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Back Local News CCU authorizes GPA to seek $26.1M short-term loan

CCU authorizes GPA to seek $26.1M short-term loan

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THE Consolidated Commission on Utilities has authorized the Guam Power Authority to seek financing legislation for a two-year short-term borrowing of up to $26.1 million to finance necessary technical and system improvements – including $15 million worth of critical facility upgrades for Cabras' No. 1 and 2 generators.

According to GPA General Manager Joaquin Flores, the short-term borrowing would not only finance critical system improvements and upgrades, but it would also reduce a potential 9 percent rate increase in fiscal 2014 to only 2.2 percent. He added the financing could also avert a planned rate increase in FY2017.

However, as part of the rate plan, the short-term borrowing would be refinanced – after two years – by a planned FY2015 borrowing of around $100 million.

“When we go to the bond market to take this first $26 million or so to pay off this short-term borrowing debt, we are adding other projects that in five years would cost about $100 million. Instead of paying it off on a year-by-year basis, we will compress it into a $100 million loan, which would already include the $26 million, and levelize this over a long period of time,” Flores said.

The borrowing requires the approval of the Legislature, the Guam Economic and Development Authority, and the Public Utilities Commission.

Realized

In January, when GPA was working on its FY2014 budget, utility officials realized there were a series of projects which were greatly needed; however, these projects also cost significantly more than what GPA would normally fund from an annual budget.

GPA determined that if the projects were to be included in the budget, a 9 percent rate increase in FY2014 would be required.

Aside from the $15 million facility upgrades, the short-term borrowing will also support $3.5 million worth of facility upgrades, $1.5 million for the continuity of the smart grid project, and $1.3 million worth of cyber-security plan upgrades, among other planned improvements.

Flores stressed that the CCU is concerned with the impact of a possible rate increase, and has encouraged the power company to figure out how to bring any rate increase down or eliminate it completely.

The short-term borrowing, Flores said, will help him address this concern and help GPA reinvest in the system as well as provide better reliability to power customers.

LNG not included

The fuel diversification strategy of converting to liquefied natural gas, or LNG, has not been factored into the short-term borrowing plan. Flores said the LNG project entails a completely different set of funding requirements.

At this point, the power company is still in the process of putting together an implementation strategy for the acquisition of LNG. Once completed, the plan has to be approved by the Consolidated Commission on Utilities, then by the Public Utilities Commission.

“They all have to agree with the implementation strategy, including capital expenditures. Until that plan is approved, it would be imprudent for me to be asking money for short- or long-term borrowing,” Flores said.

Although GPA’s environmental compliance requirements were initially raised during an earlier CCU meeting, it was not included in the final list of projects that will be funded by the planned short-term bonds.

The USEPA RICE-MACT regulations require additional equipment installed on GPA’s small diesel generators by next year.

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