Sablan: Privatization may happen sooner

The power privatization on Saipan may take place sooner than expected, following the recent declaration of a disaster emergency on utilities.

Quoting government sources, Saipan Chamber of Commerce president Alex Sablan, who attended yesterday’s government briefing on the current emergency situation, said an independent power producer contract may be awarded in a couple of months.

“We hear it’s very soon. I don’t know if it’s during the emergency period. There’s limited power in the emergency declaration, we acknowledge that. What we are talking about is an IPP contract being actually awarded. They [government] say it’s very soon. We’re hoping to press the idea that it needs to come very soon, especially during the summer months,” said Sablan.

Sablan and several other business representatives met with administration officials headed by Lt. Gov. Diego T. Benavente as well as CUC officials at the Governor’s Office yesterday morning for a briefing on the emergency declaration.

“We’re satisfied. This [declaration] is needed to resolve the situation with the fuel crisis. We have an overview of what’s going to happen. We’re pretty much satisfied that things are going forward and hopefully, with this IPP we’ll achieve further reduction in fuel consumption,” he said.

Sablan said the business community favors privatization of power generation.

“Privatization is what we’ve been calling for. It’s what this island needs to achieve lower cost of production,” he said.

He does not believe that a privatized operation would result in higher rates. “That’s a misconception. Twenty-two cents per kwh is based on the government getting a 20-percent loan rate but the government does not go to the banks; they go to the market,” he said, noting that the government has never settled for over 7 percent loan rate.

“We believe that we can achieve a lower cost by doing what they’re considering doing,” he said.

CUC currently charges 14.5 cents and 19.5 cents, including surcharge, for residential and commercial users.

CUC executive director Lorraine A. Babauta said the agency is “working out details right now” for the privatization plan.

She said, though, that the awarding of an IPP contract would not happen during the disaster emergency period. “We’re looking at that option but we don’t want to commit to anything that would violate the emergency regulations,” she said.

She said CUC would follow the schedule set by its consultant, the Harris Group.

Harris Group told lawmakers earlier that the awarding of an IPP contract would happen in October this year.

In a separate interview yesterday, Gov. Juan N. Babauta said the administration “maintains our general policy decision to privatize power.” He said a review of the privatization proposals of two bidders is ongoing.

Right now, he said his immediate goals are to secure a long-term fuel contract to avoid power outages, to service the engines at CUC’s power plants in Lower Base, “and continue to proceed with reviewing the proposals for privatization.”

Babauta said that power outages may occur if engines are brought down for repair. “We’ll shut down the engines and service them. That’s going to cost a lot of money. In the meantime, we may have some power outages in order to accomplish that,” he said.

Sablan said that outages may be avoided if an IPP is put in place.

“They have to shut down the engines for repair but there should be a cycle that would ensure the least impact to the community. When IPP is considered, they will augment power. They will bring in the power generation needed to augment the power supply that will be lost,” said Sablan.

Harris Group earlier estimated that some $60 million would be needed to upgrade the CUC’s main power plants. It also set the cost of privatization of power in the CNMI at $364 million over 20 years.

CUC’s main power plant has eight engines: four old engines that were installed in 1979 and four that were installed in 1989 and 1990.

Meantime, CUC’s Babauta said yesterday that negotiation with Mobil for a new contract is ongoing. She said she hopes to finish the talks by next week.

She said some details have to be ironed out, such as “the minimum and maximum volume of delivery.”

She said the government would abide by the RFP, which calls for a two-year contract.