NGERULMUD, Palau — The Palau Public Utilities Corporation (PPUC) has formally requested legislative action from the 12th Olbiil Era Kelulau (OEK), urging key policy changes to address financial strains and sustain essential water, power, and sewer services across the nation.
In a letter addressed to Senate President Hokkons Baules and Speaker of the House Gibson Kanai, PPUC CEO Frank Kyota outlined several urgent legislative initiatives aimed at restoring the utility provider’s financial stability and enabling long-term infrastructure improvements. The proposals, which were previously raised but not enacted by the 11th OEK, remain critical as PPUC struggles to maintain services under restrictive laws and increasing operational costs.
Key Legislative Requests
Among the proposed reforms, PPUC is advocating for the amendment or repeal of 37 PNC §412(b) to allow it to charge water rates that cover the actual cost of providing service in outlying states, including Babeldaob and Peleliu. The current regulation, which locks rates at 2011 levels, has led to substantial operational losses, hindering improvements to water quality in rural communities.
PPUC is also requesting an amendment to 40 PNC §2706, which governs the Pristine Paradise Environmental Fee (PPEF), to earmark at least $5 from each fee collected to help finance the completion of the Koror-Airai Sanitation Project (KASP) and its loan repayment to the Asian Development Bank. This would prevent drastic rate increases while ensuring infrastructure expansion keeps pace with tourism growth.
To address the rising costs associated with net metering, the utility provider proposes amendments to 37 PNC Chapter 6, which governs solar energy users. PPUC argues that non-solar customers are currently subsidizing grid maintenance costs for solar customers. The proposed changes would allow PPUC to charge solar users a reasonable fee to recover those costs.
Funding Water Infrastructure and Lifeline Subsidy Expansion
PPUC is also calling for 40 PNC §2661(c) to be revised to allocate 50% of the Carbon Tax revenue toward water supply infrastructure improvements, particularly in outlying states. This funding would ease the financial strain on PPUC’s water operations while enhancing climate resilience.
Additionally, the utility provider seeks to increase the income threshold for the Lifeline subsidy program from $20,000 to $30,000 per household to account for inflationary pressures stemming from the implementation of the Palau Goods and Services Tax (PGST) and rising costs of living. To make this expansion viable, PPUC is also requesting a proportional increase in the program’s funding appropriation.
Addressing Financial Viability
To ensure the sustainability of critical infrastructure projects, PPUC is asking legislators to earmark a portion of PGST revenue collected from its customers for water and sewer system upgrades. The utility provider highlighted that PGST contributions from utility bills amounted to $5.4 million for 2024 and 2025, funds that could be directly reinvested into much-needed improvements.
PPUC is also seeking an appropriation of $2.85 million to fulfill the Republic of Palau’s commitment to funding the Minimum Escrow Account Balance under its Power Purchase Agreement with Solar Pacific Pristine Power Inc. Without this allocation, PPUC will be forced to deplete its reserves, reducing its capacity for future capital investments.
Workforce Retention and Employee Benefits
Another key area of concern is workforce stability. PPUC is advocating for the removal or extension of the two-year contract limit for employees earning more than $40,000, arguing that this restriction hinders efforts to recruit and retain highly skilled staff. Additionally, the corporation is requesting the repeal of a clause in 37 PNC §410(6) that prevents PPUC from offering supplemental health insurance benefits beyond the National Health Insurance plan, which it says is crucial for attracting and retaining employees.
A Call for Legislative Action
PPUC emphasized that these legislative measures are necessary to reverse ongoing financial deficits and enable the corporation to fulfill its mandate under 37 PNC §411—which requires the utility provider to recover its operating and production costs while maintaining service quality.
The request cites concerns that past legislative restrictions have prevented PPUC from implementing cost-reflective tariffs, particularly for water and wastewater services. Without reform, the utility warns that its ability to maintain and expand essential services will remain severely constrained.
Meanwhile, the Senate is locked with PPUC over implementing the new water and wastewater rates, which were set to take effect on February 1, 2025. (By: L.N. Reklai)