Lawmakers must approve land leases for the island’s new power plant or the project could collapse, wasting years of work and exposing Guam to steep federal environmental fines, according to the Public Utilities Commission.
Guam’s legislature held a public hearing Monday afternoon for Bill 301, which would allow Korea Electric Power Company to lease 25 acres of land owned by GPA in Ukkudu, Dededo, to build and operate a 198-acre power plant. megawatts and 5 acres of land GPA. in Piti to build and operate a 41 megawatt standby diesel generator. Guam law requires legislative approval for long-term leases of public land.
The bill would also authorize and authorize the operation of power plants on these lands. Guam’s zoning law does not specifically allow power plants, according to GPA legal counsel Graham Botha.
Piti land, lot 261-2, which was acquired from the army, is not zoned. The Ukkudu land—lots 5010-1NEW-NEW-1 and 5010-1NEW-NEW-RI—is zoned for light industrial use. KEPCO operates on the island as “Guam Ukudu Power LLC” and the lease would be with this company at a cost of US$100 per year.
GPA chief executive John Benavente, who testified in support of the bill, told lawmakers the lease agreement mirrored the terms of KEPCO’s 2019 contract with GPA to build and operate the power plant.
Under the 2019 contract, KEPCO is required to finance and build the plant and operate it for 25 years, selling the electricity to GPA. The power plant is expected to be completed by April 2024, allowing GPA to permanently shut down its oil-fired generators and meet court-ordered deadlines to comply with federal clean air requirements.
KEPCO needs a ground lease to comply with local laws, in order to be able to obtain financing of approximately $750 million for the Ukkudu and Piti projects.
“It would be truly disastrous if the legislature did not approve the proposed ground lease,” PUC Chief Administrative Law Judge Fred Horecky told lawmakers. He testified on behalf of PUC President Dr. Jeff Johnson.
“KEPCO may well withdraw from the entire (power station) agreement and refuse to proceed. Inaction or failure here on the part of the Legislative Assembly does not seem possible under these circumstances,” Horecky said. “GPA doesn’t really have a choice in the matter. They are to complete the plant by April 2024.”
Horecky said electricity customers have recently experienced power rationing due to problems at some power stations. Cabras 2 has been down for about a week due to a boiler tube leak and Piti 8 will be down until next week as it is converted to burn cleaner fuel. With two large generators out of service, GPA was unable to meet peak electricity demand last Wednesday and Thursday, resulting in power outages for some customers.
“If this new power plant is not built, you can certainly expect this type of problem to develop more and more over the years,” Horecky said.
Senator Joanne Brown said she may not vote for the bill because she disagrees with GPA’s proposed lease agreement, which requires contract disputes to be resolved through mediation and arbitration instead of the courts.
Brown was the general manager of the Guam Ports Authority when it had a contract dispute with Guam tenant YTK over the development of a fishing facility at the Wharf Hotel. A fishing facility was never built and YTK failed to pay the required rent at the port, but an arbitration panel awarded the company $14 million.
The port won its case in the Guam Supreme Court when it challenged the validity of YTK’s contract, which was longer than required by law and never allowed by lawmakers.
“I’m not a big fan of arbitration because of the experience, cost and hassle we’ve been through,” Brown said, adding that she didn’t want ratepayers stuck with an arbitration award. which is not in their best interest.
“That puts a big question mark in my mind. … Otherwise, I’m very supportive of Guam Power Authority,” Brown said. “I may or may not vote for this bill.”
GPA’s attorney, Botha, said the arbitration requirements were part of other GPA contracts, but GPA never had to go to arbitration. “The lenders … wanted the option of having something else that they thought would give us less home-court advantage,” Botha said.
He said the bond requirements provide additional financial guarantees in the event that KEPCO fails to honor its contract.