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$3,000,000 Grant to Palau Public Utilities Corporation, RPPL 7-47 2008

RPPL NO.7-47
(Intro. as H. B. No. 7-119-13S, HD1, SD4,
CD1, PD1)

AN ACT

To provide a $3,000,000 grant to the Palau Public Utilities Corporation, and for other related purposes.

THE PEOPLE OF PALAU REPRESENTED IN THE OLBIIL ERA KELULAU DO ENACT AS FOLLOWS:

Section 1. Legislative Findings. The Olbiil Era Kelulau finds that the fuel costs charged by the Palau Public Utilities Corporation (P.U.C.) have become an inequitable burden on electric energy consumers and P.U.C. The fuel charge is the cost of fuel associated with producing the electric energy per kilowatt hour. With the recent precipitous rise in fuel costs due to unforeseen events such as natural disasters, terrorism, and production shortages, this charge has dramatically increased.

In the past two and a half years, the cost of crude oil per barrel has increased from $60 per barrel to over $115 per barrel. Between August of 2005 and May of 2008, P.U.C. has had to increase the fuel charge, which makes one component of the per-kilowatt hour rate, from 7¢ to 17¢ per kilowatt hour to keep up with this rising cost of fuel. At the same time, the energy charge, which makes up the other component of the per-kilowatt hour rate, has remained the same at an additional charge of 10¢ per kilowatt hour for the average consumer. This means in an average fuel bill with 1000 kilowatt hours of electric energy consumption, the fuel charge has increased from $70 (.07 X 1000) to $170 (.17 x 1000) with a net increase in the average fuel bill of $100 in addition to the cost of the electric energy charge, which adds an additional $100 (. l0x1000) per month to the bill of a consumer using 1000 kilowatt hours per month, for a total electric bill of $270 per month.

The Olbiil Era Kelulau finds that there is an amount of $3 million that is available to be used for the purpose of assisting P.U.C. Specifically, money from an $8 million loan received from Mega Bank and appropriated in RPPL No. 7-31 for airport purposes is available, provided that Mega Bank agrees that those funds may be reallocated for other purposes. The Olbiil Era Kelulau finds that $3 million of these funds should be reallocated to P.U.C., to be used to defray the cost of the fuel charge. By providing this grant, the Olbiil Era Kelulau finds that P.U.C. will be able to provide relief to residential and commercial customers who consume a lower amount of electricity per month, which will help ease the burden of ever-increasing energy costs.

The $3,000,000 grant funding necessary for P.U.C. to provide relief to its lowest-use residential and commercial customers, but not result in the Republic being unable to complete necessary airport projects or to meet airport-related obligations. Thus, in conjunction with this legislation, the Olbiil Era Kelulau and the President should make the immediate passage of substantial revenue generating measures a top priority. These measures include the corporate registry bill, legislation for the registration of foreign-owned vessels, the proposed legal framework for well-regulated exploration for oil or natural gas, a more investor-friendly Foreign Investment Act, and passage of tax amendments. The Olbiil Era Kelulau further finds that sufficient revenues to replenish the airport improvement funding must be earmarked within such new enactments.

Section 2. Amendment. RPPL No. 7-31, the "Palau International Airport Loan Revision Ratification Act," is hereby amended to add a new Section 6, as follows:

"Section 6. Authorization to grant $3,000,000 from loan proceeds to Palau Public Utilities Corporation to assist low energy use households and businesses. Notwithstanding anything to the contrary in Sections 3 and 5 above, $3,000,000 of the $8,000,000 of the non-lapsing funds appropriated under Section 5 may be awarded as a grant to Palau Public Utilities Corporation ("P.U.C."). These funds, if awarded, are earmarked to underwrite increased fuel costs to P.U.C. Upon receipt of this grant, P.U.C. must credit the fuel rate to its residential customers whose usage is no more than 500 kilowatt hours (KwH) per month, and for commercial customers whose usage is no more than 2,000 KwH per month, so that amounts due from those customers will equal the effective rate on May 31, 2008. This credit shall remain in effect either (1) until the effective rate is reduced to May 31, 2008 levels or lower; or (2) the date when the reduction in revenues to P.U.C. caused by the credit reaches the amount of the grant, after which time the Electric Service Rate Schedules, effective June 5, 2008, shall go into effect. However, if remaining grant funds are insufficient to credit all eligible customers during a billing period, P.U.C. may return the remaining funds to the National Government or apply the credit equitably among all eligible customers. The President and P.U.C. are authorized to enter into a Memorandum of Understanding setting forth details of the grant, not inconsistent with this section."

Section 3. Effective Date. This Act shall take effect upon its approval by the President of the Republic or upon its becoming law without such approval, or as otherwise provided by law.

PASSED: June 18, 2008

Approved this 20th day of June , 2008.

/s/_________________
Tommy E. Remengesau, Jr.
President
Republic of Palau