The Senate of Palau has introduced Senate Bill No. 12-19, a proposed law aimed at increasing transparency in the billing of solar energy purchased by the Palau Public Utilities Corporation (PPUC). The bill, known as the Automatic Solar Power Production Utilization Clause and Adjusted Fuel Price Adjustment Clause Act, passed the first reading on March 11, 2025, during the First Special Session of the Twelfth Olbiil Era Kelulau (12th OEK).
Key Provisions of the Bill
The bill seeks to establish an Automatic Solar Power Production Utilization Clause (ASPPUC), ensuring that costs related to solar energy purchases under PPUC’s Power Purchase Agreement (PPA) with independent solar producers are transparently passed to consumers. This will be done by mandating a fixed solar energy purchase rate of $0.1425 per kilowatt-hour (kWh), which will be reflected in customer billing statements.
Additionally, the bill aims to reinstate the Adjusted Fuel Price Adjustment Clause (AFPAC), which allows for electricity rates to be adjusted based on fluctuations in fuel prices used for non-solar energy generation. This measure seeks to maintain fair pricing for consumers by ensuring that both renewable and non-renewable energy costs are properly accounted for in utility bills.
Preventing Overcharges & Ensuring Accountability
The bill also includes provisions to prevent windfall profits from solar energy curtailment (unused but contractually obligated solar energy). If an independent power producer charges PPUC for curtailment beyond 5% of total procured energy, it will be subject to a 100% gross receipts tax. The revenues from this tax will be deposited into a restricted account in the National Treasury for acquiring diesel generators as backup power sources.
To further ensure accountability, the bill mandates periodic audits of PPUC’s ASPPUC and AFPAC implementations, overseen by the regulatory authority. Additionally, the Ministry of Finance will be responsible for collecting and allocating Windfall Profits Tax revenues.
Transparency in Customer Billing
To improve billing clarity, customer statements will include:
- Solar IPP Energy Charge – Showing total kWh of solar energy used and its cost.
- Solar IPP Curtailment Charge – Reflecting costs from unused solar energy that PPUC was still required to pay for under agreements with independent power producers.
- Solar Curtailment Tax – A tax on wasted solar energy exceeding 5%. The funds will help buy back up diesel generators.
- AFPAC Fuel Adjustment Charge – Showing changes in electricity rates due to fuel price fluctuations.
PPUC will also publish a monthly report disclosing:
- Total solar energy procured.
- Amount of wasted (curtailed) solar energy and its cost.
- ASPPUC adjustment rates applied to customer bills.
- Percentage of solar energy in PPUC’s total energy supply.
- Total tax revenue from excess solar energy charges and its use for diesel generators.
- AFPAC adjustments, including a breakdown of fuel costs and their impact on electricity rates.
Implementation and Legislative Support
The bill was introduced by Senator Mark U. Rudimch and co-signed by several senators, including Kerai Mariur, Stevenson J. Kuartei, Siegfried Bai Nakamura, Brian Melairei, Lentcer Basilius, TJ Imrur Remengesau, Andrew Tabelual, Kazuki “Topps” Sungino, and Ann Latii Pedro.
If approved by the President of the Republic of Palau, the bill will take effect immediately, or it will become law without presidential approval as provided by the legislative process.
Implications for Palau’s Energy Sector
This bill represents a significant step toward energy price transparency and accountability in Palau. By clearly defining billing mechanisms for solar and non-solar energy, the legislation aims to provide consumers with fair and predictable electricity rates while encouraging the continued integration of renewable energy sources.
The reinstatement of AFPAC and the introduction of ASPPUC also demonstrate Palau’s commitment to balancing energy sustainability with economic fairness, ensuring that both consumers and energy providers operate within a transparent and regulated framework.
Implementation & Compliance
PPUC must implement ASPPUC and AFPAC immediately once the bill becomes law. Failure to follow the transparency and billing rules could lead to penalties, including fines and corrective actions.
The bill has been sent to the Senate Committee on Energy and Public Utilities for review.
By: Eustoria Marie Borja