Final Report on the Master Plan Study for the Upgrading of Electric Power Supply in the Republic of Palau Summary

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Final Report on the Master Plan Study for the Upgrading of Electric Power Supply in the Republic of Palau Summary Palau Public Utilities Corporation No. The Republic of Palau FINAL REPORT ON THE MASTER PLAN STUDY FOR THE UPGRADING OF ELECTRIC POWER SUPPLY IN THE REPUBLIC OF PALAU SUMMARY JULY 2008 JAPAN INTERNATIONAL COOPERATION AGENCY YACHIYO ENGINEERING CO., LTD. THE CHUGOKU ELECTRIC POWER CO., INC. IL JR 08-018 PREFACE In response to a request from the Republic of Palau, the Government of Japan decided to conduct the Master Plan Study for the Upgrading of Electric Power Supply and entrusted to the study to the Japan International Cooperation Agency (JICA). JICA selected and dispatched a study team headed by Mr. Mitsuhisa Nishikawa of Yachiyo Engineering Co., LTD. (yec) and consists of yec and Chugoku Electric Power Co., INC. three times between January and June, 2008. The team held discussions with the officials concerned of the Government of Palau and conducted field surveys at the study area. Upon returning to Japan, the team conducted further studies and prepared this final report. I hope that this report will contribute to the promotion of this project and to the enhancement of friendly relationship between our two countries. Finally, I wish to express my sincere appreciation to the officials concerned of the Government of Palau for their close cooperation extended to the study. July 2008 Seiichi Nagatsuka Vice President Japan International Cooperation Agency Mr. Seiichi Nagatsuka Vice President Japan International Cooperation Agency LETTER OF TRANSMITTAL July 2008 Dear Sir, It is my great pleasure to submit herewith the Final Report of “The Master Plan Study for the Upgrading of Electric Power Supply in the Republic of Palau”. The Study Team that consists of Yachiyo Engineering Co., Ltd. and Chugoku Electric Power Co., Inc. conducted field surveys in Palau over the period between January and June, 2008 according to the contract with the Japan International Cooperation Agency (JICA). The Study Team compiled this report, which consists of the Master Plan Study for the Upgrading of Electric Power Supply, Pre-Feasibility Study on Prioritized Projects, Recommendations to Operational Improvement of Power Supply Equipment, etc. through close consultations with officials concerned of the Government of the Republic of Palau and other authorities concerned. On behalf of the Study Team, I would like to express my sincere appreciation to officials concerned of the Government of Palau and other authorities concerned for their cooperation, assistance, and heartfelt hospitality extended to the Study Team. We are also deeply grateful to the Japan International Cooperation Agency, the Ministry of Foreign Affairs, the Ministry of Economy, Trade and Industry, and the Embassy of Japan in Palau for their valuable suggestions and assistance during the course of the Study. Yours faithfully, Mitsuhisa Nishikawa Team Leader The Master Plan Study for the Upgrading of Electric Power Supply in the Republic of Palau CONTENTS 1. Background and History of the Study..................................................................................... 1-1 1.1 Background of the Study .....................................................................................................1-1 1.2 Basic Policies of the Study................................................................................................... 1-1 2. Socioeconomic Conditions and Development Programmes in Palau ..................................... 2-1 2.1 Situation of Social Development ......................................................................................... 2-1 2.1.1 Population, History and Geography ........................................................................ 2-1 2.1.2 Industrial Activities................................................................................................. 2-1 2.1.3 Situation of Public Services and Infrastructure Development................................. 2-1 2.2 Economy and Fiscal Situation.............................................................................................. 2-2 2.2.1 Economic Growth and Structural Characteristics.................................................... 2-2 2.2.2 Fiscal situation......................................................................................................... 2-4 2.2.3 Compact Renewal and Economic Reform............................................................... 2-4 2.3 Development Plans.............................................................................................................. 2-5 3. Conditions of Electricity and Energy Supply in Palau............................................................ 3-1 3.1 Policies, System and Organization Relating to Electricity and Energy Supply................... 3-1 3.1.1 Electricity and Energy Policies................................................................................ 3-1 3.1.2 Legal Framework for Electricity Business .............................................................. 3-1 3.1.3 Organizations Relating to Electricity and Energy Policies...................................... 3-1 3.2 Organizations Relating to Electricity Business.................................................................... 3-1 3.3 Power Supply and Demand Situation .................................................................................. 3-2 3.3.1 Power Demand........................................................................................................ 3-2 3.3.2 Power Supply Capacity............................................................................................ 3-2 3.3.3 Load Characteristics of the Koror-Babeldaob Power System ................................. 3-3 3.4 Present Conditions of Power Generating Facilities and the Power Supply System............. 3-3 3.4.1 Conditions of Power Generating Facilities.............................................................. 3-3 3.4.2 Conditions of Transmission and Distribution Facilities .......................................... 3-5 3.5 Power Development Plans ................................................................................................... 3-8 3.6 Potential of Primary and Renewable Energy in Palau ......................................................... 3-9 3.6.1 Endowment Situation of Primary Energies ............................................................. 3-9 3.6.2 Potential of Renewable Energy in Palau ................................................................. 3-9 4. Financial and Managerial Analysis on PPUC......................................................................... 4-1 4.1 Objectives of Financial and Managerial Analysis on PPUC ............................................... 4-1 4.2 Financial Structure and Management as the Executing Agency.......................................... 4-1 i 4.2.1 Status of PPUC and Control of the Government ..................................................... 4-1 4.2.2 Organizational Structure for Business Administration and Management ............... 4-1 4.2.3 Corporate Planning and Budgeting.......................................................................... 4-2 4.2.4 Financial Management and Control......................................................................... 4-2 4.3 Cost Recovery and Tariff Structure ..................................................................................... 4-2 4.3.1 Existing Tariff Structure.......................................................................................... 4-2 4.3.2 Electricity Bill Collection........................................................................................ 4-4 4.3.3 Analysis on Structural Characteristics of Revenue and Expenditure ...................... 4-5 4.3.4 Fundamental Direction for Cost Recovery Improvement........................................ 4-8 4.4 Main Steps to be Taken for Improvement of Financial Performance and Operation Efficiency of PPUC...................................................................................... 4-8 4.4.1 Switch from Diesel Fuel Oil to Heavy Fuel Oil ...................................................... 4-8 4.4.2 Revision of Electricity Tariff of PPUC ................................................................... 4-9 4.4.3 Strategy for Electricity Tariff Revision ................................................................... 4-10 4.5 The new actions currently taken by PPUC promptly response to the revision direction proposed by JICA Study Team............................................................................. 4-14 5. Examination of Power Development ...................................................................................... 5-1 5.1 Power Demand Forecasts..................................................................................................... 5-1 5.1.1 Review of the Existing Power Demand Forecasts................................................... 5-1 5.1.2 Review of Economic Policies, Economic Growth Rate Forecast and Local Development Programme ....................................................................... 5-2 5.1.3 Examination of Demand Side Management ............................................................ 5-3 5.1.4 Power Demand Forecast.......................................................................................... 5-6 5.2 Formulation of the Power Development Plan...................................................................... 5-12 5.2.1 Examination of the Power Station Construction Plan ............................................. 5-12
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