CUC OKs lease terms for 1.5MW power plant

The Commonwealth Utilities Corp. board of directors approved Friday the lease terms of a draft agreement between CUC and the Commonwealth Ports Authority over CUC’s plan to build a 1.5-megawatt power plant on CPA property on Saipan, to be used during disasters or emergencies.

In recognition of the pending insurance requirements that is subject to further negotiation between CUC and CPA, the CUC board gave the CUC management full authority to enter into the lease agreement once negotiations are finalized, and with the concurrence of CUC board chair Miranda V. Manglona.

It was director Janice Tenorio who offered the motion after the directors held an executive session with their legal counsel, assistant attorney general Jose Mafnas Jr.

Manglona presided over Friday’s special board meeting. Other directors present were Jovita Paulino and Aubrey Hocog.

In her presentation before the board, CUC acting executive director Betty Terlaje said CUC executive director Gary P. Camacho started this process a while ago and “we’re at the kind of the tail end of this transaction.” Terlaje said she and Mafnas have been going back and forth with CPA on this matter in the last couple of weeks.

Under this project, CUC is going to procure a 1.5-megawatt engine to primarily power the water infrastructure on the island.

Right now, there are about 65-67 active wells in the Isley Airport and Obyan areas. Terlaje said these wells provide water to the southern part of the island and serve about 4,000 to 6,000 households. She added, though, that they can go further than that. For instance, after Super Typhon Yutu struck in 2018, CUC used the wells to fill up some of the As Terlaje tank that would then supply water to Chalan Laulau and Gualo Rai areas.

She said the plan is to build Power Plant 3 and its engine is going to be funded by the U.S. Department of Interior. Terlaje said there are some funds are also available for the setup and the installation of the engine.

She said the project’s completion time is the end of this September because they have deadlines for the grant.

Terlaje said CUC is still negotiating with CPA, but that CPA has already heard CUC management at their (CPA) committee meeting last Thursday.

She said the lease will be for 40 years, with the monthly lease payments beginning at $1,438. There will be an incremental 7.5% increase after every eight years.

Terlaje said CPA also demanded free power.

“They demanded that they get free power in the event of an emergency. And so we came back and the legal counsel defined what the emergency was on the lease agreement,” she said.

She said the free power is only for natural disasters and that it’s conditional in that CPA engines have to be down because of the disaster.

Terlaje said the maximum period that CUC would supply CPA with power is for a maximum of 14 days and that the free power will only be 50% of the non-fuel portion, but not to exceed $20,000.

“One of the things we made clear to CPA is that the priority is our water wells. The priority is making sure we get water to the 4,000 customers that depend on those 67 water wells or 65 right now,” she said.

As for the insurance, Terlaje said that CUC has asked CPA to waive the $5 million liability insurance, which is required of all CPA tenants.

“We justified that by saying that the power plant is enclosed in a fenced area and it is not accessible by the public; it would only be accessible by authorized employees,” she said.

Terlaje said CPA was willing to look into it, but did advise that they needed to consult with their risk management consultant to make sure it wasn’t going to impact their bond.

She said they then further requested that, should the risk management consultant come back that they could not waive it, then CUC asked them to consider the minimal amount of liability insurance they would require.

“At this time, that is pending with CPA. Hopefully we’ll hear from them within a week’s time,” Terlaje said.