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GPA extends contract with fuel supplier

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The Guam Power Authority today signed a three-year contract extension with fuel oil supplier Hyundai Corporation worth $900 million. The utility agency says the renegotiated deal will save about $46 million, which will be passed on directly to customers.

Hyundai won the bid in 2013 to supply GPA's residual fuel oil, and the contract allowed for the extension. Consolidated Commission on Utilities chairman Joey Duenas explained, telling KUAM News, "After two years, they now know their costs. They know how long it takes the ship to leave to go here, how long it takes to get to Guam, how much they have to pay on insurance. And all these different things, so now they've refined their costs and we've negotiated with them to bring down that premium." 

The savings come from reduced premium fees, which are what GPA pays the company for certain costs associated with supplying the fuel oil such as blending agents, insurance, and shipping. Duenas says the impact on rates though will be negligible, but they're still happy with the deal. He says the biggest impact will always come from the price of oil, which has been dropping of late.

"That's the big savings," he continued. "That's why if you go back a year ago, last year in August, we were still charging I think $0.19 on the Levelized Energy Adjustment Clause. It's now $10.2 cents. So that drop is what saving the people about 30% on their power bill."

Duenas says the LEAC allows GPA to adjust for fuel prices every six months.

But there are other price pressures ahead in the form of President Barack Obama's push to reduce carbon emissions. The Environmental Protection Agency is now overseeing new standards that require power plants to burn cleaner fuel. Duenas says GPA is ahead of the curve, with plans to build new combined cycle plants in Harmon that burn ultra low sulfur diesel.

The fuel will cost more, but the plants will be 25% more efficient.

Said Duenas, "The thought is you would then burn less fuel oil to produce the same amount of power. So we're hoping that that efficiency gain translates into a revenue neutral impact to the ratepayer."

The project still requires EPA and PUC approval. 

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