Palau Public Utilities Corporation (PPUC) is saying that it will deplete its emergency reserves by April 2020, 3 months from now if nothing is done to help it cover its operating costs.
In a letter to Senate President Hokkons Baules this January 21st, PPUC Chairman and Acting CEO Greg Decherong reported that due to RPPL 10-19 and RPPL 10-26 and now RPPL 10-42 that prohibited PPUC from raising its fuel tariff in order to recover its fuel costs, it has dangerously dipped into its reserves to cover its losses.
Furthermore, PPUC reported that the emergency reserve intended to be maintained in case of emergencyincludes a sinking fund for an engine/generator replacement of at least $250,000 covenant with National Development Bank.
In addition to congress prohibiting increase in fuel rate to cover its actual cost, the merger of Water and Wastewater with Electric Utilities have further dragged down the power operations. Water and Wastewater Operations does not have enough cash to cover its power expenses of about $2 million a year, according to PPUC.
“PPUC will be in danger after April 2020 if no immediate subsidies are realized or ROP allows PPUC to adjust its AFPAC according to prevailing world oil prices and actual costs.”
Furthermore, PPUC said, “Despite best efforts to balance its budget for this coming year by drastic budget cuts through austerity measures across the whole corporation and postponing most, if not all, of capital acquisitions and infrastructure projects, our budget calculations puts PPUC in an estimated net loss of $3.9 million this coming year.”
The letter added that PPUC Board of Directors have not acted on a new fiscal year budget saying it would be a breach of fiduciary duty to act on a budget with resulting estimates of net loss of $3.9 million dollars.
“Continued net loss will result to cutting down of expenses into “most of the most essentials” and continued power disruptions due to under maintenance of power generation, transmission and distribution lines. But when worse comes to worse, we might lay-off people just to cut down our fixed expenses of paying salaries.”
Based on PPUC 2019 income/loss report which is based on tariff prohibition, it generated about $41.1 million dollars and its operating expenses was at $44.6 million dollars, leaving it with net loss of $3.4 million.
PPUC seeks subsidy of $4 to $5 million to cover the projected net loss this year from operations of $3.9 million but it says that it really needs $8 million to cover the net loss as well as $4 million much needed capital improvements. (L.N. Reklai)