Extremely concerned, dissapointed, and perplexed

Dear chairperson Roberto,

On March 1, 2016, the Saipan Tribune reported that the CUC board has delayed action on the IRP (integrated Resource Plan) in connection with Power Supple Resource proposal RFP15-002 which was issued over a year ago in January 2015.

RS Guerrero & Associates is the local agent for HSU Consortium, which participated in the RFP. We have worked hard and complied with the requirements of the CUC and waited patiently for over one year in anticipation of action by the CUC board. We believe that our proposal is responsive, and took into account of the existing fuel contract and delivery pipeline, power distribution and permitting constraints faced by the CUC in connection with the power generation needs of the Island of Saipan.

It is therefore extremely disappointing that we read in the Saipan Tribune, that CUC director David Sablan was reported to have pushed for the motion to approve Case No. 12 from one specific bidder, without first having the CUC board understand and consider the efforts of all other bidders who have diligently participated in this time consuming and expensive proposal process.

The bidders in this RFP have waited patiently in connection with the procurement process, which has taken over one year from the RFP closing to last week’s presentation by Leidos Engineering to the CUC. It is not clear whether Leidos Engineering has determined that Case 12 alone is appropriate for consideration to be decided amongst all the offers. Either scenarios do not present the CUC in good light for the firms that have worked hard to offer what each believe was a winnable and appropriate technical solution for CUC.

We are extremely concerned that the CUC board is probably not aware that the CUC does not have the transmission infrastructure to be able to accept 10MW of solar photovoltaic power. The only landmass on Saipan that can accommodate such a scale of solar development is likely in Marpi, which is served by feeder 7, which at most can only accept 3MW of power. If a solar photovoltaic of such magnitude is undertaken, the CUC will have to build up miles of transmission lines to receive such power.

We doubt that the foregoing associated development costs of solar photovoltaic have been taken into account. Also it has been evidenced in Guam that the costs of solar photovoltaic are generally underestimated and that costs related to weather-related issues such as storms are almost never taken into account, which are huge risks for any utility considering large-scale solar farms in the Marianas. May we ask if Leidos Engineering provided any analysis of such risk to the CUC Board.

Also, the 10MW proposal per case 12 will have cost an impact on the tariff and rates to the Consumers. Solar Photovoltaic is only economically possible if there are subsidies available to support this development. Whilst it is noted that renewable energy is important, one must be cognizant that implementing solar energy will impact local consumers significantly because of the impact on power rates required for costs recovery. May we ask if the CUC Board was made aware of the impact of the project on existing cost of generation and rates? There has been no report of such modeling by the CUC rates consultant, the Economist.com so I assume none has been done.Such rate impact modeling is critical if the CUC desires to pursue Solar photovoltaic so that the CUC will not fall into the same financial situation faced by the Guam Power Authority.

Also, we are perplexed that the CUC Board was asked to act on the IRP on the same day, after one hour of presentation of a year’s work by Leidos Engineering. It is clear that the CUC Board was not given sufficient time to allow the CUC Board to be aware of the proposals by other contractors, notably by HSU consortium which provided a phased and expandable power generation plant that ties in to the existing fuel pipeline and also the tie in to existing CUC distribution assets. We doubt if Leidos Engineering has provided the CUC Board adequate information of the different proposals.

The demand for power on Saipan will grow tremendously from the numerous new investments and commercial activities that have been spurned by the legalization of gaming. CUC’s current aging power generation assets will not be able to cater for the drastic increase in power demand unless action to place new power generation capacity is undertaken by the CUC. At the Same time, the placement of such new capacity requires the CUC to understand which contractor plans would match the power demand adequately and at affordable costs. The CUC board may not be aware of such planning by contractors within the one hour presentation made by Leidos Engineering. For example, was there any contractor who has proposed that their plant is sited at Lower Base to ensure that fuel delivery costs are at a minimum and that the new power can be transmitted using the existing distribution lines?

CUC should invite all firms that have participated, to provide a presentation of their proposal so that the CUC is aware of all the alternatives that the CUC has on hand before pursuing an award. We believe such action is fair and provides a level playing field for the participants of the RFP, and ensures that the CUC Board will be able to make a decision that would not be subject of procurement protests.

We agree that the CUC Board made the right decision by tabling the IRP until such time the Board Members become aware of the costs and benefits of all proposals submitted to CUC. However it is also crucial for the CUC Board to promptly initiate the process by inviting all participants to make a presentation of their proposals to the CUC board.

We hope that the CUC Board will address this request for presentation by all bidders which only serves to give the CUC a better understanding of all the alternatives proposed and be able to select the one that matches the CUC’s needs.

Ramon S. Guerrero
RS Guerrero & Associates