Both Palau national congress and the executive branch have agreed to seek funding to help Palau Public Utilities Corporation (PPUC) address its financial shortfall while they work on a long-term plan to remain financially solvent.
Despite the promised assistance, PPUC continues to be concerned about its financial future based on its current financial status and its projected needs in the coming year. It is also concern with its ability to execute decisions due to growing number of policies adding layers to its decision making processes.
PPUC’s audited financial statements for FY 2018 showed a loss of $2.2 million less subsidy, resulted in net loss of $1.1 million. Combined loss or FY 2019 unaudited loss of $1.35 and FY 2018 came to $2.5 million.
Although FY 2018 audited statement showed cash balance of $8.6 million, this fund was already committed with $1.5 for operations, $1.1 already cleared for vendors (cleared APs), $2.2 of sinking fund, a contractual agreement with NDBP, and $4.0 maintenance and contingency fund. $2.5 million of that maintenance fund was used to pay for fuel and maintenance of Nigita generators including covering shortfall in sinking funds leaving only $1.2 in 2019.
According to PPUC, the maintenance cost of the Nigita generators of about $700,000 each year is paid for from this account and even with subsidies they will be struggling to maintain the generators, cover loans, operating expenses and fuel cost.
Fuel subsidy covers only partial fuel cost but does not help with increasing operating expenses which can not be covered to due prohibition on tariff increase for energy use. The tariff is from 2011 and even though costs of everything have gone up since but they are still charging rates of 2011.
In addition, the unpaid accumulated cost of electricity of outlying states water systems is over $4.9 million. Even though it is posted in the books as revenue for PPUC, it is actually an unpaid debt from the water system which can not be paid by the water system or collected from the States themselves.
In addition to growing financial issues, PPUC management flexibility is curtailed by oversight of Palau Energy Administration over its tariff process and law makers ability to prohibit implementation of the same. Recently a Senate bill 10-151,SD1 was introduced to also require Palau Energy Administration to mitigate customer service disputes of PPUC customers. The bill essentially mandates that if a customer disputes their utility billing, that PPUC will not take any adverse action against customer such as cutting off power and gives customer up to 30 days to address issue with PPUC. If customer is not satisfied with PPUC’s resolution, the complaint will be brought to Energy Administration for resolution.
Palau Public Utilities Corporation, the only power, water and sewer utility company on island, is tasked to provide affordable utilities to all its customers and to become a self-sustaining corporation. Meanwhile, it rates and tariffs are controlled by two separate entities and its operations are hamstringed by too many boards.
With so many eyes watching over PPUC, no one is providing it with a clear solution for getting out of its financial problems in the long term. (L.N. Reklai)