Activity Report 2016 - Kosrae Utilities Authority

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State of Kosrae

Federated States of Micronesia

KOSRAE UTILITIES AUTHORITY

P.O. Box KUA E-mail: TEL: (691) 370-3799/3344

Kosrae, FM 96944 KUA@mail.fm FAX: (691) 370-3798

UTILITY BOARD AGENDA ITEM

DATE: July 18, 2016

SUBJECT: MANAGEMENT ACTIVITIES REPORT

FROM: Fred Skilling, GM

REPORT:

This report will summarize the major activities and projects undertaken during the 3rd. quarter of Fiscal Year 2016.

Highlights:

KUA welcome Mr. Hairom Livae to join the management team in replacing late Nena Gifford for the Customer Supervisor Position and also Mr. Linson Waguk as new Board member to replace Mr. Livae. Both came with wide range of knowledge and experiences to assist KUA on numerous challenges facing the operation. Mr. Livae came on Board on June 6, 2016 to assume his assigned responsibilities and Mr. Waguk on 16th. June to officially seat-in as the Board member representing Utwe Municipality. KUA is fortunate to have these talented individuals to serve KUA in their assigned capacity.

KUA had encountered major power outages during the quarter causing two days island-wide power outages due to engine problems with the three available units. One main engine units were fixed after long hours of hardworking from the crew to enable these units to restore power services to the island. The management has continued to work with World Bank to procure and deliver the new genset to help with the engine problems presently experienced. KUA wish to express thanks to everyone for their understanding and patience for any inconveniences it may cause during the outages.

The transformers for the 3 phase line to the Tropical Bottling Water Company were fixed after receiving complaints from the state gov't that it was malfunctioned and not working to supply power to the facility. A representative from CONBON, Ltd visited the plant and found out that the transformers supporting the plant was not working and reported to the state gov't. Coincidently, the main engine unit encountered mechanical problems which alerted the Operation Manager and the crew to fix before attending to the transformer problem at the Water facility. The Operation Manager will continue to check the 3-phase power lines to make sure it is working to provide power to the facility.

The new Meter for the Solar PV System at the State Administration Parking Lot was installed during last week of April, 2016 which enable the system to maximize its energy penetration into the Power grid-lines. The PV system is presently utilized its potential capacity to supplement the island load during sunny days which shows from the energy data collected from the system. The staff will continue to monitor the energy data contributed from this system.

Most of the heavy equipments, like the Bucket Trucks, Auger Truck, Backhoe are in critical shape that require new parts to repairs which are no longer available in the U.S. markets. These handicap KUA services to attend to major projects such as restoration of power lines, major work order request from customers. The staff is presently seeking quotations for these equipments from suppliers and hopefully will submit to the Board for approval to purchase new equipments to replace these old ones to improve services to customers and support works on major projects.

The Notes for the Project Exchange (E/N) by Governments of Japan and FSM took place April 1, 2016 for the approved Energy Development Grants for Kosrae funded by Japan as advised by the JICA Office in Pohnpei. For the next implementation stage, the JICA Team plan to visit Kosrae on 2nd. week of June to conclude the Consulting Service Agreement with KUA and explain the Draft Tender Agreements, Procedures of procurement of third countries products such as electric poles, insulators, etc and tendering schedules. The approved grants is around $10,936,426.00 to fund four main energy projects. These are construction of a new Power Plant with two new gensets and a new substation, construction and upgrading of the Lelu Power Distribution Lines and installing a new underground cable to the dock/airport commercial site. The commencement and implementation of these projects will be detailed during their visit on 2nd. week of June, 2016. As part of the approved grants, KUA will be responsible to perform the site clearances for the new Power Plant, Construct gate, fences and Guard house for the new building site, perform feeder cables and low voltage connection, prepare water pipes to the new Power Plant, implement public announcements and awareness program and be responsible for banking commission and fees payment to Japanese bank as required. KUA has started implementing some of these activities in preparation of the contractors mobilization to start implementing these projects.

The World Bank grants to procure the new CAT genset is underway with remaining checklists to further review and finalize the technical specs of the unit with the required TOR for the installation work and necessary technical works to reconcile running units with the new Power Plant funded from the JICA/Japan grants. The staff submitted several equipment suppliers contact address to the Project Procurement Specialist funded under the WB grant to work with these suppliers on the specific unit that meets the required specs for KUA. The management also submitted 500 street lights, one Bucket Truck Equipment and a Transformer for Luen Thai power needs to be considered under the WB grants and these need be in line with the grants for approval. The management is hoping to install this new genset and equipments and lights will be approved and procured before the end of this calendar year.

The KUA management had joined the State Gov't and UMG to conduct public awareness hearing to Utwe residents regarding the proposed operation of the new Utwe Water System after completion of the project. The public hearing focused mainly on the work progress of the system, proposed plan to transfer to KUA after completion, leakage prevention on secondary lines to customers and proposed rates. There were questions raised by the attendants concerning water fee and when to impose this fee, funding assistance from state gov't to subsidize water charges, operation cost, grace period to be allowed after completion of the project and others. The State Gov't, UMG and KUA has remaining issues and terms to clarify and agree upon for the transfer of the water system before KUA start managing the water operation at Utwe.

ENERGY SALES: The energy (kwh) sales during 3Q2016 were slightly increased by approximately 4% compared to the previous quarter. Total kwh sales were 1,351,164 kwh during 2nd. qrt.2016 compared to 1,294,648 kwh during 2nd. qrt. 2016 with average monthly sales of 450,388 kwh compared to 431,549 kwh sales from the previous quarter. Average cash collection during 3Q2016 were slightly increased by approximately 5.8% compared to the previous quarter and collection represent approximately 1.16% of the total revenue sales during third quarter, 2016. The Financial Statements for the operation during 3Q2016 is prepared and will be provided for Board’s review and comments.

Solar PV Contribution (Two Centralized PV System:

Total Solar PV kwh contributed were 83,669 kwh from the two centralized PV system, representing 5.6% of the total energy demand from the customers during the 3rd. quarter, FY2016. Estimated fuel savings from these PV system were approximately 4,502 gallons for the period amounting to approximately $12,046 savings on fuel. This fuel savings represent about 4% of the fuel required to run the engine units at the Power Plant.

Pay Pal On-Line Account:

The KUA website On-line Account showed total collection as indicated below during 3rd. qrt., FYU2016 from Kosraean living abroad. This is to encourage remittances from Kosraean working outside to help families here for their power needs. The Customer Service staff have continued to promote power payments thru the website to encourage more Kosraean to utilize the on-line payments to at least contribute to the local cash flow.

Pay Pal

Number of Customers

Revenue Collected

April 2016

$1,940.00

May 2016

$2,100.00

June 2016

$1,440.00

Total

141

$5,480.00

Prepayment Meters Program:

Total customers during the 3rd. Quarter of Year 2016 were 1788 with approximately 83% on Cash Power meters. Customers sector with CP meters were 1245 residential, 150 commercials, 49 state gov’t and 35 non-state gov’t accounts. Total energy sales and collected for the Cash Power Meter customers during the 2nd Quarter FY16 are as follows:

KWHrs Sales Current Coll. Arrears Coll.

Apr. ’16 246,427.70 kwh $87,565.58 $ 788.16

May. ’16 247,074.00kwh $89,590.90 $ 1,775.30

Jun. ’16 201,739.00kwh $116,488.82 $ 511.20

The prepayment Meters Program has continued to support the needed cash flow for the operation and assisting customers in managing and educating customers the power usage more effectively which benefit customers in reducing their electric usage as well as required supply load from KUA. The staff have continued to monitor cash power meters with the idle accounts and for new hook-up.

Power Outages:

The unexpected power outages occurred during 3Q2016 were significantly increased due to weather conditions, engine problems and damages to the distribution lines. There were 21 unexpected power outages with approximately 51 hours and 12 minutes duration of power outages representing about 2% of total number of service hours to customers. One major island-wide outages due to engine problems that affected the whole island which took approximately 40 hrs. to restore the power to the island. The management continues to work with WB and Nat'l Gov't for the procurement of the new Genset to ensure continuity of services to the island.

The Fuel prices received during 3rd. qrt. FY 2016 were substantially increased by 13.7% starting with $2.4701 per gallon and slightly increased to $2.6227 during 2nd. week of April and further increased to $2.6978 during 2nd. week of May and slightly dropped to $2.6227 on 1st. week of June and again increased to $2.8611 for the remaining of 3QFY2016. The average fuel price were $2.65488 per gallon during the period. The FAC were adjusted based on the highest price received which were calculated and took effect on the first day of each month. The revenues from FAC were reduced by approximately 10% due to the fuel price during the quarter.

Total fuel delivered during 3rd. qrt. were 108,000 gallons with total cost of $286,136.00 and total fuel usage were 105,570 gallons with total cost of $275,142.85. The average monthly consumption were slightly decreased by approximately 8% from the previous quarter due to power outages and conservation efforts . The ending fuel inventories were 14,193 gallons at the Fuel Storage Tank which can supply approximately one week and three days of required fuel to run the Power Plant Engines.

KUA INVESTMENT FUNDS: The market value of the KUA investment funds under the management of Asia Pacific Group of Raimond James and Associates Inc. were reported at $313,205. 44 at the end of 3rd. quarter of FY2016, a slight increase of 1.6% from the previous period. The KUA portfolio reports show investment in US Equities at approximately 53.92% , Non-US Equities at 4.82%, Fixed Income of 35.45%, Cash & Cash Alternatives at 3.31% and Real Estate & Tangibles at 2.50%. As reported by the Investment Managers, the investment climate is affected by the Brexit by Great Britain to separate from the EU having the pound fell immediately with some affects on US dollars. The management will continue to monitor the stock markets for any alarming trend of the stock market to ensure that the KUA investment will be safeguarded.

The value of KUA TCD/s (Certificates of Deposits) with Bank FSM is reported with a slight increase of $174,995, slight increase of approximately 5% inclusive of earned interest as of July 4, FY2016. This TCD's is collateralized to secured the KUA Line of Credit with the Bank with an amount of $200,000. The L/C will be matured on December 25, 2016 with a present balance of $25,005 from the $100,000 withdrew to purchase fuel during price was down and favorable. The management anticipate to pay-off this balance during 4th. quarter of this fiscal year. The staff plan to request the Board to use this L/C after clearing the balance to purchase equipments for the operation.

Training:

Mr. Tolenoa Joe and Mr. Hairom Livaie went to the training held in Pohnpei, FSM to participate in the Energy Audit Capacity Building Training conducted on June 06-17, 2016 by the International Institute for Energy Conservation under the Energy Audit Project with support from the United Nation Development Program. The training is to introduce the energy audit providing four session and five selected building at Capital Complex to use the energy efficiency equipment to anaylize the power consumption and present the recommendation to the FSM Energy Officer.

Mr. Sisado Olter left last Saturday on July 02, 2016 to attend the JICA Training at Okinawa International Center to gain knowledge in the field of Water Management and Water Resource Supply. The expectation for him after the training is to formulate the ideas and techniques for the sustainability of the water services in Japan. The duration of the training will be three months period.

This report summarizes the main activities undertaken during the 3rd. quarter of Fiscal Year 2016. If you have any questions concerning the reports and other issues not included in this report, please feel free to visit or call the KUA office for more clarification.

Thank you.

Fred N. Skilling

Cc: Governor Lyndon Jackson

Lt. Gov. Carson Sigrah

Speaker Tulensa Palik

KUA Board Members

Kosrae Utilities Authority