After an initial request to reject the 198-megawatt power plant proposal with Korea Electric Power Corp. fell flat with the Consolidated Commission on Utilities, Sen. Clynt Ridgell is now asking the same of the Public Utilities Commission.
The PUC typically meets on the last Thursday of each month.
Ridgell's request was issued after a nearly three-hour-long oversight hearing on the Guam Power Authority on Tuesday. Lawmakers discussed renewable energy initiatives, climate change and concerns over the new power plant.
In August 2018, GPA entered into renewable energy agreements with Hanwha Energy Corp. and KEPCO - the same company selected for the new plant. Under the agreement, GPA would purchase solar energy generated by the solar facilities operated by each company.
GPA officials stated during the hearing that the cost of the solar contracts to GPA is about 8.5 cents per kilowatt-hour.
The total cost for power generated at the KEPCO power plant is expected to be about 15 cents per kWh – 5 cents in fixed cost and 10 cents for ultra-low-sulfur diesel fuel, according to GPA General Manager John Benavente.
"The CCU and GPA have been touting this power plant as a cheaper alternative, but the fact is it will cost more to produce power from the proposed plant than it does from the two most recent solar contracts," Ridgell stated in his release.
Batteries not included
Benavente said the costs for the 120 MW solar contracts do not include energy storage facilities able to power the island.
Utility officials repeatedly pointed to energy storage, in terms of reliable power output for renewable energy, as lawmakers honed in on the construction of another fossil fuel power plant on Guam.
A renewable energy power plant capable of 198 MW of capacity, including storage capabilities, would cost $3.7 billion, according to CCU member Michael Limtiaco. Ratepayers would be looking at a significantly higher base rate with renewable power, he said.
Ratepayer savings from the KEPCO plant, according to GPA, will come from fuel efficiency. The anticipated 15 cents per kWh cost is less than the 19 cents GPA is paying with MEC 8 and 9 generators today, Benavente said.
The new power plant also will regulate power frequency from inconsistent solar power, Benavente added. Currently, GPA uses generators to help smooth over the quick jumps or drops in solar energy, to ensure power flow remains as consistent as possible, however, those units aren't as efficient or quick as the new power plant is expected to be.
Additionally, though GPA projects a base rate increase to facilitate the new power plant it also anticipates a fuel surcharge decrease that will average around 12 cents given that cheaper liquid natural gas is approved for use. Benavente stated during a CCU meeting on Sept. 3 that he would recommend moving in that direction pending a review of an LNG study.
Company responsible for Cabras 3 and 4
While the conversation on Tuesday ended with talks of renewable energy and climate change, it began with inquiries on the selected bidder, KEPCO, and Korea East-West Power, which is part of a consortium with the company.
KEWP was responsible for Cabras 3 and 4 - the generators rendered useless after an explosion and fire at Cabras in 2015.
Benavente told the Post on Aug. 29 that the same company is anticipated to operate the KEPCO power plant, but that may not be how the latter ultimately decides to manage the project.
"EWP is supposedly going to operate the plant for them,” Benavente said. "But they could change that whenever."
The root cause of the explosion was undermentioned but new allegations from GPA's insurers lay blame with EWP and its contractors. A lawsuit from the insurers, claiming EWP acted negligently, is pending at the Superior Court of Guam. GPA is not a party in the lawsuit.
Concerns with EWP formed the basis for Ridgell's initial call to reject the KEPCO agreement.
"I am still concerned that we are awarding a multibillion-dollar contract for a power plant to a company that is being sued for the Cabras 4 power plant explosion," Ridgell stated in his release on Tuesday.
Sept. 3 meeting
The CCU approved the KEPCO agreement on Sept.. 3. Commissioners did discuss Ridgell's concerns during that meeting.
The agreement is a 25-year build-operate-transfer contract, meaning the power plant will be transferred to GPA after 25 years. Before then, KEPCO will own and operate the plant.
"They’re required to insure it. ... They borrowed money on it. Put in at least 20% equity on it. They own the power plant until 25 years from now when they turn it over or we extend it," Benavente said at the meeting.
If the new power plant does explode under KEPCO’s watch, GPA will bear no responsibility, according to Benavente.
In addition, KEPCO is required to maintain certain reliability measures, such as guaranteeing the availability of at least 96% of plant power output. Failure to meet reliability measures, including construction and commissioning deadlines, subjects the company to millions of dollars in damages, Benavente confirmed in response to inquiries from CCU Commissioner Michael Limtiaco.
"No private company will allow itself to lose this type of money. So they’re going to hire the best. It’s a big investment," Benavente said.
Limtiaco, on Sept. 3, said Ridgell needed to realize that KEPCO takes full responsibility for the power plant and the agreement holds the company to its performance.
"Any concerns regarding the company – and some of them are valid – we do need to make sure we understand how they're involved, whether it’s in operation and maintenance or construction. ... We want to make sure we can address those concerns with the senator. But it should be pointed out they are responsible for operating this plant," Limtiaco said.
In the end, the commission appeared satisfied by the protections within the KEPCO agreement, as well as the company’s worldwide electric sales. EWP is also just one of 16 companies under KEPCO, according to Commissioner Francis Santos.
"They have customers around the world that pay them $507 billion a year for services," Commissioner Simon Sanchez said during the meeting. “There seems to be a lot of people very comfortable buying energy from this company. And this company clearly has the financial assets to deal with any worst-case scenario that might occur.
"There’s risk in any purchase. ... The goal is to mitigate the risk by having good partners and putting in an agreement that says you need to protect us from your failures. And all of those are in this (agreement)," he added.