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Pacific Islands Development Program, East-West Center

With Support From Center for Pacific Islands Studies, University of Hawai‘i

Saipan Development LLC Appeals To CNMI Residents
Claims new power plant could save $500 million over 25 years

By Haidee V. Eugenio

SAIPAN, CNMI (Saipan Tribune, Jan. 24, 2013) – In an "open letter" to the Commonwealth of the Northern Mariana Islands’ people, Delaware-based Saipan Development LLC (SDLLC)has said that their proposed new power plant would provide more than $500 million in savings during a 25-year period because of "drastic" improvements in technology.

This comes weeks after Attorney General Joey Patrick San Nicolas said that the $190.8-million power purchase agreement (PPA) signed by SDLLC, Gov. Benigno R. Fitial, and former attorney general Edward T. Buckingham in 2012 is void and unenforceable, and amid a pending taxpayer suit against the sole-source, 25-year PPA.

The Fitial administration has agreed with the AG's legal opinion, but not SDLLC.

In paid advertisements in CNMI newspapers today, SDLLC explained the advantages of its proposed new power plant over the main power plant on Saipan.

"Due to drastic improvements in technology, power produced at the new plant would cost significantly less," it said.

It cited the Commonwealth Utilities Corp.'s (CUC) cost data as of Sept. 30, 2012.

Based on the CUC data, the existing power plant generates 14.27 kilowatts per gallon of fuel consumed whereas a new power plant will provide 20 kilowatts per gallon of fuel, SDLLC said.

SDLCC said if fuel costs average $4.281 per gallon, saving $4.8 million gallons of fuel would reduce power production costs by more than $20 million per year.

"During the 25-year timeline, these savings would total more than half a billion dollars. In fact, savings realized during the first four years of operation will exceed the cost of the new plant. These savings should dramatically reduce the cost of power to Saipan consumers," SDLLC said.

The Fitial administration and SDLLC had been saying that the PPA would result in lower power cost for CUC customers now paying over 30 cents per kwh.

SDLLC, in its "open letter to the people of the CNMI," reiterated that the estimated $70 million cost of the power plant has been reported correctly by some media.

"However, this cost would not be paid up front. It would be amortized through a 25-year lease arrangement allowed under the CNMI rules. This financial arrangement enables the CUC to keep the cost per kilowatt-hour as low as possible during the repayment period. When the amortization and interest are paid, the CNMI would own the power plant," SDLLC added.

But while the estimated cost of building the power plant is $70 million, the amount would balloon to $190.8 million because of financing. These are based on figures in the PPA itself and SDLLC officials' previous statements.

SDLLC's "open letter" also said it understands that the price of fuel and the kilowatt-hours needed may change. But it said one figure is constant-the "cost per kilowatt generated per gallon of fuel used"-even if other factors change, the reduction in fuel usage will continue to provide an ongoing savings and benefit to Saipan consumers in terms of lower power costs.

SDLLC said its letter presents factual information used in the development of the SDLLC proposal and in discussions with numerous government and elected officials.

"We feel it is unfair and irresponsible for individuals to repeatedly issue false, unsupported, damaging statements. Those doing so should be held accountable and required to produce factual documentation to substantiate their accusations," SDLLC added.

Rep. Janet Maratita (IR-Saipan), the lead plaintiff in a lawsuit against the PPA, said yesterday that she has yet to see SDLLC's advertisement. However, she said the people of the CNMI are not stupid to believe the whole open letter.

"I believe this is an ad of desperation. The people of the CNMI are not stupid to fall for this kind of ad. They continue to disrespect the court process, and the Office of the Attorney General already issued a legal opinion stating that the PPA is illegal and cannot be enforced," she said.

The governor's signing of the PPA is also among the issues included in a pending resolution impeaching Fitial for 18 allegations of corruption, neglect of duty, and felony.

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