Regulator responds to threat
The Regulator, Unutoa Auelua-Fonoti, has responded to a threat by First Solar to take “formal action” against the government over a multi-million-tala solar project.
The threat is the latest development in a dispute over the treatment of V.A.G.S.T in the existing Power Purchase Agreement (P.P.A.) between the parties.
A letter signed by Jack Curtis, Regional Manager - Asia Pacific First Solar, leaked to the Sunday Samoan, sees First Solar accuse the Electric Power Corporation (E.P.C), and the Office of the Regulator (O.O.T.R.) over a proposal to enforce new feed-in-tariff (FiT) regulations on existing projects.
“The actions taken by E.P.C and O.O.T.R and the treatment of SfS by the Samoan Government (and its related institutions) has decimated our confidence in the country and raised sovereign risk concerns for current and potential investors from all industries vital to Samoa’s economy,” Mr. Curtis wrote.
“We have no doubt this has caused irreparable damage to the credibility of Samoa and the Pacific region as an investment destination.”
But Unutoa defended the government’s position.
In a letter to the Samoa Observer yesterday, she said: “One of the objectives of the Electricity Act 2010 (E.A. 2010) is to promote economy, efficiency, reliability and affordability of electricity provided by service licensees."
“As such, the Regulator is afforded powers, responsibilities and functions under E.A. 2010 to ensure proper and effective administration of the said Act.”
The following is Unutoa’s letter in full:
I refer to your news articles under the headings:
• (i) Investor threatens action against Govt (Sunday 12th March 2017); and
• (ii) Solar Power Dispute Negotiated (13 March 2017).
In the said articles there were references to issues that concern the Office of the Regulator (O.O.T.R.) and I find it important to respond; for the information and benefit of the public and other relevant stakeholders in the electricity sector.
One of the objectives of the Electricity Act 2010 (E.A. 2010) is to promote economy, efficiency, reliability and affordability of electricity provided by service licensees. As such, the Regulator is afforded powers, responsibilities and functions under E.A. 2010 to ensure proper and effective administration of the said Act.
I accordingly highlight for convenience statements made by First Solar on behalf of Solar for Samoa (“SfS”) and respond as follow:
“Proposed Rate not feasible”
It was pertinent to take action to ensure that a proper mechanism is in place to guarantee that Feed-In-Tariffs (FiT) (which is the rate that the Electric Power Corporation (E.P.C) pays for the electricity generated by Independent Power Producers (I.P.P.) such as SfS for the national grid) were fair and yet still competitive.
The drive for the mechanism is to ensure that consumers or the rate payers (which consists of the general public) of electricity is not subjected to major impacts from pass on costs due to high FiT rates.
The proposed substance of the policy document was not generated on a whim but was in fact based on information and data, collected and analyzed; and for the record is still going through the consultation phase and therefore is still receptive to further analysis subject to input made by stakeholders.
“Deficient Consultation Process”
As far as the Regulator is concerned the consultation opportunity was provided for the relevant stakeholders; the stakeholders being the licensees who will be involved in the implementation of the policy, which includes SfS.
However that is not to say, that if Solar for Samoa and First Solar feels obligated to consult its investors/financiers then that is their obligation to them and they should therefore take responsibility for not consulting them.
That said, I reiterate that the O.O.T.R FiT Policy is still in consultation phase; the phase whereby input is collected and analyzed; for First Solar to label such a practice aggressive is ludicrous given that consultations has always been a regulatory practice effectively utilized by the O.O.T.R. with all other service providers and licensees particularly in three (3) of the sectors (Electricity, Broadcasting and Telecommunications) it regulates.
“Change in Law”
It is ironic for First Solar to claim that they have never witnessed a Regulator enforce legislative changes and yet it is a common practice to include change in law provisions in Power Purchase Agreements (P.P.A) a practice and provision in which surely they are not excluded from.
I trust this will shed some light on the matter.
Ma le fa’aaloalo tele,
Unutoa Auelua Fonoti