YEAR-END REPORT Commonwealth Utilities Corporation, 1998

Amid warning of crippling power crisis on Saipan, a new source of electricity from a proposed 80-megawatt plant has come under a storm of protests that has left the Commonwealth Utilities Corporation groping in the dark for much of the year.

With an almost worn-out system to power an island of 50,000 people, the government-owned utility firm was bent by early 1998 on forging ahead with the project to increase its power generation capacity.

Scheduled to begin construction by late this year, CUC put its stake as early as May 1997 on the new power plant designed to meet rising demand by the end of the decade.

But the gamble has yet to pay off as the project has stalled on the heels of mounting opposition over the awarding of the $120 million contract — the largest ever in the history of Northern Marianas.

CUC officials maintain the protests have delayed the start date of the construction phase, pushing back the schedule of operations further to late 2001 and throwing the island into debilitating power outages by next year.

The protests stemmed from earlier decision by utility officials to forge an agreement with industrial giant Marubeni Corporation of Japan and its U.S. partner, Sithe Energies, Inc. over 12 other companies bidding for the project.

A firm lost out in the final round, Pacific Marine and Industrial Corp. and Ogden Energy, Inc. had questioned before the Office of Public Auditor a move to trim down selection to seven top-ranking bidders in the absence of clear-cut criteria.

The protest successfully blocked a final deal between CUC and Marubeni-Sithe after OPA slammed what it alleged as arbitrary and unreasonable action by the utility firm to eliminate others that fell below the cutoff score.

Two other companies lodged their own protests to challenge choice of Marubeni-Sithe, including close competitor Enron and a consortium of Alson, Tomen, Singapore Power and Tan Holdings Corp.

Caving in to growing pressure, CUC held off final action on the agreement with Marubeni-Sithe after nearly two months of negotiations on the terms of the contract that ended in late September under a threat of serious power crisis if the project continues to be hampered.

Power generation shortfall

Current capacity of existing power plants ran by CUC peaks at around 65 megawatts, below actual demand on Saipan, according to official records.

Large customers, such as hotels and garment factories, have also built their own generation facility to meet the shortfall of 40 megawatts, combining present island power peak of 105 megawatts.

The demand is anticipated to swell to more than 109 megawatts by year 2001 and 160 megawatts by year 2010. The new power plant was in fact mapped out to double present capacity when it gets online.

“CUC is already behind the recommended schedule in the power master plan for increasing power generation and we are very near an emergency situation,” utility officials said in a report.

Under the plan, the 80-megawatt facility will become operational within two years of the contract signing, retire obsolete plants while overhaul other power source for major maintenance job.

The proposed plant, to be constructed through the build-operate-transfer scheme under a 25-year accord, is expected to produce 100 percent of its capacity to provide 147 megawatts in combined generation with existing facilities through the year 2008.

And with bleak outlook for efficient supply in the near future, the proposed Saipan power plant is looming large in the wake of several measures being drawn up by the government to help revitalize the local economy.

Independent review

While pending protests have been temporarily muffled by a CUC decision to hire an engineering firm to undertake a new round of deliberation, officials hope the move will clear doubts on the proceedings.

A search for an independent evaluator ended last month with three firms submitting proposals to undertake what may be a difficult task of reviewing various offers, including the power purchase agreement.

The centerpiece of the $120 million deal, the agreement will cover the fixed capacity charge, operations and maintenance charge as well as the price of power per kilowatt hour.

Although the review has thrown the process back to square one, officials say the project is expected to pick up steam once the deliberation is over.

“We want to do it as quickly as we can but the engineers reviewing the proposals will need more time to do their job,” said Kay Delafield, whose job is to sort out the offers of the various engineering firms.

Representatives for the two firms opposing earlier agreement say they are holding off further action on their pending protests with OPA until the review will have been completed.

The board of directors is expected announce its choice of the independent evaluator by January. In the meantime, CUC hopes power capacity remains stable to avert what could be a serious power shortage as early as next month.