‘Junk proposed changes in Tinian IPP contract’

Georgetown Consulting Group Inc., the independent consultant of the Commonwealth Public Utilities Commission, has recommended rejecting the proposed changes in the contract of Telesource CNMI Inc. because it will result in $32 million added cost for utilities consumers on Saipan, Tinian, and Rota.

CUC’s current contract with the independent power producer on Tinian will end in March 2020, over eight years from today. A proposed change order would double this length of time and extend the term to 15 years.

Although there is a provision in the proposed change order that is favorable to CUC, Georgetown believes this provision is not realistic.

“Instead of being favorable to CUC, under change order 5, the agreement allows for the automatic extension, at Telesource’s option, of the agreement for additional five-year terms up to 15 years if CUC is unable to demonstrate that fossil fuel generation is no longer needed,” said Georgetown in its report to the commission Monday.

It said that CUC currently pays Telesource slightly less than $2 million per year. Under the proposed change order, CUC will pay a higher amount of over $3.5 million yearly—an increase of approximately $1.5 million. In a 15-year period, consumer rates are expected to increase by more than $32 million.

For consumers using 1,000 kWh a month, this will be a $6.92 increase in their monthly billing in the first year and a $14.05 increase per month by the 15th year.

Georgetown explained that whether a consumer is located on Tinian, Saipan, or Rota, every CUC customer will ultimately see an increase in their electric rates if the change order is approved. “Since CUC’s electric base rates are developed on a ‘postage stamp’ basis, the additional cost of the change order 5 will be the same per kilowatt-hour on each island.”

The proposed Telesource contract change has been on the commission’s table since April but action was deferred pending the submission of evidence or additional requirements such as whether Telesource has transferred title for the Tinian plant to CUC or discharged the security interest (lien) held by the Bank of Kuwait. On Monday, Georgetown said that CUC failed to show any evidence of these requirements.

CUC, it added, also failed to justify that the change order is necessary, prudent, or cost-beneficial to customers.