing Telesource to use the plant as security for a loan with the Commercial Bank of Kuwait.

In November 2011, then-CPUC chair Viola Alepuyo approved change order No. 5, which extended the contract by up to 15 years and with incremental increases each year: $3.5 million a year for a total of $32 million in the 15-year period. Prior to this change order, the IPP still had eight years or until March 2020 on its contract.

The Tinian power plant serves an estimated 4,000 residents.

“Imagine? We’re trying to favor change order No. 5 when government is looking at ways on alternative measures to generate power? Once this is approved (the funding for the change order no. 5), who’s going to pay for it?” asked Dela Cruz.

He appealed to the CPUC to revisit and reconsider this past CPUC decision, saying it would have a detrimental impact on ratepayers.

The CPUC is set to decide on the funding for the Telesource amended contract in April.

This comes amid findings by both CPUC consultant Georgetown Consulting and CUC consultant economists.com that the change order for the Telesource contract is unnecessary and not beneficial to customers because both believe that CUC can explore other ways to bring renewable or sustainable energy to its customers other than amending the IPP contract.

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