Commissioner: Delays are costing taxpayers money | Guam Business
With recent legislation authorizing the refinancing of Guam Power Authority bonds, utility officials sought approval from the Consolidated Utilities Commission and the Public Utilities Commission, for what GPA Chief Executive John Benavente, described as “high urgency”.
“I was watching CNN this morning. The feds have raised the rate a few basis points. So it’s really with great urgency that we get to the market and maximize rollover savings,” Benavente said Thursday, during an interview. a working session with the CCU. It appeared to refer to the Federal Reserve raising interest rates for the first time since 2018.
There are spillovers with the projected savings.
A resolution proposed by GPA indicates that the refinancing could generate $14 million in net present value savings.
That’s less than the $15.4 million that was discussed last month, when lawmakers were in session to discuss the refinancing authority with officials from GPA and the Economic Development Authority of Guam.
Asked about it, GPA said interest rates have since risen.
“GPA and its finance team are working quickly to get to market to avoid further reduction in savings,” the utility said.
CCU member Simon Sanchez blamed the chairman of the legislative committee overseeing GPA – Senator Clynton Ridgell.
“The real misfortune for the taxpayer is that I know that John asked for this bill to be introduced last summer. And we couldn’t ask our president to do it, so Senator (Joe) San Agustin saw the benefits of savings. He introduced the bill in October (2021) and here we are in March to finally enact it,” Sanchez said.
“And this delay of the legislature, mainly because the president was, for some reason, hesitant to help, … cost our taxpayers savings. But the good thing is in the design of the debt, … we can still max out the savings we can get,” the commissioner said,
But “ultimately,” Sanchez said, the commissioners are grateful for the refinancing authorization because it will level GPA’s debt and help prevent taxpayers from paying more for the overall debt.
GPA’s preferred method of refinancing would be to accelerate savings while extending debt service for another 10 years, ending it in 2044 rather than 2034.
This is intended to create savings for ratepayers in the early years of commissioning of the Ukudu plant, when costs are typically higher. The Ukudu plant will require expenditures taken from GPA’s base rate, and the refinancing is part of efforts to potentially eliminate a base rate increase.
Either way, there are significant overall savings to be made on electricity bills with the new plant, but this seems largely due to fuel savings. The Ukudu plant is expected to be more efficient, while utility solar projects will further reduce the need to import fuel.
There would be additional payments to be made by extending debt service by a decade, but Benavente said the burden would be minimized because then the costs would be spread over a wider customer base.
A few things still need to happen before the refinance can take place.
The CCU is due to meet on Tuesday for its decision on the refinancing, while GEDA’s board of directors met and approved the refinancing on Thursday.
The PUC will also have to decide on the matter and have scheduled the matter for their April meeting, according to Benavente.