28 November 2012

Guam Power Authority Seeks Switch To Liquefied Natural Gas

Abandoning oil could save $1.3 billion over 30 years

By Steve Limtiaco
Pacific Daily News

HAGÅTÑA, Guam  Guam "absolutely" needs to convert all of its oil-burning power plants to liquefied natural gas, according to Guam Power Authority General Manager Joaquin Flores, who said the power agency will ask the Consolidated Commission on Utilities, then the Public Utilities Commission, to approve the change.

The Consolidated Commission, which sets policy for the power and water agencies, is scheduled to meet this afternoon at the power agency's conference room in Harmon.

"This is a game changer -- bigger than solar or wind," Flores said of the plan to make all of the power agency's baseload generators run on liquefied natural gas.

The baseload generators, which provide most of Guam's power, currently burn fuel oil, either to boil water for steam turbines, or through internal combustion.

Switching to liquefied natural gas instead of burning fuel oil would save power customers about $1.3 billion over the next 30 years, Flores said, and create jobs related to the infrastructure for the new fuel.

"It's a slam-dunk decision," Flores said.

The power agency for years had been considering the switch to natural gas, but Flores said new federal emissions standards -- which would require the power agency to spend about $400 million on cleaner smokestacks, made natural gas the obvious choice. The first new emissions requirements take effect in 2015, he said, and additional requirements take effect in 2017.

It would cost less to convert the power plants to natural gas, Flores said -- $250 million to $300 million -- as opposed to $400 million to fix smokestacks for generators that continue to burn oil. He said the island's smaller "fast-track" generators would continue to run on diesel, even if the larger power plants are converted to natural gas.

Natural gas is less expensive than fuel oil -- about 15 percent cheaper -- and there are more places to buy it, Flores said. Singapore currently is the only source of fuel oil for Guam's power plants.

If the power agency decides to spend $400 million to build cleaner smokestacks instead of converting to natural gas, it effectively would be committing to the continued use of fuel oil for decades, Flores said.

The fuel savings from natural gas would be about $45 million a year, he said -- cash that could be used to pay off any loans or bonds to make the conversion to natural gas.

"Once we commit to this, this will create jobs. It's cheaper than oil over the long term," Flores said.

Guam Power Authority residential customers pay an average of $226 per month for electricity -- more than twice the national average, according to the power agency's audited financial statement for Fiscal 2011.

About 70 percent of that amount, or $158, is for the fuel oil that is burned, the "fuel surcharge."

The switch to liquefied natural gas would require a policy shift, beginning with today's CCU meeting, Flores said.

Switching to natural gas won't be easy, Flores said. It would require new infrastructure to handle the volatile fuel and additional training for those who handle it and work at the power plants. It also might require additional land, Flores said, noting the Port Authority of Guam owns vacant property across the street from the Cabras power plant. 

                    GPA to close old generators

Variety file photo
THE Guam Power Authority plans to dispose of its Dededo diesel and Marbo combustion turbine plant generators by selling the equipment to the highest bidder. The decision to retire some of the older power generating units is consistent with the recommendations of GPA’s 2012 Integrated Resource Plan, GPA General Manager Joaquin Flores said.

GPA recently completed its 2012 IRP, which is a 30-year energy roadmap for the entire island.

According to GPA studies, the four 2.4-megawatt high-speed Dededo diesel units and the 15.6-megawatt generator at the Marbo combustion turbine plant are no longer needed for the efficient and proper operation of the system.

The Marbo Combustion Turbine is an asset that was transferred to GPA by the United States Air Force and has not made any significant contribution to the islandwide power system.

The Dededo units, on the other hand, are the highest-cost unit in GPA’s generation portfolio. According to GPA’s 2012 IRP, these medium-speed reciprocating units burn ultra low sulfur diesel. They have been recommended for retirement in 2012.

Another reason cited for the closure of the older power plants was the recently issued U.S. Environmental and Protection Agency regulations requiring additional investments to bring existing plants into compliance.

In an interview with the Variety, Flores said it will cost approximately $400 million to bring existing GPA plants into compliance with EPA regulations.

For generators such as the Dededo units, GPA estimates an environmental compliance capital expenditure cost of approximately $2.2 million with additional operating costs of $300,000 a year.

The most prudent course of action, according to Flores, is for GPA to dispose of the Dededo Diesel and Marbo combustion turbine plant units by selling the equipment to the highest bidder.

In compliance with GPA’s bond indenture agreement, net proceeds from the sale will be deposited to GPA’s Revenue Fund.
Rate rollback

Meanwhile, the Consolidated Commission on Utilities has authorized GPA to file a petition with the Public Utilities Commission to roll back the rate hike approved last May 2012.

According to a resolution presented at the last CCU meeting, the savings from GPA’s bond issuance exceeded the $9.1 million rate increase last May, allowing GPA to roll back the entire rate increase.

According to GPA, it has explored a variety of options for implementing the rate rollback and is considering “employing a negative surcharge” for the period when the new rates will take effect.

If PUC approves the petition, power consumers are expected to have a decrease in their rates by December.