Report No. 10441 -EAP The Federated States of Micronesia Issues and Options in the Energy Sector Annex B July 31, 1992 The World Bank in Cooperation with The UNDP/ESCAP Pacific Energy Development Programme The Asian Developmnt Bank and the Forum Secretariat Energy Division FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Abbreviations ADB Asian Development Bank ADO Automotive Distillate Oil AIDAB Australian International Development Assistance Bureau CIF Cost, Insurance, and Freight (included in price quoted) DPK Dual Purpose Kerosene DPW Department of Public Works ESMAP Energy Sector Management Assistance Program (.: ,nt World Bank, UNDP & Bilateral donors) FDI Foreign Direct Investment FOB Free On Board FSED Forum Secretariat Energy Division FSM Federated States of Micronesia GDP Gross Domestic Product MG Millions of (U.S.) Gallons OBP&S Office of Budget, Planning and Statistics OMIP Operation and Maintenance Improvement Program (USDOI) OTEC Ocean Thermal Energy Conversion PEDP Pacific Energy Development Programme (UNDP) PREA Pacific Regional Energy Assessment PU&C Public Utilities and Contracts PV Photovoltaics RON Research Octane Number (octane "rating" for gasoline) TOE Tonnes of Oil Equivalent USDOE United States Department of Energy USDOI United States Department of the Interior Currency The official currency of the Federated States of Micronesia is the U.S. dollar. This report is based on the findings of a mission which visited the Federated States of Micronesia from 5 through 15 February and from 23 through 28 February 1991 visiting all four states (Chuuk, Kosrae, Pohnpei and Yap) as part of the joint World Bank, PEDP, ADB and Forum Secretariat Pacific Regional Energy Assessment. The mission comprised Mr. Peter Johnston (Team Leader, PEDP), Mr. Vilhelm Mtrrup-Petersen (Power Engineer, World Bank consultant), Mr. George Tavanavanua (Petroleum Specialist, World Bank/AIDAB consultant), Mr. Christopher Cheatham (Energy Economist, PEDP) and Mr. Robert Lucas (Macro Economist, FSED). FOR OFFICIAL USE ONLY TABLE OF CONTENTS Page Abbreviations List of Tables and Figures Energy Conversions and Measurements SUMMARY OF MAIN FINDINGS AND RECOMMENDATIONS i Energ;y Situation and Priorities i Principal Recommendations iv Petroleum Subsector iv Power Subsector iv Household and Rural Energy vi Energy and the Environment vi Institutional Development vi I. ECONOMIC AND INSTITUTIONAL CONTEXT 1 Energy and the Economy 1 Institutional Framework 4 II. ENERGY CONSUMPTION 6 Thv Structure of Energy Consumption 6 Consumption of Petroleum Products 6 Consumption of Electricity 8 Consumption of Biomass 15 Demand Projections 15 III. ENERGY SUPPLY 17 Overview 17 Electricity 17 Chuuk State 18 Kosrae State 22 Pohnpei State 23 Yap State 30 Rural Electrification 34 Petroleum Procurement and Distribution 35 New and Renewable Sources of Energy 39 IV. POLICY ISSUES AND PRIORITIES 41 Pricing Issues 41 Petroleum Product Pricing 41 Power Tariffs and Utility Fnance 43 Regulatory and Other Policy Issues 44 Overview 44 Petroleum Subsector 45 Power Subsector 47 New and Renewable Sources of Energy 49 Energy Conservation 50, Environmental Issues S' V. INVESTMENT AND TECHNICAL ASSISTANCE PRIORITIES 52 Energy Planning and Coordination 52 Power Subsector 52 Petroleum Subsector 54 Household and Renewable Energy 54 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. List of Tables, Figures, and Annexes Page List of Tables in main text Table 2.1 FSM Petroleum Consumption by Sectors, 1990 7 Table 2.2 Summary of Electricity Generation and Consumption, 1990 (GWh) 10 Table 2.3 Number of Electricity Consumers by Category (1990) 11 Table 2.4 Fuel Consumption per Tuna Vessel 15 Table 3.1 Existing Generating Capacity in Pohnpei (MW) 27 Table 3.2 FSM Petrolcum Fuel Storage by State, 1990 36 Table 3.3 Total FSM Fuel Import Volumes and Values by State, 1990 and 1989 37 Table 3.4 1990 Petroleum Imports by Product 37 Table 3.5 Summary of Biomass resources of FSM (1983) 39 Table 4.1 Fuel Prices by State, early 1991 42 Table 4.2 Financial Performance of the State Power Utilities, 1990 43 List of Figures Figure 2.1 Hourly Electric Loads in Chuuk, Kosrae, and Yap 12 Figure 2.2 Firm Capacity and Peak Demand (MW): Chuuk 13 Figure 2.3 Firm Capacity and Peak Demand (MW): Kosrae 13 Figure 2.4 Firm Capacity and Peak Demand (MW): Pohnpei 14 Figure 2.5 Firm Capacity and Peak Demand (MW): Yap 14 Annex 1: Statistical Tables Table 1 Selected Development Indicators (1985 - 1990) Table 2 Selected Projections (1990 - 2000) Table 2a Petroleum Demand Projections Table 3 Energy Balance: TOE (1990) Table 3a Energy Balance: Original Units (1990) Table 4 Energy Balance: TOE (2000) Table 4a Energy Balance: Original Units (2000) Table 5 Petroleum Market - Demand Volumes (1985 - 1990) rable 6 Public Electrification (1985 - 1990) (2 pages) E Table 7 State Electrification Performance Indicators (1990) Table 8 Electricity Tariff Structure (1990) Table 9 Non-conventional Energy Resources and Use (1990) Table. 10 Biomass Resources (1983) Table 11 Energy Sector Capital Investment and Plans (1990 - 1991) Annex 2: Suggested Scope of Work: ADB Technical Assistance and Potential Financing of Projects Annex 3: Estimated Power Production Costs in Each State in the FSM Pro Forma Operating Income and Expenditure Accounts, 1989-1990: Table 1: Chuuk Power System Table 2: Kosrae Power System Table 3. Pohnpei Power System Table 4: Yap Power System Annex 4: Affordability of Increased Electricity Charges dI FSM Maps of the Power Grids of Chuuk, Kosrae, Pohnpel, and Yap ENERGY CONVERSIONS AND MEASURENTS lhpical Tl)pical Gross Gross Oil Unit Density Density Eneigy Energy Equiv kg/litre 1/tonne MS/kg MU/litre toe/unit (net) Biomass Fuels Fuelwood (5% mcwb) tonne 18.0 0.42 Coconut Residues (air dry) I Shell (15% mcwb)^,, tonne 14.6 034 Husk (30% mcwb)X,, tonne 12.0 0.28 Ave-rage (air drybA ,,d ,b, ,2 tonne 14.0 0.33 Coconut Palm Wood (air dry) tonne 115 027 Charcoal 30.0 0.70 Vegetable and Mineral Fuels COrde Oil tonne 42.6 1.00 Coconut Oil tonne 0.910 1100 38.4 0.90 LPG (propane) tonne 0510 1960 50.0 255 1.17 Ethanol tonne 27.0 0.63 Gasoline (Super) tonne 0.730 1370 465 34.0 1.09 Gasoline (Unleaded) tonne 0.735 1360 4b.5 '442 1.09 Aviation Gasoline (Avgas) tonne 0.695 1440 47.5 r.0 1.12 Lighting Kerosene tonne 0.790 1270 46.4 36.7 1.09 Power Kerosene (Avtur, DPK) tonne 0.795 1260 46.4 36.9 1.09 Automotive Diesel (ADO) tonne 0.840 1190 46.0 'Z.6 1.08 High Sulphur Fuel Oil (IFO) tonne 0.980 1020 42.9 42 l 1.01 Low Sulphur Fuel Oil (IFO) tonne 0.900 1110 445 1.04 Electricity (MWh) Fuelwood ' MWh 0.93 Fuel Conversion Efficiency Diesel: Text uses actual where known, otherwise: Average efficiency for small (< 100 kW output) diesel engine 0.46 UkWh (22%). Average efficiency of large (>100 kW output) modern diesel 0.284 /kWh (36%). Average efficiency of low speed, base load diesel (Pacific region) 0.30 - 033 l/kWh (28% - 32% eft). Energy Measurements Area: 1.0kmn = 100 hectares = 0386mi2 1.0 acre = 0.41 hectares Mass: 1.0 long tons - 1.016 tonnes Energy lkWh = 3.6 MJ = 860 kcal = 3412 Btu = 0.086 kgoe 1 toe = 11.83 MWh = 42.6 GI = 10 million kcal = 39.68 million Btu 1 MS = 238.8 kcal = 947.8 Btu = 0.024 kgoe = 0.28 kWh Notes: (1) Average yield of 2.93 air dry tonnes residues/tonne copra produced (Average NCV 14.0 MSk) mcwb = moisture content wet basis. NCV - net calorific value. (2) Proportion: kernel 33%, shell 23%, husk 44% by dry weight. (3) Assumes converson efficiency of 9% (biomass-fuelled boiler). Sources: Petroleum from Australian Institute of Petroleum, January 1991 Renewable Energy Assessment - An EnergyPlanners ManuaL (Gowan 1985) Woody & Biomass Use in Agro-Industries. (PEDP, Gilmour, 1987) Energy Data and Corversion Factors (New Zealand Energy Research & Development Committee 1984) SUMMARY OW MAIN FINDINGS AND RECOMMENSTDATIONS ENERGY SITUATION AND PRIoRmIES 1. Overall. The Federated States of Micronesia (FSM) has a population of over 100,000 people increasing by approximately 3% per year and living on approxmately 65 Populated (of 600 total) volcanic islands and atolls scattered over 965,000 square miles of the Pacific Ocean, located roughly midway between Hawaii and the Philippies. The FSM comprises four states (Chuuk, Kosrae, Pohnpei (the national capital), and Yap) with widely varvine endowments of natural resources and population densities. Governed under a federal structure, powers and responsibilities not specifically assigned by the Constitution to the national government reside with the states, which therefore have a high degree of autonomy. The economy is highly open, with a large volume of imports - $680 (FOB) per capita in 1988, the latest data available - largely supported by Compact' funds and other U.S. assistance. 2. Agriculture and fishing are primarily subsistence, although small semi-commercial segments of the primary sector supply local markets. Small volumes of fish, copra, trochus shells, handicrafts and other commodities are exported. Tuna is a major resource in FSM waters, currently exploited predominantly by foreign fishing vessels. The GDP2 of $1,500 per capita is based largely on public sector expenditure and is highly dependent on U.S. grants^which are expected to decrease in real terms over the next decade. Future economic growth, expected to be two to four percent per year during the 1990s, depends on the private sector, particularly planned joint ventures involving tuna processing and tourism. 3. Although energy use patterns vary considerably from state to state, a few generalizations can be made. Due to inefficiencies in the production and delivery of energy to consumers, garticularly in the power sector, a large portion of the country s financial resources has been directed to the energy sector. In al states, there is an abundance of installed electrical generating plant in relation to load which, due to poor maintenance and other factors, is often barely sufficient to meet peak demand. Installed capacity per capita in FSM, at more than 370 kW, is high in comparison with other countries in the region, nearly triple the corresponding figure in relatively well-developed Fiji for example. There are separate petroleum supply contracts with each state and thus cost penalties associated with low volumes. Moreover, a proliferation of retail outlets for petroleum products results in high fixed costs in the supply of fuels to consumers. With a growth strategy based on energy- intensive development (tourism and fish processing), the government of the Federated States of Micronesia3 needs to assure that energy is acqured and sold on reasonable terms and supplied much more efficiently than at present. 4. Petroleum. Imported petroleum products dominate the national energy economy accounting for 88% of primary energy use and 99% of commercial energy. 1990 consum tion of 500 kg of oil per capita is approximately 6% by value of tot.- mports (FOB, P988, higher in later years) equivalent to 76% of export eearnings. Mobil is the only I Compact of Free Association between the FSM and US., providing a 15-year assistance program (1986 - 2001) and specific rights for the US. 2 Provisional 1988 government estimate at 1988 market prices. 3 In this report referenced as the 'national government' or TFSM. State governments are referenced by namc, e.g, the government of Chuuk, the government of Pohnpei, etc. u - marketer4, a situation which is unlikely to change due to Mobil's efficiency of supply logistics and ownership of bulk storage on the mam islands of all four states. Uobil has a separate suppy agreement with each state, some (Pohnpei and Chuuk) dating to 1982. The terms are not unreasonable but some provisions, such as FOB prices based solely on posted Singapore prices, should be reviewel L- .4lly new supply agreements. 5. The main petroleum sector issues arn! the lack of competition in the supply of petroleum products to FSM, the proliferation co^ -vice stations and associated high fixed costs, the security of supply andc the cost implicauons of improving security, the absence of pric. monitoring, non administration of the supply contracts by the states or the national government, concern over product quality and the grades of gasoline being marketed, declining physical standards of storage facilities in several states, the absence of fuel storage and handling standards, and the inadequn y of data collection resulting in reliance on Mobil for volume and pricing information. The most critical problems are on Chuuk and Pohnpei with deteriorating on-shore storage and encroaching commercial development in the immediate vicinity of storage. 6. Electricity. T e-e is no national power company. Four utilities provide diesel-generated electricity to Mo Thuuk), Kosrae, Pohnpei, and Yap. Chuuk and Pohnpei accounted for roughly a third a )f total generation in 1990, with 20% and 13% respectively in Yap and Kosrae. With i. - tion of the electrified outer islands of Ulithi and Woleai in Yap, generation is re.trio j to the main islands of the respective states, which contain 85% of the country's population. t-bout 27% of all national households and over 40% of those on the main islands are connec. d. Tl :echnical condition of the power generating capacity varies considerably by state witd Po mpei and Chuuk showing the greatest signs of neglect and deterioration; maintenance Vv-idards are better in Kosrae and Yap. In all states however, power cuts, low voltage lseves and voltage fluctuations are frequent due to heavily loaded generation and distributna systems with inadequate maintenance. The power plants in all states are subject to muJi-reduced worldng lives because of poor maintenance, necessitating a greater investment in capacity and higher fixed costs than would otherwise be required. Although the power systems in FSM are among the most capital-intensive of the predominantly diesel-based systems in the region, much of the capital equipment has been run down very quickly and therefore produces little output per dolrar expended relative to other countries in the region. 7. Tariffs are heavily subsidised throughout FSM with no state recovenng more than 20% of costs, metering is inadequate5, and revenue collection is poor. The total 1990 subsidy to electricity consumers was about $11.2 million. Management responsibility for the power utilities of each state is fragmented across several government departments, with power system operation and maintenance generally separate from metering, billing, and revenue collection, which is further separate from responsibility for the budget. Pohnpei and Yap are taking steps to centralise management responsibility within state utilities. With better planning, r e efficient institutional organisation, and especially improved maintenance, considerable improvements in power system reliability, quality of power, and returns on investment can be achieved. In addition, in all states except Kosrae, additional canacity can be deferred by using existing capacity more effectively. 4 With the exception of a minor volume of lubricants supplied by Shell in Yap. s Tariffs have not even been officially set in Chuuk, due to an almost total absence of metering. - iii - 8. Key electricity issues include exceptionally poor maintenance, the institutional structure of state utilities, poor power sector plannng and operation resulting in the purchase of unnecessary generation plant, inadequate attention to the quality of transmission and distribution, wasteful use of electricity, and the reluctance of the government to raise tariffs. The immediate sectoral priorities are organising the state utilities into financially autonomous corporaXons, refurbishing run-down plant, metering of all customers, improving revenue collections, and introducing a clear policy of steadily increasing the electricity price with the goal of eventually meeting full costs. 9. Household and rural energy. IHydroelectric generation in Pohnpei, biomass for cooking and photovoltaics for small electnc loads are the only significant uses of local renewable energy resources. Three state governments have identified solar photovoltaic (PV) electrification as a priority for remote communities. About fifty small PV systems have been installed in the remote parts of three states but many have reportedly failed or deteriorated due to poor planning and maintenance. Key issues are a lack of clear responsibility at the nationaf level leading to inadequate mechanisms for the disbursement of available aid funds to support PV programs, insufficient and poorly trained staff, and likely failure of programs in Chuuk and Pohnpei if maintenance does not improve. 10. Environmental issues. In general, the main power stations are adequately distant from residential and office areas, with the exception of Kosrae, where the power station is adjacent to the government offices, creating a noise nuisance. Lube oil is recycled or burned and reportedly no transformers use hazardous polychlorinated biphenyl (PCB) fluids. In Pohnpei, there is risk of marine oil pollution in the event of mishap m the ill- maintained barge which houses the main power station. A further serious issue is the danger of water pollution and fire due to deficiencies in fuel storage and handling especially in Chuuk and Pohnpei. Adequate standards should be introduced soon and be strictly enforced. 11. Institutional issues. Within the state and national governments, there is no structure for coordinating or overseeing energy matters or the key subsectors of electricity and petroleum. As a result there are no clear state or national policies, planning is negigible and the basic data required for informed decision-making are not collected. Reliable records of petroleum import volumes and values are generally not available in the state or national governments, so that the country is dependent on Mobil for basic information. There is no routine administration of supply contracts in any state or the national government; it has been the experience in other countries that considerable savings can result if qualified persons are appointed in government to verify that the supplier is adhering to contract provisions. 12. The state power utilities are poorly organised and heavily subsidized. The advantages and disadvantages of eventually combining the four state utilities into a single national utiuity should be carefully considered; loss of state autonomy in power sector investment decisions under a national utility, for example, could be outweighed by the advantages of standardizing equipment, national fuel tendering, developing a national program for training, attracting overseas finance on better terms, allocating power sector expertise where needs are greatest, etc. 13. Restructured utilities, whether state or national, vill require expertise not available locally; temporary overseas recruitments are likely to be required to assist in management. Aside from reorganization, training in virtually all aspects of power utility operations is the prorit need. In all states, power sector operational and maintenance expertise is in critically short supply and semor management capable of taking responsibility for - iv - autonomous utility corporations is lacking. With the assistance of qualified temporary overseas Personnel, coupled with greater allocations of resources to training than in the past, FSM can develop a comprehensive power sector trainirg programme to ensure that trained local managers will be available for FSM's corporatised power utilities withini the 1990s. This is a reasonable goal, however, only if FSM begins a well-coordinated effort in all states now. PRINCIPAL RECOMMENDATIO.NS 14. Petroleum Subsector. The following immediate measures are recommended: a) Customs Department procedures should be amended to ensure that the volumes of oil products imported are physically verified, and that invoices and bills of lading accompany each shipment with accurate information provided by the oil compames on products, volumes, FOB value, shipping cost, ocean losses, and insixrance (all states); b) further development in the vicinity of the fuel storage facilities in Pohnpei shouid be prohibited and measures taken to mitigate the impact of likely oil polluticn to the hotel and fisheries project that are located there now; c) the national government should attempt to persuade the states of the benefits of organising a national tender for fuel supplies (i.e., consolidating the current state contracts) and begin the coordinating work required for a national tender; if a national tender is not possible, some pro Asions of the outdated 1982 Mobil supply agreements in Pohnpei and Chuuk should be renegotiated; d) the national government should appoint a short-term petroleum advisor for 12 - 24 months to assist with negotiating a national supply agreement, improvirg storage, and assessing the overall slipply and pricing arrangements; an(l e) existing and new agreements should be routinely administered. The following short-to-medium term measures are recommended: f) national regulations on the storage and handling of fuels should be adopted and enforced; and g) storage facilities in Chuuk should be reconditioned to an internationally-accepted standard. 15. Power Subsector. The following immediate measures are recommended for all states except where specified: a) enact legislation to centralize all power utility management functions, including operation and maintenance, planning, procurement, metering, billing, revenue collection, budgeting, etc., under one authority; b) organize a consultancy to determine manpower requirements of the restructured state power utilities; c) begin recruitment for senior managenient positions as soon as possible, both locally and where necessary, overseas; d) establish training programs for all state power systems including on-the-job training, studies overseas, and apprenticeships for technical staff; ?nd formal degree courses and on-the-job training by overseas professionals working with local under-studies for managerial staff; e) immediately improve metering, disconnection and collection procedures, install meters and require payment from all customers, including government; f) introduce a tariff of 10/kWh for all consumers in all states, followed hv annual increases in gradual steps to their full costs (including capital costs) o- -eriod of five years or less with extensive prior publicity explaining the new policy, g) as tariffs are increased, introduce subsidized "lifeline tariffs" for the first 100 kWh per month of household consumption (set at about 10/kWh or half of the normal household tariff, whichever is lower); h) purchase vans, tools, equipment and spare parts and rehabilitate the stores and workshops to enable the staff to undertake preventive maintenance and customer service; and i) rehabilitate the substation at the power station in Chuuk. The following short-to-medium term measures are recommended for all states except where specified: j) establish standard utility budgeting and accounting systems, systematize collection and analysis of statistical data (in a consistent format in all states), prepare system maps of the distribution system, and investigate the causes of poor voltage and outages in the system; k) adopt realistic short-ternm power and energy demand forecasts based on higher tariffs and likely economic developments; 1) when new capacity is needed, study the fe sibility of bringing out-of-service capacity back on-line before purchasing new plant, and refurb shing operating equipment to increase efficiency and output; m) in Kosrae, determine the feasibK i y of refurbishing the old Caterpillar and White Superior gensets and purchasing equipment to synchronize them with the 1.5 MW Caterpillar commissioned in 1990; n) in Chuuk and Pohnpei, systematically upgrade the distribution systems where outages and/or low voltage are serious problems; o) in Chuuk, conduct a feasibility study prior to rehabilitating the Dublon power system and transfer responsibility for the power facilities at Dublon to the state Bureau of Public Works; and p) seriously consider the option of combining all state power utilities into one national power utility. -vi - 16. Household and Rural ELergy. The following measures are recommended: a) cariy out househnlid energy end-use surveys in all states to establish information on energy use patterns and to enable realistic targets to be introduced for energy savings to help reduce the impact of higher electricity prices; b) carry out rural energy surveys to determine the real costs of iectricity and fuel and to design measures to improve supplies and/or reduce costs. c) standardize stand-alone PV systems for supplying small electric loads on outer islands; d) cha,ge a monthly bill to al: recipients of government-provided PV systems which is sufficient to cover at least maintenance costs; and e) strengthen the capacity of the state Energy Offices to plan, install and systematically maintain photovoltaic systems through improved traimng, staffing, and budgets. 17. Energy and the Environment. The following measures are recommended: a) inspect and refurbish or replace (as required) the ALCO barge in Pohnpei; and b) improve fuel storage and handling procedures. 18. Institutional Development. The following measures are recommended: a) The national government should train local officials or recruit expertise to monitor fuel supply contracts, and begin monitoring wholesale and retail prices of gasoline, distillate and kerosene to establish guidelines for fair prices; b) allocate responsibility for national energy sector coordination to a specific national government department (Office of Resources and Development) and appoint a senior-level officer to develop a national energy strategy, supervise the photovoltaics program, oversee power management contracts, oversee petroleum contract negotiation and admmnistration, and collect and analyze energy data; and c) increase the capacity of state government Energy Offices to oversee PV programs, household energy surveys, and rural energy matters in gener.l. I. ECONOMIC AND INSTITUTIONAL CONTEXT ENERGY AD THE EcoNomy1 1.1 The Federated States of Micronesia (FSM), consisting of the states of Chuuk, Kosrae, Pohnpei, and Yap, is a mixed market-subsistence economy. The market economy is driven by a large public sector which is sustained by external assistance, largely from the U.S. Estimated GDP increased from $106.5 million in 1983 to $144.7 million2 (about $1,500 per capita) in 1988, of which nearly 30 percent was subsistence production. There has been almost no growth in real per capita GDP since 1983. Investment in 1988 declined both absolutely and proportionateiy compared with 1983: whereas private fixed investment increased from $3.7 million to $13.5 million, government investment declined from $34.1 million to $21.1 million. Future growth of the economy depends on the nation's ability to utilize U.S. Compact funds - a 15-year assistance package for FSM granted by the U.S. under an agreement signed in 1986 - and other external investment to develop the private sector. Commercial fishing and tourism have the most potential for becoming market- oriented growth sectors. 1.2 Since the late 1950s, population growth has averaged 3% per annum and now totals about 101,000. In all states a growing proportion of the population lives in or near the state capital urban area3; the outer islands population share-has declined from 30% of the total in the 1950s to about 15% currently. The population is young, with an estimated 47% below the age of 15. As the age group 20 - 29 is expected to increase at the highest rate (3.6% per annum), the economy faces a severe challenge to create sufficient jobs to absorb new entrants to the labor force. The average annual growth rate of the labor force since 1980 has been about 4% which appears to exceed the economy's capacity to create new employment. The 1989 unemployment rate was 27%. 13 Under the Compact, FSM citizens may freely migrate to the U.S. Although no firm data exist, migration overseas is believed to be increasing with the rising population density and continued stagnant economic conditions, e,specially m Chuuk. Migration is expected to become an increasingly important economic safety valve during the 1990s4. 1.4 Govermnent expenditures constitute the pri'"'y driving force in the FSM economy. The dominant source of revenues to support publc sector spending is U.S. Compact funding, the amount of which is essentially detenrined through the year 2001. Scheduled step-downs in Compact funds mean a decline im government revenues in real terms, unless private sector growth can generate sufficient local tax revenues to offset the decline in U.S. I This section is etracted and summarized from Assessment of Perfomuance and Growh Prospects: Republc of the Marshall Islands, Federated States of Micronesia, and the Republic of Palau, (?acific Islands Development Program, East West Center, Honolulu, May 1991), prepared as a background report for this assessment. The ADBs Economic Report on the Federated States of Micjunesia (December 1990) and the FSM government's draft 1990-1994 Second National Development Plan (1990) were also very useful background documents. 2 Government estimates of GDP exist only for 1983 and 1988, and are considered provisionaL 3 Weno (Chuuk), Lelu (Kosrac), Kolonia (Pohnpei), and Colonia (Yap). 4 Among states there is a large variation of GDP per capita. The 1988 per capita GDP for FSM was $1,523, but state GDP ranged from a low of $1,027 (Chuuk) to a high of $2,M in Kosrac. Pohnpei and Yap are $1,732 and $2,209, respectively. -2- assistance, although this is considered unlikely. Increased foreign assistance from non-U.S. sources could partially offset the decline in U.S. funding. 1.5 The government's economic strategy is to stimulate private sector growth and development through fiscal intervention, targeting commercial fisheries as the leading development sector. Longline tuna transshipment facilities arc planned as joint-ventures with foreign investors in each of the states. The viability of the industry will depend critically on the ability to service fishing fleets competitively at FSM bases, and to transport fish to export markets. Airfreight capacity will be a key variable in enabling the FSM to exploit the lucrative fresh fish market in Japan and the U.S. 1.6 FSM's tuna resource is abundant. In 1988 more than 190,000 tonnes of tuna were harvested, mainly by purse seiners. In addition, the longline fishery (about 15,000 tonnes in 1988) has the most potential for development for exports. Longliners catch deepwater tuna (best suited for sashimi) such as Bireye and Yellowfln, of which the probable sustainable yield of FSM waters is believed to be well over 100,000 tonnes per annum. Current plans are for investment of over $30 million in new lond1ine basing facilities to be constructed in Chuuk and Yap, a fish loining/packaging operation to process and export fish caught by purse seiners and smaller vessels of the local fishing fleet in Chuuk, and fishing transshipment facilities in both Pohnpei and Kosrae. In each state the longline fisheries ultimately expect to achieve peak monthly catches of 2,000 to 3,000 tonnes5. .7 Agriculture, together with artisanal fishing, is at present a predominantly subsistence activity with little potential for growth. Tourism, however, is a promising development sector, but the rate of growth is likely to be influenced by the effectiveness with which government facilitates foreign investment, and the extent to which infrastructure problems are resolved, particularly the quality of water and electric pow..i services. In the 1983-1989 period, visitor arrivals grew at an average annual rate of nearly 15%. Tourism development wvill depend largely on private sector initiative, and is likely to require significant Foreign Direct Investment (FDI) since, unlike the fisheries sector, government has largely opted not to become actively involved in tourism enterprises. Both fishing and tourism developments, if successf, could significantly alter the pattern of energy demand in FSM. Fisheries may require increased capacity for ADO bunkers, while expanded tourism would increase demand for air, land and sea transportation, as well as for electricity. 1.8 FSM's limited resource base remains largely undeveloped. Total exports ranged from $4.0 to $5.4 million between 1984 and 1988, mcluding visitor expenditures, which in 1988 were estimated at about $3.1 million. Commodity exports in 1988 were only $2.3 million, nrincigally copra, fish, trochus shells and handicrafts. The largest category of imports was ood, everages and tobacco, accounting for between 41 and 47 percent of total imports in the five-year period ending in 1988 and 35 percent in 1989 ($24.7 million FOB). With the very low voiume of exports, there is a substantial trade deficit: about $86 million in 1988 after adding estimated freight and insurance costs6. 1.9 In 1988 state and national combined government revenues amounted to $165.1 nillion, equivalent to nearly 115% of GDP. External assistance ($136.7 million), mainly U.S. 5 An ADB fisheries sector review was underway as this report was being prepared. The review was not yet available but is believed to be not optimistic about prospects for large-scale commercial fishing in Micronesia. 6 Imports in FSM are valued FOB. -3- Compact funds, accounted for 83 percent of total receipts and 118 percent of total expenditures ($115.5 million). In both 1988 and 1989, an overall budgetary surplus was achieved, mainly the result of the start of Compact funding in 1987 while transitional funding, especially for Capital Improvement Program7 (CIP) projects, was still being received for projects funded under the former UN-Trusteeship. uture total receipts are expected to decline as U.S. federal program grants are discontinued8. Total government revenues from domestic sources in 1988 amounted to $20.6 million, about 12.5% of expenditures. Fishing rights fees amounted to $7.7 million in 1988 and about $10.3 million in 1989. 1.10 Externally generated revenues other than U.S. assistance amounted to only $0.4 million in 1988. Although FSM can exjpect to receive some technical assistance from the Asian Development Bank (which it joined in 1990) and several other international organizations and some bilateral aid from Japan and other countries, Compact funds will be the primary source of revenue for government, and via government spending, income to the FSM economy. Under the Compact, however, U.S. grant funds are scheduled to decline at five year intervals, to about $60 million per year in constant-dollar terms by 1997 from about $86 million per year in the 1987-1991 period9. 1.11 Throughout the 1990s, FSM will thus be hard Pressed to maintain total government expenditures in real terms at 1988 and 1989 levels ($115.4 and $125.8 million, respectively). If local tax revenues are optimistically assumed to increase at 15% per annum on average, and other revenues including fishing rights fees to increase at 5%, total government revenues in real terms would amount to about $107 million in 1995 and $103 million in 200010. 1.12 In an attempt to accelerate development of the productive sectors of the economy, the FSM national government is issuing $300 million in medium-term government notes m the UJ.S. capital market, pledging future Compact funding as secunty. The Medium Term Notes program will in effect allow the national and state governments to borrow against diminishing future Compact receipts to finance increased exenditures (mainly for development projects) in the present. By early 1991, approximately $28 million from the program had been obligated1". It is understood that proceeds from the sale of notes will be allocated among the states and the national government according to the same formula used to disburse annual Compact payments. 7 The Capital Improvement Program is a long term USDOI-f&nded program to improve infrastructure quality and maintenance. 8 Federal program fundinp dating from the pre-Compact period was $33.4 million in 1988 and $19.9 million in 1989. However, beginmng in fiscal 1990, only $2.85 million per annum in non-Compact U.S. program funding is expected. 9 The FSM may be eligible for additional Compact funding up to $40 million, contiogent on the FSM government demonstrating adverse impact on the economy of Title IV (Compact Agreement), which relates to certain changs made to U.S. trade and tax provisions relating to the FSM after the Agreement was riginally negotiated. 10 Assuming an average inflation rate of 5% per annum. These projections do not include non-U.S. foreign assistance. 11 Capital expenditures amounted to about $19.6 million (17 percent) of the total 1988 government budget of S11S.5 million. -4- 1.13 While the Medium Term Notes program will permit funds to flow at a faster rate into productive sectors of the FSM economy, it raises several matters for concern. Firstly, it will involve a substantial net interest cost to FSM, much of which wil come due at the end of the Compact period. Secondly, it is questionable whether FSM can absorb a vastly increased rate of investment without increasing the risk of project failures, particularly in view of the limited resource base and the fact tat the development planning process in the country is to a large extent decentralized. There is a significant risk that the program could result in a net loss of national resources by the end of the Compact period. Thirdly, as the bond issue may lead to a potentially rapid increase in the money supply, the prospect of increased inflation is real. 1.14 Growth in real GDP in FSM through the 1990s is expected to range from 2%-4% per annum on average, with the lower rate premised on achieving limited success in developing a national fishing industry but no signifieant increase in the rate of foreign investment. INSTITUmONAL FRAmiEwoRK 1.15 Overall. There is no effective national government structure with overall responsibility for the energy sector. The Department of Resources and Development (R&D) is responsible for energy planning and disbursing U.S. grant funds to the states for photovoltaic and other rural energy and conservation projects, but apparently does not identify issues and constraints and makes only limited attempts to develop policies and strategies. The Office of Planning and Statistics (OPS) is responsible for the five-year development planning process including energy issues but relies on others for energy sector data and analysis. Nevertheless, the draft Second National Development PlanU2 contains a good assessment of the national energy situation and identifies a number of worthwhile initiatives including proposals to strengthen the role of national government in energy planning, fuel tenderng, and assisting the states in management of the energy sector, especialy in relation to the commercialisation of state power utilities. 1.16 Energy planners were appointed to the national government and each state in 1981, initially funded by the USDOE (now ended), but the position is vacant in Chuuk and has been abolished in Yap. Energy planners are still employed in Pohnpei and Kosrae, with primary responsibilities to oversee photovoltaic and other rural energy projects. However, there is little budgetary support for design, pla ning, travel or maintenance. 1.17 Petroleum. Petroleum piroducts are imported by Mobil Oil (Guam) with bulk storage facilities in Weno (Chuuk), Kosrae, Pohnpei, Yap, and Ulithi (Yap). The proliferation of service stations, all privately owned, in each state is partly responsible for high onshore costs; savings to consumers should result if the number were reduced. There is no wholesale or retail price control and no legal requirements for product quality, storage, or handling. Each state's Customs Department calculates tax revenues based on oil company submissions but does not ve the volumes of fuel imported or their value. A supply contract negotiated with Mobil i 1982 is still in effect on Chuuk and Pohnpe, and /sim'lar contracts have been in efftct in Kosrae and Yap since 1987, but none has ever been effectively administered by the state governments concerned. 1.18 Power. Electricity is generated and distributed by the Public Works Departments of Chuuk, Kosrae, and Pohnpei and by the Department of Public Utilities & Contracts in 12 The Second National Development Plan (1990-1994) was produced in draft in 1990 but has not been officially released. -5- Yap. All utilities are under local management and rely to a very limited extent on expatriates. In all states, management responsibility for power operations is fragmented among several Ministries, with Public Works generally respnsible for operation and maintenance, while Treasury/Finance departments oversee biling, revenue collection, and financial management. Such fragmented responsibilities often lead to inefficiencies and inappropriate budget allocations, both of which increase the utilities' operating deficits and their need for direct subsidy support from the respective governments. Some states, notably Chuuk and Pohnpei, have taken steps to correct these problems by consolidating power utility management under new government-owned corporations. However, training efforts and the level of staff development in all utilities are poor, and are areas that have yet to be seriously addressed. -6- II. ENERGY CONSUMPTION THE STRucruRE OF ENERGY CONSUMLPION 2.1 No household energy end-use surveys or industrial censuses have been carried out in FSM from which energy use could be derived, nor are any studies of energy end-use in govermnent or commerce. A Household Income and Expenditure SurveyU3 was carried out m 1988 and 1989, but contains no energy consumption data. Accordingly, the national energy balances (Statistical Annex) are estimated. About 88% of all energy use in the FSM is derived from petroleum, 11% from biomass, and 1% from hydro. About 60% of all imported petroleum is used for transportation, 33% for electricity generation, 5% by government14 and 2% by households. CONSUMPTION OF PETROLEUM PRODUCTS 2.2 Petroleum product imports have increased from 12.4 million U.S. gallons (MG) in 1986 to 15.9 MG in 1990, an average annual rate of 6.4%, excluding a negligible amount of ocean bunkers's. The 1990 import level corresponds to about 1040 barrels per day. Of the inland demand (87% of total demand), low sulphur automotive diesel oil (ADO) accounted for 6.4 MG (46%), Jet fuel16 for 23 MG (17%), gasoline for 4.1 MG (30%o), and kerosene 0.3 MG (2%). The balance of inland demand was made up of minor products such as aviation gasoline, lubricating oil, and solvents. Internatioaal ships' bunkers of ADO added 2 MG or 13% to total demand. Government accounts for over half of the total petroleum use by state for power generation, construction, and transportation in Kosrae and Yap, and 30%7-35% in Chuuk and Pohnpei. 2.3 Growth in petroleum imports has varied considerably by state. Whereas import volumes in Chuk and Yap have been nearly static since 1986 and have increased only slightly in Kosrae, the increase in Pohnpei has been exceptionally h;gh, averaging almost 17% per year. The growth in Pohnpei iS concentrated in the transportation sector, with both gasoline and jet fuel use increasing markedly, possibly due to the relocation of the national capital to Palikir outside of Kolonia and an increase in Air Micronesia's scheduled and chartered air traffic through Pohnpei. Imports of ADO also increased significantly in Pohnpei during the period, manly due to increased fishing activity. 2.4 Estimates of fuel consumption by economic sector are summarized in Table 2.1. The same breakdown in Tonnes of Oil Equivalent (TOE) is shown in the 1990 energy balance (Tables 3 and 3a) in the Statistical Annex. 13 Results of the Household Income nd Ependiture Suvey in the Federated States of Micwlnesa, 10&1989, Fia Repor4, UNDP Project TrP/86/203, Februaiy 1990. 14 For uses other than eectrity generation or transportation. 1s Historically insignificant, ocean bunkering in FSM will become much more important in the 1990s if the states' plans for fisheries developments are realised. 16 The entire volume of jet fuel is treated as re-exports, that is, fuel used for international flights, although some is used for inter-state travel. - 7 - Table 2.1: FSM Petroleum Consumption by Sectors, 1990 (volumes in thousands of U.S. gaUons) TOTAL FSM CHUUK KOSRAE POHNPEI YAP SECrOR Volume percent Volume percent Volume percent Volume pereeot Volume percent Urban electricity 5251 33.1 1570 26.8 652 475 1924 32.4 1105 40.7 Rural electricity -46 Q2 na ni An 11 Total electricity 5297 333 1570 26.8 652 47.5 1924 32.4 1151 42.4 Road transport 4800 30.2 2141 36.5 168 12.2 1806 30.4 685 25.2 Air transport 2334 14.7 1105 18.8 103 7.5 903 15.2 223 8.2 Sea transport 2422 1S2 783 D13 1i S9 1058 Zi 5 83 Total transport 9556 60.1 4029 68.6 627 45.7 3767 63.5 1133 41.8 Government 735 4.6 138 2.4 70 5.1 115 1.9 412 15.2 Household 299 1.9 132 2.2 23 1.7 127 7.1 17 0.6 Totals 15887 100.0 5869 100.0 1372 100.0 5933 100.0 2713 100.0 na = not available Sources: State Departments of Public Works, state Departments of Budget, Planning and Statistics, and state Customs offices. 2.5 Electric Power Generation. Electricity production, which accounts for 33% of petroleum fuel use, is entirely from ADO except for a small amount of hydro output (3.7% of FSM electrical energy production in 1990) on Pohnpei and a few photovoltaic instalations in three states. Urban electrification, defined as all electricity produced (including power from privately-owned standby generators) in the main urban area of each state, consumed about 5.3 MG in 1990. Diesel-powered rural electrification on Ulithi and Woleai in Yap consumed about 46,000 gallons; an unknown but small amount was consumed in private generators on other islands throughout FSM. 2.6 Transportation. The transport sector accounted for 60% of FSM's 1990 petroleum consumption as follows: road transport 30%, air including international 15%, and sea including bunkers 15%. 2.7 Road transpoll. Per capita consumption of gasoline appears to be higher than elsewhere in Micronesia17, possible because road mileage (both paved and unpaved roads) is higher, especially in Pohnpei. Road vehicles used 4.8 M of fuel, highest in Chuuk at 2.1 MG (42.9 gallons per capita), followed by Pohnpei at 1.8 MG (54.5 palIons per capita). The growth rate in automotive fuel consumption from 1986-1990 was highest im Pohnpeil (over 15%0 per year) folowed by Kosrae (almost 12% per year), but in Chunk and Yap wag close to zero. Growth in gasoline demand in Chuuk is constrained by the poor quality of roads; improvements to the road infrastructure there are likely to result in substantially increased gasoline demand. Based on the reported plans of some states to upgrade main road networks (in Pohnpei and Yap, major improvements have recently been completed or are 17 For example, 1990 fuel use per capita for road transport in FSM (48 gallons) was significantly higher than in the Marshall Islands (25 gallons). -8 - underway), gasoline consumption in FSM is expected to increase in the 1990s at a somewhat higher rate than population and economic growth. 2.8 Air transport. Fuel used for air transportation is mostly dual purpose kerosene (also called aviation turbine fuel, avtur or Jet Al) with a minor volume of aviation gasoline used by private air services. The total volume of 2.3 MG is consumed by Continental/Air Micronesia, the main carrier providing commercial air services to the FSM. The promotion of the states as bases for joint venture tuna fishing companies may considerably increase air traffic in Pohnpei and Chuuk, which hope to serve the sashimni markets in Japan and Honolulu18. 2.9 Air Micronesia is a long-established carrier operating a Boeing 727 aircraft four to five times a week on regularly-scheduled flights stopping at most of the main islands between Honolulu and Guam. When traffic warrants, a DCt-nl is used. Air Micronesia prefers to use Guam as a refuelling stop using FSM as little as possible, uplifting only 0.2 MG of a total 2.6 MG per month19, due to high costs. 2.10 Sea Transport. Sea transportation consumes 15% of fuel demand or 2.4 MG, mainly distillate (nearly 2 MG20 of bunkers for fishing vessels in 1990) except for a small volume of gasoline used for fishing, local transportation and pleasure. About 0.2 MG of ADO were used in Chuuk, and lesser amounts in other states, by government-owned inter-island transpoit vessels. However, growth in demand for ADO since 1986 has come mainly from the filshing industry, a trend which will accelerate if the states' plans for fisheries dievelopment come to fruition during the 1990s. 2.11 Government and commercial use. Direct government and commercial fuel consumption (not for electricity production) of 0.74 MG or 4.6% of total FSM demand includes construction, road maintenance, direct heating and other uses. This is mainly ADO. 2.12 Household and Other. Household consumption comprises mainly lighting and cooking estimated at slightly under 0.3 MG of kerosene and an unknown but probably vezy small amount of liquid petroleum gas21, mostly in locations without electricity, and 25,000 gallons of gasoline and ADO, adding up to just under 2% of total FSM fuel use. CONSUMPrION OF ELEr icrry 2.13 Because of poor metering and billing in most states, only limited data exist on consumption trends for electricity. Billing records are nonexistent in Chuuk, and are extremely sparse in Yap, where the billing system was not functioning between June 1990 and the first quarter of 1991. Billing records exist in Kosrae, but are not collated or 18 A Japanese company which freights fish from Micronesia to Japan using a Boeing 727 aircraft alrpady uses Chuuk occasionally for this purpose. 19 Average monthly figures for 1990 were provided by Air Micronesia. 20 480,000 gallons in Chuuk, 356,000 in Kosrae, 1,050,000 in Pohnpei, and 81,000 in Yap. 21 The estimate of kerosene use by households (275,000 US. gallons) is based on household energy end-use surveys carried out in other Pacific Island countries during the 1980s which indicate that FSM households would consume 250 - 450 thousand gallons of kerosene, probably closer to the low estimate. Imports of LPG in FSM do not appear in the available records, but it is assumed that small quantities are used. -9- summed and therefore cannot be used for analysis of consumption patterns. In Pohnpei, however, a computerized billing system in use since October 1990 provides tentative results22. Estimates of end-use consumption are therefore based on the latest billing rxcords where available, although in some cases an entire year had to be extrapolated from a single month's records. Estimates for consumption growth are based on recent generation data which are reasonably complete, with records kept since 1987 in all states. Consumption in years prior to 1990 is estimated based on gross generation and assumed levels oftransmission/distribution losses and station use. 2.14 Growth in energy consumption and peak output in the FSM averaged about 7.1% per year between 1987 aid' 1990, \ arying considerably by state. Growth was lowest in Chuuk at 4.1% per year with a peak load in 1990 of 3.4 MW. Growth in both Pohnpei and Yap averaged about 6.7% per year, with 1990 peak outputs of about 5.2 MW and 2.5 MW respectively. In Kosrae, energy consumption grew at an average annual rate exceeding 15% per year, and peak output grew from 770 to 1,300 kW, probably a reflection of the extension of the power grid during that period. 2.15 As shown in Table 2.2, consumption for FSM overall is evenly split between residential and commercial/government with a high percentage of unmetered use in all states. Unmetered consumption includes "estimated" sales and unbilled consumption, both of which are highest in Chuuk where virtually all customers are unmetered, and accounts for over half and about a third, respectively, of consumption in Yap and Kosrae. In percentage terms, unmetered consumption is least in Pohnpei, due to a more effective billing system. 22 Prior to October 1990, Pohnpei used a manual billing system which apparently operated well, although it was not capable of aggregating customer records conveniently for analysis. - 10- Table 2.2: Summary of Electricity Generation and Consumption, 1990 (GWh) Cross Technicallosses Electricity Consumption Generation inci station use Residential Commerciall Unmetered2 Total Chuuk 20.6 3.7 na na 16.9 16.9 (100%) (100%) Kosrae 8.5 1.5 2.7 2.2 2.1 7.0 (39%) (31%) (30%) (100%) Pohnpei 25.1 4.5 8.3 8.9 3.4 20.6 (40%) (43%) (17%o) (100%) Yap3 13.2 2.4 2.6 1.8 i.4 10.8 (24%o) (17%) -,9%) (100%t) Total 67.4 12.1 13.6 12.9 28.8 55.3 (25%) (23%) (52%) (100%) Notes: 1. Includes billed government consumption. 2. Includes both 'estimated' and unbilled consumption, plus streetlights. 3. Includes Ulithi and Woleai. Billing data are estimates based on December 1989 and first six months of 1990; the billing system has not functioned since June 1990, but was scheduled to resume during 1991. na = not available. Sources: state Departments of Public Works and mission estimates. 2.16 In Table 2.2, "technical losses including station use" are estimates, since station use is not metered and technical losses have not been evaluated. Station use is assumed to be 4.5% of gross generation (typical of diesel stations elsewhere) and transmission/distribution losses are assumed to be 14% of energy sent out in each system, based on the condition and loading of the distribution system. 2.17 Although billing records are incomplete, they suggest that the average consumption of electricity per residential consumer in FSM is high by Pacific Islands standards: almost 300 kWh/month in Kosrae, 250 in Yap, and over 400 kWh per month in Pohnpei, compared to 50 - 100 kWh per month typical in other countries in the region3. Average consumption in Chuuk is unknowvn but it is believed to be comparable to the rest of FSM. Although the causes of high residential (and commercial) consumption are not known in detaiL it is cear that much of it is wasted. There is no incentive for-households to conserve electricity. For example, air-conditioners are widely used in an uncontrolled manner in spaces that are not insulated or well enclosed. Due to low tariffs, household lighting relies extensively on incandescent rather than more efficient but more expensive fluorescent fixtures. For the same reason, the use of electricity for cooking is probably much higher than it is in other Pacific Island countries2", although cooking with other fuels such as kerosene and LPG is more efficient. Most commercial cooking is probably done with electricity since the use of 23 100 kWh/month il Fjin 1990, for example, 65 in Kiribati, and 28 in Tuvalu. In PNG, where consumption is skewed by relatively -ghincome expatriate households, average monthly household consumption is 260 kWh. 24 Electricity is seldom used for cooking in Pacific Island countries such as Fji, Kiribati, and Tonga, where electricity is not highly subsidised. -11- LPG is extremely limited. It can be expected that if the government subsidies to electricity drop and tariffs rise to full cost, such uses will be curtailed. It is recommended that measures be taken to assist residential consumers to reduce consumption and lessen the impact of tariff increases, such as encouraging more efficient use of air-conditioners, switching to fluorescent lighting, etc. 2.18 There are about 5,830 consumers, as shown in Table 2.3, of which about 80% are residential and 20% commercial or government. Table 2.3: Number of Electricity Consumers by Category, 1990 Residential Rcidenuial onmmercial Commercial Metered Uinietered Metered' Unmetered1 Total Chuuk2 0 1310 0 390 1700 Kosrae 772 na 142 na 914 Pohnpei 1599 na 481 na 2080 Yap 87 1 151 13 1131 Total 3241 1410 774 403 5828 Share 56% 24% 13% 7% 100% Notes: 1) Includes government. 2. A 1990 government survey of customers in Chuuk (Moen) produced estimated bills for 1075 residential customers and 25 commercial customers. Both counts are believed to be well below the true number of customers of each category connected to the power supply. The above are mission estimates based on the per capita consumption patterns of Pohnpei. na = not available. Source: state Departments of Public Works 2.19 With high residential loads and probable heavy use of electricity for cooking, the peak load in each state2s occurs in the evening (6:00 - 9:00 pm), except in Yap, where the peak occurs in the afternoon (1:00 - 3:00 pm) due to a high daytime air-conditioning load (also present but smaller in Kosrae and Chuuk), as shown m Figure 2.1. Load factors26 are high above 0.75) in Chuuk, Kosrae, and Yap, and about 0.65 in Pohnpei but will probably ecline as tariffs increase and average consumption falls. However, they have shown little variation since 1987, indicating that peak load has been increasing at roughly the same high rate (about 7% per year overaZl) as electricity consumption. 2s Daily load curve data are extremely limited in all states and unavailable in Pohapei. These estimates of peak load are provisional only. 26 The ratio of average load to peak load (kW). - 12- Hourly Electric Loads in Chuuk* Kosrae, and Yap (typical weekdays) 4000 3500 - Chuuk 3000- 2500 - 2000 - Yap 1500 - { ~~~~Kosrce 1000 = 500 1 . I I. 100 200 300 400 00 600 7 00 900 1000 1100 1200 1300 1400 1500 1600 t700 1800 1900 2000 2100 2200 2300 2400 Hours Figure 2.1 2.20 As shown in Figures 2.2 - 2.5, with scheduled capacity additions in 1991 and 1992 in Chuuk and Pohnpei respectively, all states except for Kosrae will enjoy large capacity reserve margins throu&h the 1990s even under sustained high growth in power demand. As a result of the commissioning of a new 1.5 MW diesel engine/generator in Kosrae in November 1990, which due to a lack of synchronization equipment cannot be operated in parallel with the other smaller machines, there is a marked "lumpiness" in available capacity and additions are still needed to provide increased security of supply. 2.21 The higher of the two growth rates in demand shown in each of Figures 2.2 - 2.5 corresponds to the trends of 1986 - 1990; the lower corresponds to the estimated effect of progressive tariff increases. - 13 - Firm Capacity and Peak Demand (MW): Chuuk 14.0 Installed copocity 1 decommissioned plant) 12.0J 3tledcpcy 10.0 8.0 r ~~~~~~~~~~~~~~~Firmn capacity 6.0 _ Continued high growth (6%) 4.0 _- ~~~~~Low growth (3%) Peak demand 2.0 . . . L .L .L .L .L . . 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Figure 2.2 Fim Capacity and Peak Demand (MW): Kosrae 3.5 3.0 | Installed capacity 2.5 2.0 - 1.5 - ~~6% growth/yr 3X. growth/yr 1.0 | ~~~~~~~~~~~Firm capacity 1.0 P e a~~~ek demand 0.5 . * 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Figure 2.3 - 14 - Firm Capacity and Peak Demand (MW): Pohnpei 20.0 15.0- Installed copocity 10.0 _ Continued high growth (6X) 5.0 _ 2 = = 5 E ; i h~~~~~~~~~~~~~~ (3%) 5.0 Fimcpct _______ Peak demand 0.0 I . . 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Figure 2.4 Firm Capacity and Peak Demand (MW): Yap 8.0 7.0 - Installed capacity 6.0 5.0 - 4.0 - 3.0 Continued high growth (67. Peak demand______________ 2.0 Low grnwth (3%) with increased tariff Firm capocity 1.0 . p | * 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 Figure 2.5 - 15 - CONSUMPrION OF BioMAss 2.22 The percentage of households which cook primarily with fuelwood in FSM is not known. Based on recent censuses and household energy end-use surveys27 carried out in neighboring countries and in the region, it is estimate that 10%-20% of families in FSM cook primarily with fuelwood and consume 1.6 kg/capita/day (3.3 lbs) of biomass, and that all otfier households use 0.25 kg/capita/day (0.5 Ibs) for occasional cooking and other uses, for a total of 16,500 tonnes in 1990. Copra drying consumes an estimated 6,000 tonnes of coconut wastes based on the average 1974 - 1988 copra production28 of 2,500 tonnes with 2.4 tonnes of biomass to dry a tonne of copra. Only a minority of the total consumption of approximately 22,500 tonnes of biomass is coconut wastes since wood fuel is abundant. Overall, biomass accounts for slightly under 11 % of primary energy, compared to 30 - 60% for most South Pacific island countries. DEMAND PROJECrlONS 2.23 Inland trade and aviation. Real GDP growth in the 1990s is assumed to range between 2% and 4% per year. For the high growth case, inland fuel consumption is estimated to grow at 6% overall through the year 2000 (5% and 6% for ADO and gasoline respectively and 9% for Jet Al; 2% and 3% for kerosene and avgas respectively). Power generation would grow at 6%, or nearly the 1986 - 1990 rate, and 3% in the low growth case. The low growth case assumes an average annual increase of 3% for ADO used in power generation, road transport fuel growing at 3%, jet fuel increasing at 6% and kerosene and avgas growing at 1% each. 2.24 Ships' bunkers. Both projections would change significantly if major projects such as the fisheries projects now proposed by the states are successful. As the states' expectations for tuna fishing are optimistic and tuna fishing is fuel-intensive, it is difficult to estimate future bunker fuel requiremTents for fishing fleets. Typical fuel consumption for tuna vessels is shown in Table 2.4 based on a recent study of ships operating in Pacific Island waters. Table 2.4: Fuel Consumption Per Tuna Vessel (Thousands of U.S. gallons per year) Vessel Size Fuel use seiners 1100 ton 515 - 660 long liners 100 ton 180 - 210 pole & line n.a. about 130 n.a. = data not available Soiwrce: Fuel Use t 7Tuna Fishing (Forum FLsheries Agency, PEDP, FSED, 1989). 27 See Energy Statistics Relevant to Household and Rural Energy Issues in the Pacific Islands (PEDP Report REG 90-5, October 1990). 28 1989 - 1990 data were unavailable. - 16- 2.25 Existing storage capacity in each state is adequate for needs through the 1990s if past trends in petroleum demand continue (see para 3.99). However, the states' optimistic plans for fishenes development could raise FSM s aggregate throughput of ADO bunkers by up to 70 million gallons annually (if all fuel were purchased in FSM, which is unlikely); comparatively modest fisheries development could raise bunkers by 15-20 million gallons annually by 1995, more than doubling FSM's 1990 fuel consumption. An increase of 15 million gallons annually would necessitate additional investment in on-shore storage facilities, so much so that fuel storage considerations are likely to be a powerful constraining factor in the development of fisheries. With or without rapid developments, however, it is expected that growth in petroleum demand will be concentrated in ADO and let fuel as these products are required by fishing and tourism, both potential growth sectors mFSM. 2.26 Electricity. As showvn in Figures 2.2 - 2.5, existing and scheduled new capacity is adequate in all states except Kosrae through the 1990s even under conditions of continued high growth. In Kosrae, further investment in new capacity (a new 1.5 MW generator was installed in October 1990), is required as soon as possible29. However, under conditions of steadily rising tariffs to eventually reach full cost, the high consumption growth rates of the past are not expected to continue, but to fall to about 3% per year. Thus the need for new capacity would be still further delayed, assuming existing equipment is refurbished and then adequately maintained. 29 Investment in equipment to allo'- the new plant to run in paraDel with the older eisting machines is also recommended (see para 3.32). - 17 - III. ENERGY SUPPLY OVERVIEW 3.1 Over 80% of the land area of FSM is under biomass (see Statistical Annex, Table 11) in the form of forests, secondary vegetation, and mixed coconut and scrubland. FSM also has an abundance of sun, waves, and possibly an attractive ocean thermal resource, although no temperature gradient profiles are known to have been measured. There are hydropower resources in Pohnpei and Kosrae which have been exploited to a limited extent. These and various other resources were assessed by the U.S. Department of Energy (USDOE) for FSM in 19823°. The conclusions of this report are broadly the same as those of the USDOE: considering the status of the various alternative energy technologies, relative economics, the environment of the FSM, and the existing and planned energy infrastructure, the urban population of each state will remain dependent on petroleum for transport and power for years to come. However, the USDOE also stressed energy conservation as an important energy source. In remote islands, photovoltaic systems appear to be the most feasible option for small electrical needs. ELE'Rcrrv 3.2 Electric supply growth has averaged 4.1% per year since 1987 in Chuuk, 6.7% in Pohnpei and Yap, and over 15% in Kosrae or 7.1% in FSM overall, trends which could continue if electrncity charges remain well below the cost of production. Despite recent new capacity additions in some states, all state power utilities are trying to cope with serious technical problems, in both their generation and transmission/distribution systems. Much of the equipment is aging, was acquired second-hand, and has been poorly maintained. Nevertheless available capacity, including newly ordered equipment, is adequate to meet load for a number of years in all states except Kosrae. Includng 2MWof hydro capacity in P-ohnpei installed capacity in the four public systems is about 37.6 MW (to inrease to 423 7MW by the end of 1992). Most of the major commercial consumers have stand-by diesel generators due to frequent power outages and low voltage from the public power supply. 3.3 Some technical comments agply to all states. Pole-mounted single-phase distribution transformers are not maintained. Due to high humidity and salt contamination, corrosion is progressing fast and flash-overs are likely to occur. The number of outages and the need to purchase replacement transformers31 could be reduced by routine maintenance. Low voltages and voltage fluctuations are often caused by undersized distribution transformers, service connections, and housewirin. Apart from excessive losses in the distribution system, low voltage can cause breakdowns of air-conditioners, freezers, refrigerators, electric motors and other electrical appliances. Abank in Kolonia (Pohnpei) has purchased a generator to run continuously durng office hours because of low voltage in the public power supply. Resources spent on repair and replacement of electric appliances as well as investments i stand-by generators by consumers trying to provide their own power during blackouts could be better spent on improved power and distribution system maintenance. 30 TeniodalEnerrjAssessment (Report DOE/CP.0005/1, December 1982) which covuer the FSM and other islands. 31 There is a considerable number of scrapped transformers in DPWs warehouse. -18- 3.4 Poor maintenance of power stations, observable to varying degrees in aU states but especially severe in Chuuk and Pohnpei, appears to have four major causes: a) only a small portion of the funds necessary for purchasing necessary materials and spare parts is allocated in the annual budget. Maintenance funds are generaUy released only in response to engine failures or similar crises, and there is no provision for preventive maintenance; b) due to the state governments' poor creditworthiness with overseas suppliers, spare parts are often purchased from unauthorized dealers, or prepayment has to be made when purchasing from authorized dealers. Consequently, purchase procedures are cumbersome and slow, and the quality of the goods purchased is questionable; c) staff qualifications are far below those needed to operate and maintain the power system satisfactorily. With a limited budget, staff frequently improvise parts and procedures to keep the power system running, but without adequate training, improvisation can and often does lead to failure; and d) the workshop, tools, and spare parts are below the standard required for serious maintenance and repair work. 3.5 These problems can be addressed through better training at all levels of utility operations including senior managers, and through reorganization of the utilities to allow managers greater autonomy in the budgeting process. 3.6 Part of customers' problems with poor power quality and voltage drop originate in the service connections, i.e., loose and overloaded connectors. The utilities should measure voltages on customer premises and make necessary corrections, and advise consumers on economical ways to reduce electricity consumption; an additional benefit would be improved monitoring of the distribution system. 3.7 The supply of power in each state, including rural electrification, is discussed below. Chuuk State 3.8 Public electricity supply is provided on Moen by the Department of Public Works (DPW) which is also responsible for water, sewerage, and roads. The overriding condition that affects every aspect of DPW operations is the lack of staff training and experience, even at senior levels. The Division of Power, headed by a graduate electrical engineer assisted in the power plant by an expatriate engineer, has approximately 35 people in three departments: fifteen in Power Generation (two foremen, seven operators, three electricians and three mechanics), fifteen in Power Distribution and five in Electric Service. The operators and linesmen have no formal training and on-the-job training has not been adequate. The supervisors were trained mainly on-the-job, and the department hds are trades specialists with only limited vocational training. Consequently, operations and maintenance in the power station and distribition network are inefficient and ultimately too costly. 3.9 Power generation. The Moen Power Station produced about 31 % of national electricity output in 1990. Installed capacit is 10.8 MW, comprising machines of a wide variety of makes and vintages: one 1,155kW Nordberg, vintage 1960 (poor condition); two 2,000 kW Caterpillars (900 rpm) vintage 1990 (good condition); two 800 kW Caterpillars (1200 rpm), vintage 1980, one unit dismantled, the other used occasionally on standby; and two 2,035 - 19- kW ALCO engines, vintage 1975 and installed (refurbished) at Moen in 1986, one unit permanently dismantled. Average fuel efficiency (11.5 kWh/gallon) is poor. The power station is situated approximately two kilometers from the harbor, from which diesel fuel is transported da;ly by road. 3.10 The Caterpillar generator sets and associated electrical equipment were delivered on a turn-key basis. Spare parts are easily obtained, but training and after-sales service are reportedly poor. AIthough these modeLs are designed as peaking (standby) units, they are operated on baseload duty. Therefore, increased failures, downtime and shortened life can be expected. Ideed, four 800 kW Caterpillar engines that were operating in 1984 have been removed for this reason. 3.11 The standard of maintenance and general appearance of the engines and generators is poor, although attempts are made to keep to recommended service intervals. Mechanics carry out engine repair work in a workshop area that is too small, and spar- '.Xrts and tools are lacking. Considerable quantities of oil are spilled, collecting in cable trenches. The control room is poorly insulated against noise, and is cluttered with unused control panels and other instruments. Cooling water is reportedly taken from the public water system without chemical treatment, so that scales build up in the heat exchangers causing overheating and consequent derating of the engines. 3.12 Power Distribution. The grid from the power house substation to the Nantaku area, government buildings, and the hospital consists of an old 4.16 kV section and a more recent 13.8 kV line extending to the populated areas on the shore. The total length of the overhead lines on wooden poles is approximately 40 kilometers (24 miles). A detailed system evaluation was carried out in 1985. It is recommended that this be updated soon including preparation of maps. 3.13 The 4.16 kV system has two short feeders (numbers 1 and 2) built as a double circuit overhead line to Nantaku. Upgrading the system to 13.8 kV has been scheduled for completion by early 1992 at a cost of $270,000. However, as apparently no staff from DPW are to participate in the work, an opportunity for staff training in distribution line construction will be missed. 3.14 The 13.8 kV system has three feeders each of 8 km (5 miles) or less: heavily loaded number 3 to the southeast coast; number 4 to the airport and northeast coast; and number 5 inland to the west. Due to the short distances, voltage drops in the 13.8 kV system are not believed to be serious. The 13.8 kV lines have been extended to most vilages on Moen, but many households are not connected. Extension to additional households IS included in the Second National Development Plan, but is of lower priority than upgrading the presently overloaded 4.16 kV network. The condition of the 13.8 kV grid is generally acceptable, but there is insufficient tree and foliage cutting. Temporary repairs date from the early 1980s; it is recommended that permanent repairs be included within a preventive maintenance program. Strong wind and heavy rain cause frequent earth faults, short circuits, and broken conductors throughout the system, often leading to island-wide blackouts of two hours or more. Faults caused by falling trees cannot be totally avoided in view of the difficulty of obtaining permits from land owners to cut trees, but improved efforts could be made to keep the lines free from branches and foliage. 3.15 The old 4.16 kV Vid is in poor condition. The poles are heavily stressed as they carry a 4.16 kV double circuit, a 13.8kV circuit, and two telecommunication cables. Many pole- mounted transformers are corroded. The system is heavily loaded and suffers from high losses and voltage drops. It is recommended that the entire system be upgraded to 13.8 kV. - 20 - 3.16 The 4.16/13.8 kV substation at the power house is poorly engineered and hazardous, as it was not designed for two voltage levels. Circuit breakers are instaled on the five feeders, on two 3,000 kVA transformers operated in paralel, and on the two ALCO- generator feeders. The other generators have only disconnectors in the outdoor substation as their circuit breakers are mstaled in the indoor control panels. Two old 2,500 kVA transformers are kept as spares. 3.17 No diagram of the substation is available and essential information about design and performance is lacking. Upgrading the 4.16 kV distribution system cannot properly be carried out without reEabigtating the substation first. Old (1930s vintage) oil-tanc circuit breakers are insufficient to control the system; others are reported to be out of operation and spare parts for their repair are lacking. At a minimum, it is recommended that all circuit breakers be maintained and the oiT checked regularly, as a reported reason for system black-outs is the improper functioning of relays at the circuit breakers. 3.18 Management. The qualitv and reliability of the distribution system depends on improvements in the techmcal sU of the staff and the resources spent on rehabilitation and preventive maintenance. Skills can be improved through methodical on-the-job training and maximum involvemept of staff in rehabilitation of the 4.16 kV network and similar projects. 3.19 Although old maps of the distribution lines may exist, updated diagrams and system data are lacking. The staff are familiar with the system configuration from daily experience, but are not capable of assessing, planning, or monitoring the system, and fault location and repair are unnecessarily complicated and time-consuming. There is no monitoring of load, voltage or losses in the system and inadequate skills in distribution plannig. The upgradig of transformers usually occurs only after a customer complains about poor voltage. these inadequacies can be eliminated by fairly simple record keeping and planning methods. No facilities for transformer maintenance and meter calibraton exist, Stocks of essential parts are inadequate, but a serious attempt is being made to organize stores properly. 320 Metering, billing, and revenue collection. Consumers in Chuuk are not metered, and there are no data on the number of customers connected, let alone their consumption. However, it is understood that the state government has purchased a number of single- phase and three-phase meters for installation during 1991. It is recommended that this effort continue as a high priority until all consumers, including the government itsel£, are metered and are receiving timely and accurate bills3. 3.21 Power System Expansdon. Installed capacity in the Moen power house is 10.8 MW, eak demand is 3. MW and firm capacity is 6 MW. In February 1991, 8 MW of capacity (nameplate rating) was operationaL but effective capacity was less due to cooling problems. DPW staff are of the opino which app ears to be reasonable, that some of the older equipment will have to be scrapped in the near future. Even allowing for a su1lstantial derating of the older machines, however, the 1991 reserve margin33 remains ainple at around 75%. 32 The Department of Public Works is attempting to increase revenues in the interim by billing consumers based on a 1990 survey of appliance ownership. 33 Firm capacity over peak demand expressed as a percentage, where firm capacity is the total installed operational capacity less the capacity of the largest generating unit. -21- 3.22 If all engines were refurbished and their full ratings restored, firm capacity would increase to 8.8 MW and the reserve margn to 159%o, indicating that existing capacity is sufficient to meet likely growth during the 1990s. However, maintaining an adequate reserve margin depends primarily on good maintenance and a stock of spare parts sufficient for timely repairs. With more than half of the capacity consisting of relatively old engines which are increasingly difficult to service, only 6 - 7 MW of the capacity in Moen can be considered "firm". Therefore new capacity will be needed when peak demand on the power system approaches 5.5 or 6 MW well towards the end of the 199Os. 3.23 The Chuuk state Office of Planning and Statistics predicts substantial but unquantified demand increases during the early 1990s, mostly from fisheries and tourism development. However, commensurate rapid increases in peak load are not expected to occur even if all development goals are realized, since the developments are unlikely to place coincident demands on the system. Delays in some or all of t;he projects are probable, particularly when the largest investments are concentrated within a few years, as is presently planned for fisheres. Investing in excess capacity to meet future load which never materializes is an expensive mistake which can be avoided with proper planning and realistic assessments of future demands. It is too early for Chuuk to begin planning power system expansions to cater for major new economic developments, since available capacity is sufficient to cover contingencies until 1995 or later. It is recommended that government carefully monitor load growth and the energy consumption of each customer category and establish realistic short and medium term orecasts of both economic development and probable growth in peak demand. The need for new generation or transmission capacity should be determined only on the basis of approved and confirmed projects. 3.24 A new 900 rpm 2.2 MW Caterpillar was due to be shipped to Moen by mid-1991 at a landed cost of approximately $0.8 million. The generator is apparently one of two intended to replace the two aging ALCO units, which are to be overhauled and transferred elsewhere. As no island other than Moen within Chuuk state is currently electrified, it is difficult to see where the ALCO units could be usefully deployed within the state, but it is possible that Pohnpei or Yap (which use equipment of the same make) might be interested m taidng the units if offered at a low cost. However, these units would provide the most benefit to Chuuk if they were overhauled and used for baseload duty, which would be far less expensive than replacing them with new capacity as planned. If properly maintained, the refurbished ALCO units should provide at least ten more years of refiable service; the benefit of new capacity purchased now is therefore practically nil. A critical precondition for reliable service is, however, proper maintenance supported by good staff training. Considerable savings to the state would result from avoiding investments in new capacity m favor of utilizing exLsting capacity more effectively. These savings may mean the difference between a reliable power system that consumers can afford and one which becomes an increasing burden on limited state finances. 3.25 It is recommended that the ALCO units be overhauled by an experienced contractor, preferably jointly with the utilities on Pohnpei and Yap so that better terms can be negotiated. The contract should include training and employment of local staff in the overhaul work as well as a performance guarantee for the operatig life of the overhauled engines of at least five years. A professional engineer should be engaged to supervise the contractor. Based on the tendered costs and the expected residual jiretime, an economic and financial comparison of the overhaul option and the purchase of new generators can be made. 3.26 If the purchase of the Caterpillar unit cannot be cancelled, the inoperable ALCO unit should be kept for spare parts Tor the operable one, which should remain in service for -22- several more years with adequate maintenance. It is recommended that the Nordberg engine not be overhauled, but be scrapped when major repairs become necessary. 3.27 Rehabilitation of the distribution system. Low voltage and losses are concentrated in the 4.16 kV grid to the Nantaku area, which DPW plans to upgrade to 13.8 kV. This upgrade is justified as it will improve service quality, reduce losses and maintenance cost, and simplify the system. 3.28 It is recommended that further investments be based on detailed technical analysis of the distribution system, including mapping, measurements of loadings and voltages at critical points and an evaluation of losses. Possible use of capacitors should be investigated. A protection scheme for the system should be designed, covering the circuit breakers m the substation, sectionalizers, and simple fault indicators on the lines. Automatic reclosers in the grid are not likely to be necessary. Technical assistance is needed for the analysis and design work required. Kosrae State 3.29 Kosrae's power system is the smallest in FSM, serving less than 1,000 consumers and accounting for less than 13% of FSM's gross generation in 1990. The generation and iistribution of electricity is the responsibility of the state Department of Public Works, although in early 1991 plans were being made to reorganize the power system as an independent utility. There are 14 station operators and mechanics working in the powerhouse at Tofol, entirely local except for an expatriate chief mechanic. The Department of Public Works employs five electricians to maintain the distribution system. 3.30 Generation. Total nameplate generation capacity in the power house is 3.3 MW, but firm capacity is only 1.3 MW since almost half of the installed capacity consists of one engine/generator set and all of the smaller sets have been derated. Installed plant comprises one 1.5 MW Caterpillar 900 rpm diesel set installed in November 1990, two 300 kW White Superior sets (both derated to 200 kW) installed in 1984 and three 400 kW Caterpillar 900 rpm sets (each derated to 300 kW), of which two were installed in 1984 and one in 1980. In 1990, Kosrae produced about 8.5 GWh (see Table 6 in the Statistical Annex) and peak load was 1.3 MW. 3.31 Baseload generation is provided by the 1.5 MW machine operating alone; due to a lack of synchromzation equipment, the older generators cannot be operated in parallel with it. The addition of the 1.5 MW machine in November 1990, which more than doubled installed capacity, did not add commensurately to firm capacity34. Actual reserves - the difference between firm capacity and peak load - are negative. Between 1986 and 1990, load grew at approximately 12% per year, indicating a reserve deficit of about 150 kW in 1991 and 300 kW in 1992, if the growth trend continues. New capacity is needed as soon as possible. 3.32 It is recommended that in planning for new capacity, an effort be made to optimize the configuration of the power house in hght of the present "lumpiness" in the capacity mix. In particular, planners should attempt to make use of the older units as peaking capacity by synchronizing them with the existing and future baseload units; otherwise a much larger increment of new capacity will be required to ensure an adequate reserve margin. It is 34 Firm capacity is a measure of the minimum or 'woist ce" capacity assumed to be available at all times, and is usually calculated as the sum of derated installed capacity less the capacity of the largest unit. -23 - recommended that a study be undertaken to determine whether the technical condition of the older machines would permit synchronization and whether such a step would be financially feasible. 3.33 Management. Training is carried out on-the-job, mainly by the expatriate chief mechanic. In February 1991, one of the White Superior engines was partially dismantled for overhaul by the local staff, and was awaiting spare parts. However, the power house staff (except for the foreman and the chief mechanic) lack professional qualifications. A formal training program in both the mechanical and electrical trades is recommended. 3.34 Station records are kept reasonably well: a report of basic operating statistics including energy generation, power demand, fuel and lube use is prepared every month. Technical specifications for the baseload 1.5 MW power plant and the 13.8 kV distribution system are probably available since all of those items were installed in 1990. Therefore, construction drawings are up to date; it is recommended that maps of the new system be prepared if these are not already available and be kept up to date. 3.35 Metering, billing, and revenue collection. Customer records are maintained by the Department of Finance, which is also responsible for reading meters and issuing bills. According to the billing records of November 1990, there are 914 metered customers, of which 772 or 85% are residential and the rest are commercial or government. The number of unmetered and unbilled consumers is unknown. However, billing methods do not appear to be effective: as of November 1990, uncollected revenues were equivalent to more than a year of billings. It is recommended that collection procedures be tightened through more igorous enforcement of disconnection policy and that a meter survey be undertaken to ensure that all consumers are metered. 3.36 Distribution. The distribution system consists of three 13.8 kV feeders extending from the power house substation at Tofol: two along the north end of the island to the airport and Lelu and another southwards to Utwe (see map, after Annex 4). These extensions were completed in 1990 and are in excellent condition; losses are assumed to be light. An extension of the line between Utwe and the airport to complete the circumference of the island is reportedly planned, but timing is uncertain. The condition, loading, and losses of the heavily loaded feeder to Lelu is unknown, but upgrading of the feeder is reportedly underway. 3.37 The government of Kosrae has plans to transfer responsibility for managing and operating the power sector from the Department of Public Works to an autonomous power utility which is expected to be established by December 1991. To assist the new utility and to address the capacity deficit, it is recommended that a power development study be carried out in Kosrae to determine: (1) the tariff level which should be charged to recover costs, (2) realistic future load growth trends under rising tariffs, (3) the suitability of the older machines in the power house to serve as peaking units, and the cost of installing synchronizing equipment, and (4) the optimal addition of new capacity to the power house given the present capacity mix. Pohnpei State 3.38 The generation and distribution of Pohnpei's public electricity supply is the responsibility of the state Department of Public Works (DPW). With no engineering background, no managerial or technical support and inadequate funds, the DPWs Chief of Utilities (wno is also responsible for water and sewerage), is overburdened. The Power Division employs twenty operators, six mechanics, four electricians, five linesmen and - 24 - seven assistant linesmen. An expatriate electrical engineer has been hired by USDOI on contract to manage the Nanpil hydro station. 3.39 Total public generation capacity is 17.3 MW, comprisng eleven diesel engine- generators totalling 15.5 MW and a run-of-river hydro plant of 1.8 MW. These facilities are the largest in FSM producing about 37% of the national public power output in 1990. The diesel capacity is installed in three locations: on a barge moored near the fuel depot and airport, at the inland power station Nanpohnmal, and at a trailer installation at the Palildr national Government Complex, which is meant to be stand-by capacity and is owned and operated by the national government. Most large commercial consumers have stand-by diesel generators. Due to a number of serious breakdowns, derating of units, and the dry season, only 6.6 MW was available in February 1991; it is understood that available capacity dropped to 4.7 MW in May (taking into accour.t the temporary outage of one 1.1 MW machine at Nanpohnmal for repair). If urgent refurbishment and repair work is completed, firm capacity will be 6.6 MW; otherwise, it is only 4.7 MW (as shown in Table 3.1)35. 3.40 The ALCO Barge Diesel Power Station. Four medium-speed ALCO diesel-generators originally rated at 2 MW each and manufactured around 1975 are installed on a barge moored in the harbor one kilometer from Kolonia. Due to overheating, the generators have been derated to 1.9 MW, and are normally not operated continuously above 1.8 MW. The barge with the plant was acquired second hand from Canada by the USDOI and reconditioned in the U.S. before delivery in 1986. 3.41 The condition of the plant is extemely poor; it was never properly commissioned after delivery to Pohnpei. Unit 1 has never been in service and has been cannibalized for spare parts for the other engines. The generator of Unit 2 has burned out, probably due to an incorrect setting of the $enerator breaker relay, and was to be shipped to the U.S. for a $76,000 repair which is likely to take six months. Unit 3 is also out of service awaiting spare parts. In February 1991, only Unit 4 was operating; it is understood that by April or May of 1991, Unit 4 was also taken out of service. 3.42 The barge itself is not maintained and is heavily corroded. A serious leakage could be fatal to the power.plant. During a typhoon several years ago the power house was damaged, but has been repaired to an acceptable standard. The outdoor 13.8 kV switchyard is placed on the foredeck. A single feeder transmits power to the substation at the original (derelict) power st.- n in Koloma. 3.43 The Nanpohnmal Diesel Power Station. The Nanpohnmal station is situated inland approximately five kilometers from Kolonia and the port facilities, with a total installed capacit of 5.8 MW comprising six high-speed (1,200 rpm) Caterpillar diesel sets. Units 1, 2, and 3 are 800 kW D399 sets and Units 4, 5, and 6 are 1,135 kW T3516 sets. The station is designed for peak load and stand-by operation, but has been forced to operate on baseload duty because of a shortage of operable capacity at the barge. The 800 kW units are due for 35 Counting only capacity at the barge (6 MW) and at Nanpohnmal (5.8 MW), and assuming that the largest machine in each power station is out of service. As the power stations m Pohnpei are interconnected, however, it can be argued that this definition is unreasonably restrictive. An alternative method of computig firm capacity in this case, suggested by a power sector consultant with considerable experience in the region, is to sum the available capacity in the two power stations, subtract the largest unit of the interconnected system, and multiply the difference by 0.8. This method, considered fair for an interconnected system, yields a er firm capacity rating for Pohnpei: 7.8 MW vs 4.7 MW under the previous definition. -25 - 6,000 hours overhaul in 1991, while the 1,135 kW units are new. In February 1991, Unit 4 was out of service for repair. 3.44 All of the engine/generator sets including control boards and other electrical equipment were delivered turn-key from Hawaii. Spare parts are easily obtained, but after- sales service and training is reportedly inadequate. The wall separating the control room and the engine hall is poorly insulated and noise in the control room is unacceptably high. 3.45 As the engines are fairly new, the standard of maintenance cannot be evaluated, but as of mid-1991 no steps have been taken to begin overhauls. Small high-speed engines need regular and timely overhauls if an acceptable life is to be obtained. Operation of the units continuously on baseload duty will require special attention to maintenance. 3.46 Nanpil Hydro Power Station. Nanpil is a highly automated run-of-river hydro station located near Kolonia, commissioned in 1988. It is equipped with two generators of 725 kW and 1,335 kW capacity, although the design of the intake limits output to 1.8 MW at maximum flow. The plant's energy output was designed to be 4,000 MWh per average hydrological year, or about 19% of the gross generation on Pohnpei in 1988. However, flows since 1988 have not met expectations, and generation in 1989 and 1990 amounted to only 3,300 and 2,300 MWh respectively. 3.47 The plant is supervised by an expatriate electrical engineer who is working full time under a USDOI contract. Eight local operators work in four shifts. One operator must be stationed at the intake to remove materials when the plant is operating. The local crew are proficient at running the station, which has achieved an excellent availability of 99.5% when water is flowing (about half the year). Continued good operation of the plant will require permanent supervision by a trained engineer. Because there are lengthy dry periods, the plant does not contribute to Pohnpei's firm generating capacity, but when operating saves overall costs by reducing fuel use and some maintenance expense on the diesel engines, at no negative environmental impact. 3.48 Palikir Stand-by Generator. A 1.6 MNW Caterpillar stand-by engine/generator is located at Palikir, owned and operated by the national government. Primarily a back-up unit for the national government offices, it is installed in a mobile container, connected to the 13.8 kV grid and sometimes used to supply power to the state grid. It has been out of service during part of 1991 for unknown reasons. 3.49 The Distribution System. The distribution grid consists of an old 4.16 kV system in Kolonia town and a recently-constructed 13.8 kV system which circles the island. The total length of the overhead lines is approximately 160 km (100 miles) and the number of poles exceeds 2,000. The 4.16 kV system comprises two feeders from the substation located at the derelict power station in Kolonia, where a 1,500 kVA 13.8/4.16 kV step-down transformer is installed. Another substation is located at Nanpohntnal with a 3,750 kVA 13.8/4.16 kV step-down transformer. Feeder No. 2 has been extended to the 4.16 kV busbar at Nanpohnmal, indicating that Kolonia town is supplied from two sides. An old transformer is kept in reserve at Nanpohnmal. 3.50 The 13.8 kV system includes a six kilometer (3.6 mile) overhead line which forms a 'backbone" between the ALCO barge, which generates at 13.8 kV, and the Nanpohnmal diesel power plant. From the "backbone", the 13.8 kV grid has been extended to the new parts of Kolonia, Sokehs, Palikir, the hospital and the Nanpil hydro plant. A 60 km (36 mile) ring along the coastal road was completed in 1989. The northern part of the 13.8 kV system was built around 1980 with wooden poles, while the recently-completed southern -26- part was built with concrete poles in order to increase durability and resistance to falling trees. 3.51 There has been a moratorium on the connection of new consumers in Pohnpei since mid-1990 to res.rain demand growth due to limited capacity. It is understood that the backlog of requests for new connections exceeded 200 in early 1991. 3.52 The condition of the 13.8 kV grid is fairly good outside Kolonia, but as in other states there is insufficient tree cutting and foliage clearance along the line which contributes to frequent earth faults, short circuits, and broken conductors. The old 4.16 kV Kolonia grid, however, is aging and overloaded. Power cuts occur about twice a week on average, primarily because of a lack of systematic, preventive maintenance of the lines, poles, transformers and switches. There are insufficient distances between the 4.16 kV conductors which are often slack due to frequent emergency repairs. There are many heavily loaded poles throughout the 4.16 kV system, i.e., poles carrying 13.8 kV, 4.16 kV and up to four telecommunication cables as well as transformers and a number of service drops. Most of the poles are fifteen years old and are recommended to be checked for rot; some angle poles should be guyed or reinforced if possible. The cross-arms suffer from rot but these are changed when detected. Line repairs are carried out every Saturday when scheduled power cuts of four to six hours' duration are announced. 3.53 Overloading of the 4.16 kV system causes low voltage and high losses. Voltage drops are severe (greater than 10%), and the system is vulnerable to outages due to heavy winds and earth faults. The frequent black-outs are reportedly due to poorly functioning relays at the circuit breakers. Circuit breakers are installed at all feeding points of the 13.8 and 4.16 kV grid, but isolation of faulted lines can be difficult to obtain with low short-circuit power in tne generators and with parallel 13.8 and 4.16 kV lines between two generating pomts. It is recomri.enred that the two 50-ampere fuses protecting the 60 km line around the island be replaced with relay-operated circuit breakers (preferably with automatic reclosure) in order to clear distant line faults. At present, however, every short-circuit or earth fault reportedly causes the whole system to black-out. 3.54 Management. Staff sldlls in monitoring power plant and distribution performance, troubleshooting, and planning are not adequate to overcome the technical problems facinz the power system. Hnowever, even if skilled technical manpower were available, both managerial skills and the information necessary for effective management are absent. The records that management need to make informed decisions, such as daily operating data and periodic techmcal status reports are not available. 3.55 Similarly, technical specifications about the system are lacking. For example, construction maps of the distribution lines exist, but are out of date. Consequently fault location and repair are complicated and time-consuming. No monitoring of load, voltage, or losses in the system is carried out, and no skill in distribution planning exists. Further, there are no facilities for transformer maintenance and meter adjustment. Although stocks of many essential parts are depleted, a serious attempt has been made to organize the stores. Lack of parts, vehicles, and tools prevent dispatching of crews for preventive maintenance, monitoring of voltages, or customer service. 3.56 Metering, billing, and revenue collection. Metering of customers in Pohnpei is far better than in other FSM states, with state and municipal government offices metered. In -27- 1989 there were 1,739 metered customers and 61 unmetered36; by 1991, the number of metered customers had risen to 2,080. Unaccounted-for consumption, which includes streetlighting, was less than 14% of gross generation in 1990, but is much higher in other states (e.g., nearly 100% in Chuuk, where metering is poorest). A computerized billing system began operating in October 1990, speeding up the billing process and providing improved sales accounting and customer record keeping. 3.57 Despite the new billing system, however, revenue collections are poor, especially from government offices. Of a total estimated billing in 1990 of $740,000 from all customers, only $500,000, or 68%, was collected. However, among government accounts (municipal, state, and national), total billing in 1990 was about S150,000, whereas collections were about $12,000, or just 8%. It can be expected that collections will improve as the Finance Department learns to use the new bilrmg system more effectively and the disconnection polcy is more rigorously enforced. It is recommended that improved collections from government accounts be enforced, possibly through special measures such as assigning responsibility for the payment of electricity bills to the heads of the respective consuming departments and givmng explicit authority to the utility to disconnect any government account for nonpayment. 3.58 Firm capacity. Installed, available, and firm capacities of the public power supply are shown in Table 3.1. Table 3.1: Existing Generating Capacity in Pohnpei (MW) February 1991 Available Firm Available Firm Installed Feb 1991 - capacity after repair2 after repair ALCO Barge 8.1 1.9 0.0 3.8 1.9 Nanpohnmal 5.8 4.71 4.7 5.8 4.7 N anpil hydro 1.8 0.0 0.0 1.8 0.0 Palikidr stand-by 1.6 lL0 Q0 1 1, Total 17.3 6.6 4.7 13.0 6.6 Notes: 1) In February 1991, one 1,135 kW unit was down for temporary repair. 2) Assuming two ALCO machines refurbished, and Palikir and one machine at Nanpohnn .d repaired. Source: mission estimates. 3.59 The nameplate capacity of 17.3 MW appears to be excessive for Pohnpei's needs, as peak demand was about 5 MW in January 1991. However, available capacity (6.6 MW) in the first quarter of 1991 was less than 40% of what is installed; by June 1991, Pohnpei was completely dependent on the "standby" Nanpohnmal station. Three engines (one each on the barge, Nanpohnmal, and at Palikir) are ex-pected to be repaired, following which available capacity would be 13 MW. Unless repairs of those machines and the others on the barge are carried out quickly, however, it is possible that Pohnpei will be unable to meet the load in the very near future. A breakdown of another engine in the Nanpohnmal will force frequent power cuts, if they are not already necessary. 3.60 Installed avalable capacity in Pohnpei is presently 4.7 MW, peak demand is 5 MW and, assuming urgent repairs are accomplished soon, firm capacity will be 6.6 MW. The 36 As reported in the Pohopei State Statistical Yearbook for 1990. -28 - run-of-river hydro capacity cannot be considered "firm" as no water storage exists. The stand-by unit at Palikir similarly cannot be included as its Purpose is to provide standby power to the capital. With firm capacity of 6.6 MW, the 1991 reserve margin is reasonable at around 32%. New capacity will be needed when peak demand approaches 6 MW, which at the present rate of demand growth would occur in 1995. However, the adequacy of any reserve margin depends on ensuring high reliability of the engines. Firm capacity would be quickly reduced below 6.6 MW if the present neglect of maintenance continues. 3.61 If all engines including Unit 1 on the ALCO barge were refurbished and their full ratings restored, firm capacity would increase to 10.7 MW and the reserve margin to 114%, indicating that existing capacity is sufficient to meet any reasonable increase in growth during the 1990s. Additional capacity in this case would be needed when peak demand approaches 10 MW, which at the present rate of demand growth would occur well after the year 2000. However, it is likely that some of the refurbished engines would need to be replaced before the end of the century. 3.62 Future Expansion. The Pohnpei state Office of Budget, Planning and Statistics (OBP&S) has predicted an increase in demand during 1991 - 1992 of 5.8 MW based on twenty-two identified developments, more than doubling peak demand to 10.8 MW by the end of 1992. Such rapid development is unlikely, but even if it did occur, it would not raise peak demand by a commensurate amount, since the developments are unlikely to place coincident demands on the system. Comments regarding a similar issue in Chuuk (para 3.23) apply here. In 1991, it is too early for Pohnpei to begin planning power system expansions to cater for major developments which are uncertain, since available capacity is sufficient to cover reasonable contingencies until 1995. New generation or transmission capacity should be planned on the basis of approved and confirmed projects. 3.63 Despite the uncertainty of load projections, the government must make urgent decisions about the best way to meet future power demand. Options include: a) Refurbishment of the ALCO barge. If no serious rehabilitation work is undertaken soon, the barge and its entire power capacity will have to be scrapped. On the other h~nd, refurbishment of all four engines to the full capacity of 8MW would leave Pohnpei with a high percentage of fairly old engines. The maximum time before replacement becomes necessary is not known, since the extent of overhaul in 1985 is unclear and no records have been kept on maintenance and later repairs. b) Replacement of the ALCO barge A 5 or 6 MW baseload low-speed engine/generator burning less expensive RFO could replace the ALCO barge. The engi.e could run on residual fuel oil with exhaust boilers for preheaters and with low specific fuel cost. However, to be economic, this option would require a peak demand of 10 - 15 MW, introduction of RFO, and a high degree of technical skitl for maintenance. The unit could be delivered turn-key on a new barge prepared for two engines if an on-shore site is not available. This option is not recommended for the short to medium term. c) Nanpohrnal addition. Two new medium speed engine-generators rated at approximately 2.5 MW each could be installed in two steps in a new power house at Nanpohnmal. This, the option recommended by OPB&S, is easy to implement and administer. The project will require a 13.8 kV substation at Nanpohnmal and at -29- least one new feeder37. The new feeder(s) should be connected to the 13.8 kV ring around the island which should be separated from the Kolonia grid. A proposal for the supply of new engine/generators by Japanese grant aid has been presented to the state government by Japanese commercial interests. The turnkey project including power house and step-up transformer is estimated to cost $5.5 minion excluding a 13.8 kV switchyard and new distribution lines. It is recommended that the government compare the costs of this option with refurbishment before committing itself to the Japanese proposal. d) Hydro. The per-kW cost of the Nanpil run-of-the-river hydro plant (about $4,000) is much higher than diesel plant (about $1,000), and its capacity cannot be relied upon. The state has received a proposal for the design and construction of a new hydro power plant at Lehn Mesi (1,080 kW) and at Senipehn (210 kW), funded through Japanese grant aid. The high initial cost combined with the prospect of insufficient year-round water flows on Pohnpe, probably make the small hydro option unattractive compared to diesel. Another option under consideration is increasing the catchment area of the existing Nanpil plant at a cost of some $6 milhjn. Additional output is not known, since detailed hydrological studies have not been completed. The economic viability of this option, wbich appears to be doubtful based on the present estimate of costs, should be evaluated when engineering studies are completed. e) CoaL Transport costs of imported coal, which has been suggested as an option, are probably prohibitive. The expected demand for new capacity during the next decade is too small to justify considering coal as a senous option, and it is not recommended. 3.64 It is recommended that, subject to the results of a detailed technical investigation, option (a) be adopted, i.e., that three of the ALCO engines be overhauled by an overseas experienced contractor, if a reasonable tender for the work can be obtained. As a first step, it is recommended that the barge be inspected by a naval expert. Then one or two contractors should be asked to tender for the refurbishment including training, employment of local staff, and a post-overhaul performance guarantee. A realistic expectation of at least five years of service from the machines after overhaul is required to make the option attractive. It is recommended that a professional engineer be engaged to supervise the contractor. Based on the contract cost and the expected residual lifetiime of the machines, an economic comparison of refurbishment and purchase of new capacity at Nanpohnmal can be made. 3.65 Transmission and Distribution. The most urgent action required to improve distribution service quality is reh,.oilitation of the 4.16 kV system in Kolonia, for which a proposal for Japanese grant aid has been submitted to the state government by Japanese commercial interests. The proposal is to upgrade the entire 4.16 kV system to 13.8 kV within a 24-month construction period. If this project is carried out, it is recommended that all wooden poles be replaced with concrete poles, and new insulators, conductors, transformers, switches etc. be installed. Automatic reclosing systems and ring main 37 An additional benefit of a new feeder is improvement of the reliability of the grid since total black-outs due to simultaneous distribution faults would be rare. -30- operation should be adopted. The total cost including 1,200 concrete poles and 51 miles of conductors is estimated at $6.4 million, of which $3.7 million is for materials. 3.66 While the proposal appears to be an effective way to improve service quality, reduce losses and maintenance costs, and add spare capacity to the grid, the main work will evidently be done by foreign consultants and contractors. It is recommended that the rehabilitation be carried out in smaller steps with the assistance of the local staff within a period of three to five years. This is an excellent opportunity to train staff. 3.67 In addition to distribution rehabilitation, the loading and voltage in drop lines and service connections in major commercial consumer premises should be analyzed. A distribution system protection scheme should be designed, including circuit breakers, switches, and fault indicators on the lines to enrable better planning and maintenance and faster repair when necessary. Yap State 3.68 The public electricity supply is provided on the three main islands of Yap by the Department of Public Utilities and Contracts (PU&C). The Division of Power within PU&C has approximately 35 people engaged in three departments: eighteen in power generation, fi teen in distribution and two m electric service. In addition, PU&C has ten people in administration and nine in billing, who have recently been moved from the Department of Finance. Ulithi and Woleai islands have small diesel power systems which are operated by the local authorities. Yap's power utility operations are well organized. However, technical, financial, and administrative skills should be improved. 3.69 The Colonia Power Station. The total capacity in Colonia is 7.1 MW and produced about 20% of the national public power output in 1990; in addition, some commercial consumers and the hospital have stand-by diesel generators. The power station is situated approximately two kilometers from the harbor, from which diesel fuel is transported daily by road. Due to severe mechanical problems in some machines, the presently o erational installed capacity (nameplate rat * is 4.4 MW. All of the operational units have been substantially derated due to cooling problems. Load shedding was necessary for several days in February 1991, even with loads of only 1.5 - 2 MW. The peak load recorded in December 1990 was 2.4 MW. 3.70 The Colonia plant comprises six diesel generators: a) Two 2,035 kW ALCO engine/generators (units 1 and 2, 900 rpm), manufactured in Canada in 1975 and reportedly refurbished and shipped to Yap m 1987/88. Unit 1 has a dismantled roller bearing at the generator shaft. The engine has recorded 61,000 hours, 3,300 since an overhaul in September 1990. Four out of nine fan- motors have been removed for repair in Guam. Unit 2 is in service3g, but as five out of nine fan motors have been removed for repair, the engine is derated to 1,100 kW. b) Two 750 kW White Superior engine/generators (units 3 and 4, 600 rpm). Unit 3 was installed in 1974 and is in service, but oil leaks from the cylinder heads and elsewhere. According to station records, the unit is not operated above 540 kW. Unit 4, installed in 1971, has been out of service for six years with essential parts 38 The hour meters on units 2 and 5 indicate 5,600 and 4,600 hours respectively, both of which are probably an order of magnitude low. -31 - including cylinder heads, exhaust tubes, cooler, and all instruments on the control panel dismantled or removed. The unit is unlikely to be returned to service. c) Two 800 kW Caterpillar engine/generators (D399 sets, units 5 and 6, 1,200 rpm), both installed in the late 1970s. Unit 5 is not operated above 580 kW. Unit 6 has recorded 53,000 hours and is operated at a maximum of 600 kW. Although designed as standby units, both have been operated on baseload duty because of the critical capacity situation in the plant. 3.71 Effective plant capacity, allowing for machines out of service and deratings, was only 2,820 kW in February 1991, and load shedding was necessary. Technical assistance by a diesel specialist is recommended to investigate reasons for the deratings. 3.72 Despite insufficient workshop area, spare parts, tools and expertise, maintenance efforts in Yap are better than in other FSM power stations. Routine service and overhauls are carried out at the manufacturers' recommended intervals. Cooling water is reportedly supplied from the public water system, but is treated in a chemical filter process before entering the radiators. It is recommended that the effectiveness of the filtering process be investigated. 3.73 Although staff have maintained the ALCO engines competently, the machines experienced many problems in 1990. A turbo-charger has been replaced, a cam shaft broke, and fan motors continue to break down, a problem which might be solved by installing complete new radiators. The main bearings of one engine continue to wear out prematurely, indicating either a bent shaft or improper alignment of the engine-generator; it is recommended that a specialist be engaged to determine a solution. Similar troubles with ALCO generators have been experienced in Pohnpei (4 engines) and in Chuuk (2 endnes). It is recommended that both the recruitment of specialist help and contracting for refurbishments be coordinated with the other two states. 3.74 It is recommended that the dismantled White-Superior (Unit 4) not be refurbished because of its age, but be retained for spare parts. Unit 3 may have a limited lifetime, but should be kept running as long as possible, at least while the ALCO engines are being refurbished. 3.75 Spare parts are easily obtained for the two Caterpillar units, but as experienced in other states equipped with similar machines, after-sales service and training has reportedly been poor. operation of these units on continuous baseload duty requires special maintenance procedures. 3.76 It is recommended that a formal training program be established in the mechanical and electrical trades, mainly on-the-job for technicians but including coursework away from Yap for senior engineers. It is further recommended that funding be sought for construction and supply of an adequate workshop and stores area. 3.77 The Distribution System. The distribution system consists of two primary overhead feeders, one 13.8 kV and one 4.16 kV, extending from the substation at the power station to most of the area in three main islands. The total length is approximately 80 kIlometers (50 miles). The majority of poles are wooden but extensions since 1987 and the upgrading of the 4.16 kV lines in Colonia have used concrete poles. 3.78 The 13.8 kV system consists of three secondary feeders: number 1 is split into two lines outside of the powerhouse compound: one to the airport and to the south, and one to -32- the west coast. The load on number 1 secondary feeder is 500 kW. Number 2 extends to Colonia and to the north east, loaded at 800 kW. Number 3 secondary feeder extends to the Hospital. It was disconnected in February 1991 due to load shedding, possibly because the hospital has a standby generator. 3.79 The distance to the load center in Colonia is only 2 kilometers (1.2 miles), and the maximum distance to the rural districts with small demands is approximately twent kilometers (twelve miles). Consequently voltage drops in the 13.8 kV feeders are probably moderate. The 13.8 kV system has been extended to most villages in Yap Proper, but many households have not yet been connected. There are j,!ans to extend the 13.8 kV grid to the remaining villages on the three main islands. The condition of the 13.8 kV grid is generally good, especially the new sections with concrete poles. Tree and foliage cutting is a matter For concern, but in contrast with the other FSM states, cutting is done every three months. 3.80 The outdoor 4.16/13.8 kV substation is simple and adequate. A single 4.16 kV cable from the power station's busbar is connected to the step-up transformer. A spare transformer is stored in the original wooden crate. The three feeders are protected with circuit breakers. However, the relays have not been set correctly, as instruments and expertise are not available, and many line faults cause complete black-outs. Insufficient attention appears to be paid to the control panels, with many instruments giving imprecise readings, and others dismantled or absent. For example, there is no metering of the main feeder to the substation. The hourly recorded demand is therefore extremely unreliable. The pole-mounted single-phase distribution transformers need regular maintenance, which is understood by PU&C. 3.81 Management. The Distribution Section consist of fifteen personnel: one trades technician, seven linesmen, three electricians, one tradesman, and three in administration. Technical skill levels in the operation and maintenance of the distribution system are significantly higher than in the other FSM states. The manager of the section has a good practical knowledge on operation and maintenance. Training is needed on relay setting, transformer maintenance, hot-line work and safety. 3.82 A map of the 13.8 kV grid is available and load is monitored by simple line-mounted ammeters. Changes in loadings and system configuration should be recorded regularly if adequate assessment, planning, and monitoring of the system are to be carried out. On a smal system like Yap's, fair[y simple methods are adequate for good planning. Fault indicators have been purchased to reduce the time spent on fault location. It is recommended that sectionalizers be installed in the grid to reduce outage times. 3.83 Facilities for transformer maintenance and meter calibration are being used. Stocks of many essential parts are inadequate, but stores are well organized. An excellent bucket truck with drilling eqtuipment is available, but it must be shared between two crews. In general, lack of vehicles, parts and tools inhibit dispatching of crews for Preventive maintenance, monitoring of voltage, and customer service. It is recommended that the management and the crew be provided more funds and better equipment, as they have shown the ability and willingness to do a good job. 3.84 Firm capacity. The name plate generation capacity of 7.1 MW appears to be adequate to meet the peak load of 2.4 MW with a comfortable reserve margin, but severe breakdowns and deratings reduce the effective installed capacity to about 2.8 MW and firm capacity to only 1.7 MW. Therefore the reserve margin is actually negative. -33 - 3.85 PU&C have a well-founded concern about the future availability of the older ene generators. If all engines except the White Superior are rehabilitated, firm capacity wil be 4.4 MW and the reserve margin 85%, but this ample margin is dependent on preventive maintenance and a sufficient stock of spare parts to enable fast repairs. With al capacity comprising fairly old engines which are difficult to repair, only about 4 MW should be considered 'firm" after rehabilitation. Therefore, new capacity should be added when peak load approaches 3.5 - 4 MW, which will not occur until well after 1995 even if recent growth trends of 6%-7% per year continue. 3.86 The two ALCO engines should be investigated to see if they can be economically refurbished. The two Caterpillars should be overhauled in order to restore their nameplate output. The vintage White-Superior engine, which is too old to be worth overhauling, should be scrapped as soon as major repairs become necessary, but it will be needed during the overhauls of the other engines. 3.87 The OPB&S expects substantial demand increases for the early 1990s, based on several planned projects. However, as in othei states expecting rapid development, the impact of new projects on electricity demand is likely to be below expectations; decisions to invest in new generation or transmission capacity should be based on realistic short and m-.ledium term forecasts which reflect only approved, confirmed projects. 3.88 Power generation expansion options. Options for additions to power generation capacity to meet increases in demand in the short term include: a) Purchase of new diesel capacity. New capacity and the refurbishment of existing capacity are the only practical ontions available to Yap during the 1990s. Two medium speed engine-generators rated at approximately 2 MW each can be installed in two steps in the power house when old engines are phased out. This option is easy to implement and administer, but total costs are estimated at $445 million depending on the type of enge. It is recommended that the government call competitive tenders based on a feasibility study which outlines Yap s least cost power development options and directly compares the purchase of new capacity to the refurbishment option. b) Replacement of diesel with nonconventional imported fuels. Use of imported waste or tires for combustion for power generation have been suggested but this is technically complicated, is not an economic option, and carries severe environmental risks. It is not recommended. c) Replacement of diesel with local renewable resources. Indigenous fuelwood and otier biomass resources are available, but are probably not sufficient to sustain a major power project economically. The wind regime is too limited for power generation with present wind turbine technology, and maintenance is difficult on tropical islands due to corrosion problems. Yap may have significant wave and ocean thermal resources, but the technology is stil experimental and hence is not a practical option for Yap in the foreseeable future. 3.89 Transmission and Distribution. The distribution system is in good condition, as major upgrade work is in progress or has been completed. The remaining task is to complete the planned extensions and connection of new consumers. The grid can be extended without technical problems, but connection of distant rural households presents a financial burden to the state, as the consumers cannot afford to pay the full costs of the connections. It is recommended that the OPB&S refrain from connecting new consumers in rural areas. -34 - 3.90 It is recommended that a distribution protection scheme be designed, covering the circuit breakers in the substation, relays, sectionalizers, and simple fault indicators on the lines. Automatic reclosures in the grid are not likely to be necessary. Loss-limiting capacitors should also be considered. It is recommended that technical assistance be obtained for the design of such improvements. Rural Electrification 3.91 Chuuk Among the states of FSM, Chuuk's population is the largest and most dispersed, several lagoon and atoll islands having more than 1,000 inhabitants each. However, electrification outside of Moen is very slight. For example, the island of Uman south of Dublon with some 2,000 inhabitants has no public power supply, but a few small generators are operated privately. As on other outer islands, kerosene is used for lighting and cooking, and open-fre cooking is common, but wood is reportedly becoming scarce. Commercial fuel use is mainly gasoline for outboard engines used in fishing and transport. 3.92 A centralized diesel station on Uman cannot be justified in view of the small load and the limited cash income of the inhabitants; the same can be said for other outer islands in Chuuk and other states. Grid-based electrification would not be practical technically, as supply and maintenance would be even more difficult in the outer islands than on Moen itself, and the mainly subsistence economy of the outer island people could not support the expenses. Photovoltaic systems would be more appropriate and are recommended as the least cost method of providing for small electric loads by outer island households. 3.93 Dublon (Tonoas). Until the Second World War, Dublon was the main commercial and administrative center in the Truk lagoon; today only 4,000 people live on the island. In order to redevelop Dublon, a large pier has been built with U.S. assistance and Japan has recently donated a modem fishery plant with freezing storage and ice making facilities. No other commercial activities are evident. The population depends on subsistence and income derived from Moen. The public power system has been out of service since Typhoon Nina struck in 1987 and it has not been repaired. The power house is in good condition, but the doors are locked and, as far as is known, the equipment inside has not been inspected. As the machinery has been out of service for at least four years without attendance, refurbishment may be impossible because of corrosion of the machinery and deterioration of the electrical equipment. The 2 kilometer (1.2 mile) 13.8 kV transmission line to the pier and the village area at the lagoon seems to be fairly intact, but has not been kept clear of foliage. In the village area the distribution system has deteriorated. 3.94 A power station at the Junior High School comprises three generators (unsynchronized): a 100 kW Onan which has been out of service for several years; a 175 k;W Caterpillar D300 in working order; and a third engine of unknown size or condition transferred from Moen power station. 3.95 Despite the reportedly high priority of electrification of outer islands, no funds have been allocated for the reconstruction of the Dublon system. Some privately-owned generators have reportedly been installed. The Japanese-assisted fishery plant is the only attempt to develop industrial and commercial activities on Dublon which could beneft from a rehabilitated electricity supply. The plant has its own diesel generators. One of two Shinko diesels (6 cylinders, 1800 rpm) is operated at approximately 50 kW, serving one freezing store. As the other engine has been out of service with a broken cooling system for a long period, the fishery plant cannot be utilized as intended, and no ice is produced. Fishermen collect ice in Weno, which is costly in both time and fuel. -35 - 3.96 Kosrae and Pohnpel. Electrification requirements or capacities in Pohnpei's outer islands are unknown. However, 13.8 kV lines have been exteneded around the full circumference of Pohnpei, and on the north side of Kosrae they extend up to the airport and to Utwe in the south, but evidently few connections have been installed outside of the main urban areas. Consumers within reach of the line (1000 feet) who are willing to pay a reasonable connection fee covering at least the cost of materials (possibly with the assistance of government) should be connected. Hook-up of rural households at eater distances from the line should be given low priority considering the added financial burden on the utilities. 3.97 Yap. Small diesel powered systems are operating on Ulithi and Woleai atolls. At Ulithi, two Caterpillar generators of 150 kW each provide power 24 hours a day. Poles reportedly suffer from rot, and in general thz maintenance standard is poor. At Woleai, the high school and government offices are supplied for eight hours daily by two 80 kW generators. A typhoon has damaged part of the system. PEmoI.uM PRocUREMENT AND DISTRIBUTION 3.98 Mobil Oil has been the long-standing supplier of petroleum products to Micronesia, with coastal bulk storage on all the main islands supplied by company owned and operated local coastal tankers, using Guam as the hub and transshipment center. In the FSM there are bulk facilities in the main islands of Chuuk, Kosrae, Pohnpei and Yap, with small facilities (98,000 U.S. gallons) at Ulithi in Yap. Due to Mobil's long standing presence m the Micronesian market, these assets are largely depreciated and therefore provide relatively low cost storage. The nature of the market, very small volumes dispersed over a wide area of ocean, and Mobil's efficient supply logistics have made it extremely difficult for competitors to establish themselves on any of the Micronesian islands. Mobil therefore enjoys a monopoly throughout FSM which is unlikely to be challenged in the near future. 3.99 Mobil's storage facilities in each state are adequate to meet demand in the near to medium term, assuming the economy grows at 2% - 4% per year. However, if the economic developments promoted by the state governments are realized during the 1990s, especially fisheries and tourism, existing fuel storage will not be adequate39. Most facilities are m reasonable condition except m Chuuk: the main tanks in the bulk fuel depot there are rusting and could deteriorate quickly if neglect continues. It is recommended that the facility be painted. 39 An alternative to onshore basing of bunkering and servicing facilities for expanded fishing operations is "at sea bunkering and servcing of the fishing fleet, which might well require less investment. -36 - 3.100 Currently, stock cover varies by state and product but is rarely less than two months, as shown in Table 3.2. Table 3.2: FSM Petroleum Fuel Storage by State In 1990 (U.S. Gallons) Gasoline Gasoline Kerosene Distillate (regular) (unleaded) CHUUK Total Capacity 219,199 873,905 219,129 88,293 Average monthly demand 102,000 214,000 161,000' na Storage capacity (months of consumption) 2.2 4.1 1.9 KOSRAE Total Capacity 50,000 500,000 100,000 0 Average monthly demand 31,500 66,500 8,800 0 Storage capacity (months of consumption) 1.6 7.5 11.3 0 POHNPEI Total Capacity 239,146 873,90(; 219,129 88,293 Average monthly demand 84,083 280,000 119,000 na Storage capacity (months of consumption) 2.8 3.1 2.6 YAP Total Capacity 95,057 406,972 160,819 0 Average monthly demand 17,840 142,420 29,416 0 Storage capacity (months of consumption) 5.3 2.9 5.5 0 Note: a) Regular and unleaded combined. b na = not available. Source: Oil companies. 3.101 Import quantities. A comparison of the volumes and values of petroleum imports in each state in 1990 and 1989 and imports by product in 1990, obtained from Customs Department records, are shown in Tables 3.3 and 3.4. -37- Table 3.3: Total FSM Fuel Import Volumes and Values by State, 1990 and 1989 (volumes in million USG, values in US$ millions) 1990 FOB % FSM 1989 FOB % FSM Volume Value Volume Volume Value Volume Chuuk 5.5 4.2 36.2 4.9 3.7 39.8 Kosrae 1.5 1.2 9.9 1.2 0.9 9.8 Pohnpei 6.1 4.7 40.1 4.5 3.1 36.6 Yap 21 16 13.8 1.7 1.2 i. Total 15.2 11.7 100.0 12.3 8.9 100.0 Source: Oil companies. Table 3.4: 1990 Petroleum Imports by Product (million USG) Gasoline Gasoline Other DPK % ADO% Regular % Un leaded % (volume) Chuuk 1.1 41 2.4 30 1.6 43 0.3 75 <0.1 Kosrae 0.2 7 0.9 11 0.4 8 0.0 0 <0.1 Pohnpei 1.1 41 3.4 42 1.4 38 0.1 25 0.1 Yap 0.3 11 1i4 1j DQi .8 Q Q <0.1 Total 2.7 100 8.1 100 3.7 100 0.4 100 <0.4 Note: < indicates 'less than". "DPK" = Duel Purpose Kerosene. Source: Oil companies. 3.102 Competition. The lack of overseas competition in petroleum supply has not been severely detrimental to FSM as the terms of Mobil's current supply agreements with each state are generally reasonable, given the small volumes involved. It may not be in government's interest to promote new market competition as this may increase, rather than reduce, onshore prices unless new economic developments such as mcreased tourism and commercial fishing activity substantially raise the total market volume. In all states, there is a proliferation of retail outlets for the limited volume of gasoline sold in FSM, resulting in hiph fixed costs which are reflected in the unusually high onshore component of gasolie pnces. Retail margins, which are not controlled by the states or national government, currently average about 40 per gallon (some four times higher than retail margins in Fiji, for example). Fewer outlets handling higher volumes of gasoline will significantly reduce the per-gallon fixed costs of retailing. it is therefore recommended that the states or national government introduce retail pricing guidelines that will in effect limit growth in the number of retail outlets. 3.103 Terms of Supply. The governments of Pohnpei and Chuuk have held "evergreen" supply contracts with Mobil since 1982. In Yap, the five-year supply contract signed in 1987 and Mobil's lease on the fuel depot land both expire in March 1992, under terms of supply similar to those in Pohnpei and Chuuk. However, it is understood that the Yap government has had disagreements with Mobil during this period and consequently plan to call tenders for supply from 1992. Kosrae has a five-year agreement signed in 1986, which however was pending completion of the government's bulk storage facility and did not become effective until 1 October 1990. The bulk storage facility is operated by Mobil on a five-year contract, -38 - also effective 1 October 1990. The Kosrae supply contract terms are similar as those of the other states. 3.104 The four FSM state contracts are simiiar to Mobil's agreements elsewhere in Micronesia, being based on Mobil's Singapore posted price, Worldscale/AFRA freight rates, a varying transshipment freight rate from Guam, and a fixed-percentage onshore margin which does not appear to be cost-related. Tbe agreements are difficult for the state governments to administer, as they require a considerable knowledge of the petroleum market and daily information on pnrce component fluctuations. Mobil has reportedly never provided the necessary data and the governments have never tried to monitor the contracts, relying on the supplier for accurate pnricing. Contracts renegotiated now and in the future could be expected to provide slightly better tirms4" but, equally im irtant, should be based on formulas yielding prices which are easily verifiable by the states. 3.105 It is recommended that the state governments obtain specialist advice on how to reduce supply costs in the short term under existing market constraints. For the longer term, it is recommended that national government investigate the possibility of replacing the four separate state agreements with a single tender for a combined national volume to achieve improved supply prices in each state. A national tender could provide potentially significant cost benefits due to the higher volume. However, it woulPd require the fuSl cooperation of all states and considerable effort over perhaps eighteen months on the part of the national government to prepare. If preparations for a national tender were to begin by late 1991, a r: . national supply agreement could take effect by early 1993. 3.106 Security of Supply. The states and national government wish to increase the security of petroleum supply to FSM at reasonable cost. The government of Pohnpei announced in mid-1991 efforts to formulate an "Emergency Energy Preparedness Plan" designed to reduce the impact of possible disruptions in the overseas petroleum market. While ful security against rapid price escalations or supply disruptions is not available on any terms, onshore storage requirements can be increased to mitigate the effect of disruptions when they occur. In the long term, security depends on the availability of storage capacity to provide adequate inventories of fuel to handle most emergencies. 3.107 The states or national government can increase the security of supply by constructing additional storage facilities as "reserves". However, the direct involvement of governments in oil storage has not proved to be an effective policy elsewhere in the region, as government-owned storage facilities tend to be ill-maintained and are very expensive for the governments concerned. A variant of this option is to invite tenders for the construction and operation of reserve storage facilities but this would involve a costly duplication of investment, since existing storage in FSM could also contribute to reserve capacity. A preferred alternative, if icreased security is desired, is to mandate a minimum stock holding level (e.g., three months' stock cover for each product) to be maintained by the oil supplier. Although higher inventories will raise financing costs to Mobil which will be passed on to consumers in higher prices, it is the cheapest of the alternatives for increasing supply security. There is no evidence, however, that FSM has suffered from supply constraints, and mandated reserves are probably not necessary. 40 A 1987 assessment (PEDP Report FSM 87-2) for the national government on the FSM petroleum market and the supply agreement in effect in Pohnpei recommended that several provisions be re-negotiated. These included methods used to determine the FOB (Singapore) prices and the fixed-percenta4e onshore margin It is understood that the Forum Secretariat Energy Division Petroleum Section is providing advice in the latter part of 1991. -39- NEw Am RENEWABLE SOURCES OF ENERGY 3.108 Ethanol from local biomass has been suggested as a transport fuel for FSM. Although the technical potential may exist, the hi costs of production experienced in other countries relative to the price of petroleum fuels have prevented a viable market from developing. The same high or higher costs would apply in FSM. However, FSM is weli endowed with renewable resources which could, to a imited extent, be exploited for the production of electricity. These are discussed below. 3.109 Hydro. Hydro resources have been developed to a limited extent in Pohnpei, where an extension to the existing Nanpil hydro plant is planned, and in Kosrae, where construction of a 35 kW microhydro scheme was started and abandoned in the late 1980s. Other potential hydro resources exist in both states, especially in Pohnpei where prefeasibility studies showing significant potential have been carried out on all ofthe major river systems. Hydro cannot provide power reliably year-round but could save substantial amounts of fuel. It is recommended that further technical and economic/financial studies of hydro potential be carried out in both Kosrae and Pohnpei. 3.110 Biomass. As shown in table 3.5, biomass resources were extensive throughout FSM in the early 1980s, the most recent time that vegetation was extensively surveyed. However, biomass could not be developed as fuel for large-scale electricity production without risk of serious degradation of the environment, especially erosion and contamination of coral areas. Smal-scale biomass fired steam electric plants are feasible, however, if developed in conjunction with an ago-industr such as a copra plantation which produces biomass (husks) as a waste pro duct. Since suitable sites for such developments are probably few in FSM, it is not recommended that biomass development for energy be pursued at this time. Table 3.5: Summary of Biomass Resources of FSM (hectares, 1983) Land Class Chuuk Kosrae Pohnpei Yap Total Forest 986 7,066 19,683 3,882 31,617 Secondary vegetation 252 1,272 1,843 553 3,920 Agroforest 2,378 2,585 11,865 2,538 19,366 Nonforest 554 263 2,102 2,743 5,662 Total 4,170 11,186 35,493 9,716 60,565 Note: See Statistical Annex, Table 10 for details. Source: Vegetation Survey of Pohnpei Truk, Kosrac, and Yap (US Dept of Agriculture, Forest Service; PSW- 17, 18,20 & 21; 1986/1987) 3.111 Ocean thennal energy. In theory, a 1 MW Ocean Thermal Energy Conversion (OTEC) plant in an open-cycle design could produce both electricity and about 500,000 gallons of fresh water per day. Unfortunately, the technology is not yet proven and capital -40- investment in a prototype would be high: over $18 million on present estimates4l. OTEC systems are not expected to be commercially available this century. 3.112 Solar energy. The solar resource is generally attractive in FSM except in Pohnpei, where rainfall and cloud cover are unusual[y high. Radiation is sufficient, even in Pohnpei to provide small amounts of electricity to remote consumers using photovoltaic (PV) systems at lower overall costs than small diesel systems. There has been considerable activity in PV development (both for electrification and telecommunications) on islands inside and outside the Chuuk lagoon, with about 50 installations reported. However, there is no maintenance by government nor any budget for equipment and site visits. All states except Yap have plans to expand the use of photovoltaic systems in rural areas, mainly remote islands. Pohnpei plans to electrify outer islands based at least in part on photovoltaics42, and Kosrae has prepared a proposal for installation of 20 PV systems in areas beyond the reach of the grid extension to Utwe. In Chuuk, plans for further PV projects are unclear. 3.113 The potential for energy conservation. A large amount of electricity used by households in FSM is wasted due to inefficient appliances (cooling, freezing, water heating and lighting), especially air-conditioners. A considerable potential for energy conservation exists through proper maintenance and operation of existing equipment and by phasing out inefficient appliances. Cooking with electricity is extremely inefficient; conversion to LPG or kerosene would reduce energy conversion losses. 3.114 Simple and inexpensive means are available to reduce electricity wastage. For example, incandescent lights can be replaced with much more efficient fluorescent lights which fit into the same fxtures. Such fluorescent lights are not presently marketed in the FSM, but could be introduced with appropriate tarif legislation and other inducements to private importers. In commercial and government buildings, slim-type fluorescent tubes with high frequency coupling can reduce consumption y 309%, and in some places automatic daylight dimming could be introduced. 3.115 Yap, with the highest power tariff in the FSM, appears to have done more than the other states to promote electricity conservation. government buildings are ventilated by fans with air-conditioners installed only in special rooms and operated only during office hours. Fluorescent lights are more common than incandescent and energy conservation information brochures are distributed to power consumers. 41 Economics of Ocean Thermal Energy Conversion, by Luis Vega, Pacific International Center for High Technology Research, Honolulu (chapter 8 of Ocean Eneniy Reoverv The State of the Art, American Society of Civil Engineers, 1991). 42 The Legislature is reported by the state Office of Budget, Planning and Statistics to support diesel-based electrification as well as photovoltaics for the outer islands. -41- IV. POLICY ISSUES AND PRIORITIES PRICING ISSUES Petroleum Product Pricing 4.1 The CIF cost of petroleum products, which is not recorded by government but can sometimes be obtained from the petroleum sunpliers, was reportedly about $12.8 million43 in 1990. It is not possible to judge whether PSM pays reasonable prices for petroleum products unless Customs procedures are amended so that more reliable and complete information is collected. Even then, the state supply agreements cannot be monitored effectively to assure that CIF prices are consistent with the agreement because a) there is a lack of baseline data, b) the states and national government lack the skills to do so, and c) government does not have regular access to independent price information44. Minor variations in Customs entry procedures would yield much of the independent information required by government concerning imports and the consumption of petroleum products. However, a concerted effort to train government officials in price monitoring is also required and is recommended. 4.2 The state governments' wholesale prices compare well with other Pacific Island countries. However, retail pump prices are much higher, mainly because of high retail mark-ups over the wholesale price. For gasoline, as shown in Table 4.1, mark-ups are about 45/gallon in Chuuk, Kosrae, and Yap, and 40 in Pohnpei4s. For ADO, the margin varies between 25 and 49 in Chuuk, Pohnpei, and Yap, and in Kosrae it is 94. In Fii, retail margins for both gasoline and ADO are on the order of 11 U.S. cents per gallon. The higher retail margis throughout FSM are due in part to the proliferation of low-volume retail distributors and a lack of price monitoring or guidelines by the government. 43 Estimates based on inconsistent government and oil company data. 44 This information is, however, available at no cost through the Petroleum Section of the FSED as part of its normal service to governments. 45 Retail prices charged by different retail outlets in each state vary by up to 5 cents per gallon, indicating that prices may not be well tegulated by the market. -42- Table 4.1 Fuel Prices by State, early 1991 (U.S. cents per U.S. gallon) Government Non-Govt Retail Product Wholesale Wholesale Retail Margin CHUUK Unleaded Gasoline 151.7 155.0 200.0 45.0 Regular Gasoline 97.5 150.0 195.0 45.0 ADO 116.0 153.0 190.0 37.0 Kerosene 128.3 142.0 180.0 38.0 KOSRAE ,Regular Gasoline 103.6 154.7 200.0 45.3 ADO 110.0 156.4 250.0 93.6 Kerosene 129.3 158.2 225.0 66.8 POHNPEI Unleaded Gasoline 151.7 155.0 195.0 40.0 Regular Gasoline 97.5 180.0 215.0 35.0 ADO 116.0 153.0 178.0 25.0 Kerosene 128.3 162.0 187.0 25.0 YAP Regular Gasoline 103.6 154.7 210.0 45.3 ADO 110.0 156.4 205.0 48.6 Kerosene 129.3 158.2 205.0 48.8 Notes: Prices in February, 1991. Retail prices are the lowest of the sites surveyed. Prices include duty and tax except for government wholesale ADO which excludes excise tax of 5/gallon. Taxes in retail prices include import tax (5/gallon, except kerosene at 3% ad valorem), excise tax (5/gallon), and a gross receipt tax ($80 on the first $10,000 of gross revenue and 3% on the balance). Source: Oil company data and retail price survey carried out by the mission in February 1991. 4.3 It is recommended that government establish petroleum retail pricing guidelines. Following consultation with Mobil and retailers, it is also recommended that a formula be established and enforced for calculating maximum wholesale and retail prices. It is recommended that legislation be adopted which provides penalties for non-compliance by suppliers or retailers and that government monitor prices to ensure that all parties conform to the agreement. 4.4 An analysis of the profitability of three or four representative service station retail sites is recommended to establish a reasonable retail margin. These margins, differing for each product, should provide an adequate return on sites with a minimum throughput of 200,000 gallons per year to ensure that prices are not too high and to discourage further proliferation of small volume sites. Similarly, Mobil's profitability should be evaluated to establish a fair and reasonable formula for calculating wholesale prices. -43 - Power Tariffs and Utility Finance 4.5 Power tariffs and revenue collections. Both the level and the structure of tariffs vary considerably by state, as shown in the Statistical Annex (Table 8). For consumers using 300 kWh per month, electricity is cheapest in Chuuk (essentially free), followed by Pohnpei ($9/month), Kosrae ($15), and Yap ($27), if bills are paid. The most recent tariff change in FSM was in Kosrae in 1984; in Pohnpei, the tariff hasn't changed since the 1960s. 4.6 Revenue collections are poor in all states, since disconnections for nonpayment are not adequately enforced and responsibilities for billing and collections are fragmented. Despite adequate billing systems in Kosrae and Pohnpe4, collections are no more than 70% of billings; in Yap the normal collection rate is not known, as no bills were issued for much of 1990 and early 1991 because .of a failure of the billing system. In Chuuk, most customers are unmetered and collections are generally not enforced. Whereas total consumption in Chuuk averaged more than 1,400 MWh per month in 1990, total revenue collected between September and December 1990 reportedly46 averaged $5,700 per month, or about 0.4 per kWh. In spite of an effort in 1991 to bill some users based on their estimated consumption, fragmented management responsibilities impede the most determined collection efforts: bills are issued by the Department of Public Works but payments are made to the Department of Finance, which has no record of the bills issued by DPW. It is recommended that billing and revenue collection be placed immediately under a singlk authority, collection procedures be tightened, meters be installed for all consumers, and a disconnection policy for non-payment be rigorously enforced for all accounts, including the government. 4.7 Utility finance. In all states, power utility revenues are below 20% of the estimated total costs of electricity production including depreciation of assets47, as shown in Table 4.2, and are at most 30% of operating costs. Subsidies to the power sector in each state derive from U.S. assistance, which has donated virtually all capital equipment installed in the post- WWII period and which specifically provides funds for fuel costs each year4'. Table 4.2: Financial Performance of the State Power Utillities, 1990 Ave Revenue Ave Cost % Recovery Estimated Total subsidy State (/kWh) (/kWh) of Costs ROI (%) $ million Chuuk 0.4 20.2 2 -39 3.4 Kosrae 3.5 19.0 18 - 21 1.1 Pohnpei 2.5 26.2 10 - 20 4.8 Yap 0.4 21.4 2 - 38 2.6 Notes: ROI = Return on Investment, the ratio of profits or losses to revalued net fixed assets in service. The utilities' losses and their respective values of assets are mission estimates, as these data are not calculated by the utilities. Source: Mission estimates. 46 Fmance Department records. 47 See Annex 3 for an analysis of costing. 48 Section 214 of the Compact Agreement provides an annual grant of about $3.5 million in 1987 dollars for energy-related expenditure, mainly purchase of fuel for power generation. -44 - 4.8 Extensive subsidization of the power sector for the past 40 years in FSM has left a legacy of inefficiency, high costs, fow reliability, and low quality of power. Whatever economic benefits might have been expected from an overseas-donated public power system, they have not materialized: growth potential in key economic sectors is still constrained by, among other factors, the quality of power. Users who depend on power have installed standby generators because the public power supply is simply not adequate. As U.S. assistance diminishes in accordance with the Compact Agreement, the states will increasingly bear the burden of run-down and oversized power systems that they cannot afford. Elimination of subsidies by raising the tariff, while allowing the utilities to exercise control over their own finances, is necessary to improve management and reliability and bring the consumption of electricity more closely in line with what the country can afford. Increased efficiency and reliability will limit the rise in costs to consumers that result from higher tariffs, through reduced need for backup equipment, fewer replacements of damaged appliances due to low voltage, and fewer power cuts. Gradual tariff increases and correspondilng reductions in subsidies over a five-year period, combined with assistance to consumers to conserve energy, is recommended in afl states to mitigate the short term disruptive effects of raising the tariff to full cost recovery. As discussed in Annex 4, a lifeline tariff restricted to the first 100 kWh per month of residential consumption would adequately protect low-income consumers while requiring a total subsidy of only 5% of the current subsidy level. REGULATORY AND OTHER POLICY ISSUES Overview 4.9 Key policy issues include FSM's complete dependence on petroleum products for power generation; pricing electricity far below cost; inefficiency, lack of organisation, and low return on capital investment in the power sector; high fixed costs in the gasoline retail market; absence of government oversight of the petroleum market generally; and absence of a central govermment agency with responsibility for energy. To complicate matters, the responsibilities of the respective states and the national government for energy purchasing, production, and regulation are not clear, resulting in poorly coordinated government action on important issues and often inaction. It is recommended that national government assume a much larger role in national energy strategy than at present by taking responsibility for creating and updating a comprehensive energy supply and demand data base, coordinating energy policy among the states and assisting them to develop energy plans, reorganise the power sector, reduce the growth rate of the petroleum import bill, and use solar energy to provide reliable power to outer island population centers. It is recommended that an officer responsible for energy be appointed in each state, not necessarily on a full-time basis, to serve as the principal liaison between the national and state governments on energy matters, to handle administration of the state petroleum supply agreements49, and compile state energy data. 4.10 It is recommended that an energy office be established with two permanent senior- level national energy positions (a national energy planner and a rural energy officer) and suitable support stai located within the Department of Resources and Development. The energy planner would be responsible for national government activities in the energy sector and oversee national energy policy development and implementation, concentrating on the 49 This function would be transferred to the energy office in the event that the four state supply agreements were replaced by a national agreement, thus sharply reducing the number of skifled personnel required to administer the government petroleum supply. -45 - petroleum and power sectors. He or she would assist the states to reorganize utility management, establish training programmes, identify financing for needed technical refurbishments, and establish effective billing and revenue collection systems. In order to improve coordination of power utility development, it is recommended that the national planner be appointed a member of the Boards of the respective state power utilities. The rural energy officer would coordinate disbursement of aid funds for rural energy projects (mainly photovoltaics) among the states and would assist the states m project imtilementation including the setting up of appropriate state institutional structures and training personnel. It is recommended that a petroleum expert be hired for a year or more to assist the states with training supply contract administration, storage standards, and establishing wholesale and retail. pncing guidelines; and to assume responsibility for negotiations and vetting of tenders if a national petroleum supply tender is called. To support this activity, it is recommended that funds be provided for petroleum consultancies as needed. Petroleum Subsector 4.11 Engineering and safety. With the rapid increase in population and urbanization in all states and increasing concern with environmental issues, the absence of any petroleum industry guidelines is conspicuous. It is recommended that relevant regulations be updated to ensure adequate anti-pollution provisions. Existing regulations do not address the appropriateness of the design of the facilities nor do they cover operations to safeguard lives, to minimize the risks of fire and provisions for fighting fires. There have apparently been no attempts made to remedy this situation. It iS recommended that the states or national government adopt suitable standardssO for storage, handling and transport of fuels and enforce them rigorously. 4.12 It is recommended that all states restrict developments within and around their oil storage facilities and ban completely any new developments within ten meters of the oil installation boundaries. In Pohnpei a new hotel and a fisheries project have recently been constructed in the vicinity of the Mobil bulk fuel depot and Dekehtik port area, creating a hazard for both. A reclamation project is proceeding in an area adjoining the tank farm; it is recommended that the project be altered to observe a ten meter mmnimum clearance from the depot boundary. In Chuuk, the depot facilities are badly rusting and require maintenance, but they are located away from encroaching developments. In Kosrae, the new facilities appear to be in excellent condition and well located. 4.13 The physical condition of the depot in Yap is acceptable, but the separation distances between tanks and between the facility and other installations are not adequate. At some retail sites, pumps are installed within buildings, causing vapor accumulation and consequent fire hazards. It is recommended that this be prohibited. 4.14 Service stations. It is recommended that the number of service station outlets in each of the states be limited for safety, environmental and economic reasons. In most states an increase in the number of existing stations should not be allowed; two or three sites would be economically optimal. If other companies want retail outlets to compete against MobiL so Work begun by PEDP (to be completed by FSED's Petroleum Section) on a 'Pacijkc Isands Stndard for Combustible and Flawnmable Liquids' for South Pacific Forum island countries modifing Australian, New Zealand, U.K and US. codes to suit the regional environment. It is likely that the document will be completed during 1992. It can be further modified by the government to suit local requirements. -46 - sites can be obtained through negotiations with owners assisted, if necessary, by franchise legislation which limits the number of retail outlets that can be owned by one company. 4.15 Price monitoring. Neither the states nor the national government administer petroleum supply agreements or monitor prices, and thus must rely on the supplier to ensure that the prices conform with the respective supply agreements. It is recommended that a suitably-qualified person be appointed to momtor Mobil's prices and to train personnel to monitor fuel deliveries in the states. This would require routine collection of relevant data from Mobil, checked against other sources, on FOB (Singapore) prices, transhipment costs in Guam, freight costs, onshore storage costs, etc. Such an effort is worth the expense, as other countries in the region have found that monitoring fuel deliveries has resulted in significant savin&s51. Price monitoring should include review and regulation of onshore wholesale and retail margins, which should be limited in order to discourage growth in the number of low-volume onshore distribution facilities. 4.16 Products and Quality Control. Six grades of fuel are marketed on Pohnpei and Chuuk and five in the other two states. The five common grades are Regular Gasoline, Jet Al, Lighting Kerosene, Low Sulphur Automotive Distillate Oil (ADO) and a small amount of Aviation Gasoline (RON52 100/130). Over 90% of the gasoline marketed in FSM is 90 RON regular (leaded), with a small amount of 95 RON premium gasoline marketed in both Pohnpei and Chuuk. Marketing more than one grade of gasoline where volumes are small adds to freight, storage, and retailing costs and leads to increased prices for all gasoline sold. It is recommended that the government assess the benefits and cost of adopting a single "compromise" grade of gasoline that will suit the needs of the majority of consumers: a 93 RON unleaded grade is suggested. 4.17 It is recommended that all states verify that fuel deliveries meet the specifications of the supply agreements and keep the general public informed of changes in fuel grades or ,ualities when they occur. Each cargo of fuel received should be supported by shipping ocuments including a refinery certificate validating the quality of fuef being supplied. It may be necessary for the states or national government to engage experts to enforce fuel quality requirements. It is recommended that fuel be tested at least once a year in Guam or Manila where independent laboratories are available, and that the supplier be required to obtain the states' prior approval of any changes in the specifications of fuel being supplied. 4.18 Data Collection and Analysis. There is a lack of reliable petroleum market information. Accurate data on import volumes and values, consumption levels by sector, and other data are not available from government offices; most information on fuel comes from Mobil and a few major consumers end is incompilete. Without independent data, it is not possible to cross-check innumerable inconsistencies. However, with minor procedural changes, the Customs Department should be able to document import volumes, duty paid, CIF values and re-exports. The recommended changes are as follows: a) A customs official in each state should supervise the diping of the individual bulk tanks before and after each tanker discharge of fuel. L volumes should be calculated at ambient temperature. All tank valves should be locked and sealed by 51 The Forum Secretariat Energy Division's Petroleum Section may be able to assit in these areas. 52 All references to octane are RON or Research Octane Number. The RON of a specific gasoline is determined in a special laboratory test eonme under "mild engine-severity" conditions gNing a rough measure of the low-speed knock properties of the gasoline. -47 - the customs officer after the "before discharge" dip, to be broken by the customs officer after the completion of the "after discharge dip on each tank. The customs officer should be the only one authorized to break the seal. b) The importer should complete the Customs Import Entry (instead of go"ernment as is present practice) and submit the entries within one week of the completion of each tanker discharge and pay the total duty once the document has been verified by Customs and before any new stock from the tank is drawn. c) All Customs Import Entries should have verified supporting shipping documents53 including Shipping Invoices and Bills of Lading. These should contain the following information: procduct quantities loaded at 60oF, the unit FOB cost of each type of fuel, the freight cost per gall-on, the total cost of the total cargo, ocean losses, and the insurance paid. d) When processing the Customs Import Entry, Customs should verify volumes imported (from the "before" and "after" bulk tank dips), the value, and other details. e) In addition to the above, Customs should arrange to dip all company-owned bulk fuel tanks on June 1st and January 1st each year to ascertain the quantities of fuel in stock on those dates. These will enable government to establish the six-monthly demand volume through each installations". Power Subsector 4.19 The electric utilities in all states are institutionally fragmented: responsibilities for management, revenue collections, customer service, plant maintenance, etc., are shared among several different government ministries. Typically, responsibility (but not budgeting authority) for operations and maintenance comes under the state Department of Public Works while billing and revenue collection is under the state Ministry of Finance. Personnel are selected and appointed by the state Public Services Commission, and budgeting is often controlled directly by a state Parliamentary committee. Thus there is a lack of managerial accountability in the power sector which has three adverse effects: a) poor collections and cost recovery. Since billing and revenue collection have no relationship with the utility's budget, utility operations are not affected by inadequate billing or poor collections. Disconnections for nonpayment rarely occur since there is no financial incentive to enforce them, and the rate of collections and cost recovery do not improve (see para 4.5); b) inadequate budgeting for preventative maintenance. Since the budgets of the utilities are often controlled directly at a political level rather than by the engineers responsible for operation and maintenance, the need for budgetary allocations for routine and preventative maintenance is often unrecognized. The budgetary process tends to respond only after a breakdown has occurred, not before; there is 53 If Guam Custom officials supervise loading of the tanker, they should stamp the documents; otherwise officials at the loading port should be required to verify the documents. 54 V'olume Demand = OS + VI - CS where OS = Opening Stocks, VI - Volume Imported at ambient temperature during the period, and CS = Closing Stocks in the tanks. - 48 - insufficient maintenance of operating equipment, leading to frequent outages and shortened equipment life; and C) inadequate planning. There is no capability within the engineering staff, whose responsibilities are limited to operating and maintaining the existing power system, to anticipate future investment requirements or to prepare options to meet capital costs. Procurement to meet growing load is often delayed until outages have begun to occur due to insufficient capacity; options for adding capacity quickly are usually very limited and more costly than the least cost' solution that might be available through careful planning. 4.20 To address these problems, it is recommended that management responsibility for electricity operations be consolidated under one authority in each state. After consolidation, the new authorities would be responsible for billing and revenue collection, personnel recruitment, and capacity planning, in addition to operations and maintenance. Control of utility revenue accounts would be transferred to the authorities, as would budgeting and tariff determination responsibilities, subject to oversight by the government civil service. It is recommended that new legislation be implemented in each state to establish the new authorities and to confer upon them the legal rights and responsibilities of autonomous operation. 4.21 During 1990, a USDOI/Army Corps of Engineers consultancy team visited all four FSM states to assess general needs for rehabilitating infrastructure including the power sector. As a result, an "Operations & Maintenance Improvement Programss" (OMIP) has been proposed for the power sector in the FSM which includes a recommendation, similar to the above, to form a power authority in each state. Since 1990, the states have made varying degrees of progress towards preparing legislation and implementing autonomous *athorities. Pohnpei approved legislation in early 1991 and is likely to have an operating authority by late 1991 or early 1992. Chuuk and Kosrae drafted legislation which by early 1991 had not been approved, and Yap was administratively transferring (without legislation) billing and revenue collection responsibilities from the Ministry of Finance to the Division of Public Utilities and Contracts. 4.22 In June 1991, the Pacific Energy Development Programme commissioned a consultant to visit each state in FSM to assist them to identify ap ropriate corporate structures and manpower requirements for the proposed new authoritiesM6. Among other recommendations, the consultant suggests that the state power authorities adopt similar structures and management tools, such as reporting practices, record keeping systems, and computer software to reduce development costs and facilitate sharing of ata and expertise and other forms of cooperation among the authorities. This recommendation is endorsed. 4.23 Development of the state power authorities along similar lines would facilitate the eventual formation of a national power utility, which may eve atually be desirable. It is recommended that the feasibility of forming a national power utility be studied, to determine whether the benefits of standardized operations resulting from national ss Plan of Acton (Draft): Operations and Maintenance Improvement Program, October 1990. Louis Berger International and Barrett Consulting Group, for the US. Department of the Interior and the U.S. Army Corps of Engineers. There is one report for each state plus an FSM overview. The most recent report is the Second YearRewiew: OMIP Team's Field Reportfor the Federated States of Micronesia (June 1991). S6 Proposed Organizational Structure and Manpower Requirements of the FSM State Power Utilities (PEDP Report FSM 91-1, forthcoming, 1991). - 49 - management would justify the costs of the considerable reorganization that would be required. A national utility in FSM would also make it easier for the country to qualify for low interest loans and technical assistance to the power sector from multilateral lenders. NEw AND RENEwABLE SOURCES OF ENERGY 4.24 Photovoltaics. As the FSM has not developed a coordinated program among the states for photovoltaic (PV) installations, there are no means to determine priorities or to ensure that available aid funds (mainly U.S., but including some French and Australian assistance) are distributed efficiently to the states. It is recommended that the national government take a more active role in PV project coordipation by appointing a rural energy project manager within the proposed energy office, rbsponsible for assisting the states to design projects, secure funding, and train personnel to install and maintain PV equipment. 4.25 A key policy issue is how to establish an effective mechanism for financing, designin, installing and maintaining PV installations so the recipients have an affordable and reliable source of electricity for small loads. There has been considerable experience in the Pacific Islands with managing photovoltaic electrification, the most relevant example being the Tuvalu Solar Energy Cooperative Society (TSECS). Tuvalu, with only 9,000 people and a per capita GDP one fourth that of FSM's, has established a relatively successful independent, commercially-oriented utility devoted entirely to providing and servicing PV sv ;tems for households on remote atolls. It does so at a cost equivalent to, or lower than, the samne services provided from diesel power, and at higher rates of reliability. The TSECS began with aid finance but now relies primarily on users' fees to cover O&M costs. Its success is due to dedicated management, competent outside advice, decentralized technical and administrative resources, and emphasis on high quality maintenance and the ready availability of spare parts. If the states or national government proceed with plans to expand the use of PVs, it is recommended that a similar approach be considered57. 4.26 Biomass. The FSM has abundant biomass resources with 75% of the country forested. The small amount of biomass presently used for domestic cooldng and crop drying is not expected to diminish and its per capita use may well increase as the cost of commercial fuels rises. Its use as a domestic cooking fuel might have broader appeal if a design for an affordable and reliable cooking stove for mass production were available. The USDOE Tenitorial Energy Assessment for the FSM (1982) reports that a USDOE-sponsored project to promote use of "smokeless stoves" in FSM was successful, but it is not known to what extent such stoves are still in use. An investigation of successful stove designs for FSM would be useful for rural energy planning and is recommended. 4.27 Use of biomass for centralised electricity generation is not recommended, because of insufficient market mechanisms and infrastructure to cope with fuel harvesting and because of the high potential for degradation of soil and water supplies. 4.28 Other renewable energy sources. Hydro resources have been developed to a limited extent in Kosrae and Pohnpei and sigcant resources exist for further development. It is recommended that further mvestigation of the hydro resources of both states be carried out to determine their potential to supplement grid-based electricity or to provide power in remote communities of the main islands. 'Vind resources in FSM are insufficient for s7 Rural Utilities and the Role of Photovokaics by Herbert Wade (S.PI.R.E., Tahiti, 1990) explains the success of the Tuval- ooperative and has suggestions which would be useful for the FSM program. - 50 - reliable power generations8, but the 1982 Temitorial Energy Assessment recommends considering its use for water pumpig. Other technologies such as OTEC, wave, and tidal power are still experimental and have extremely limited potential for FSM in the foreseeable future. It is recommended that these not be pursued at this time. ENERGY CONSERVATION 4.29 Consumers have no incentive to save electricity due to heavily subsidized prices. If electricity tariffs are substantially increased as recommended, there may be initial resistance from the general public and a strong inducement for them to reduce electricity use. It is recommended that simple but effective means of conserving electricity be promoted by government, such as cleaning air conditioner filters, de-icing of refrigerators and freezers, time controls on air conditioners, solar heating of water, etc. In all states, timely government action could mitigate consumers' difficulties with rising tariffs by working with importers to assure that efficient lights, time switches and appliances are available, that import duties and taxes discourage wasteful appliances (standard electric burners and ovens) and encourage efficient ones (modern kerosene pressure stoves, LPG stoves, microwave ovens, fluorescent lights, etc). Such a program is recommended in concert with any increase in electncity tanffs and collections. 4.30 Little is known about energy end-use consumption patterns among categories of users such as businesses, government, and rural and urban households, since end-user surveys are not known to have been carried out in FSM. It is recommended that household and commercial/government energy use surveys be undertaken to help design future biomass, urban energy conservation, and rural energy planning programs. 4.31 Within the state power utilities, investments in energy conservation will generally be more economic than investments in new generation capacity. In the long term, conservation of electricity benefits utilities by lengthening the period of time between new capacity additions. Deferment of major investment is of very significant financial benefit to a power utility. For example, if a reduction in the growth rate of peak demand from 5% per year to 3% makes possible a deferment for five years of a new engine/generator costing $1 million, the savings will be approximately $0.38 million59. Deferring investment allows available funds to be used for other purposes until they are needed for the investment. In the short term, the benefits of energy conservation will be felt in fuel savings and possibly a reduction in losses at peak hours. ENVIRONMENTAL ISSUES 4.32 Petroleum Supply. The main threats to the environment in the oil industry in all states are the risks of spillage and pollution of ground water and the lagoon area during tanker discharges, ships' bunkering operations and transfers from bulk tanks to the powerhouse tanks. Adopting and enforcing suitable regulations for oil-handling facilities and procedures to be followed may reduce the number and severity of spills. However, tankers call into each FSM port at a frequency of approximately once per month, and regulations provide no protection when a mishap occurs, if equipment is not immediately available to 58 A 1.5 kW demonstration wind-powered electric generator was installed in Yap in 1983 but drew as much power from the grid as it put in, and was abandoned in 1985. 59 At a 10% discount rate. The present value of a $1 million investment five years from now is $1 million/(1 + 10%)s = $620,921, for a saving of $379,079. -51- deal with it. To ensure that the industry can respond to emergencies, each of Mobil's storage facilities in FSM should have the following minimum equipment: oil booms of 100 meters coverage, a smaU boat with an outboard engine, dispersants, ropes, sponges and tools and accessories for clean up operations. These together with fire fighting emergency equipment should be contained in a locked trailer kept on stand-by at the location of every facility. 4.33 It is recommended that industry compliance with normal international operating requirements be enforced. These requirements specify pre-discharge tests on pipelines, hoses, tanks, communication equipment, etc., minimum manning levels to ensure that all equipment is used properly, and specific training for spill prevention and clean-up operations. It is further recommended that periodic tests on equipment be rigorously carried out. 4.34 Mobil's bulk fuel depots are equipped with drainage controls to ensure that only clean water is discharged into public areas. However, the management of the separator pit is a critical part of this control; if the pit is not emptied of fuel after each discharge, fuel will overflow into the neighboring properties and the sea during periods of heavy rain 4.35 It is recommended that national government draft a "Marine Pollution Emergency Contingency Plan" to provide for a coordinated response by appropriate government agencies and the private sector to oil pollution emergencies and to specify penalties for poUluters. Other than bulk fuel depots that are not eqwpped with drainage controls, service stations, back-yard garages and ships' bilges are typically the main sources of pollution in urban waters. Regulations should be revised to cover these and the local authorities should be briefed on any changes. 4.36 A further source of oil pollution in all states is the improper disposal of used oil from vehicles, power generators, and other engmes. The small volume involved in FSM makes impractical some methods of disposal including recycling used in developed countries, but there are affordable alternatives which are environmentally acceptable. These include incineration, burning used oil with fuel in the powerhouse, and using oil to mark playgrounds or to spray unpaved rural roads to control dust (although such use should be closely s ipervised and restncted to the drier periods of the year). 4.37 Electricity Supply. The power stations in all states are located sufficiently distant from residential areas that noise and air poUution problems are minimal, although the power station in Kosrae is located quite close to government offices. Transformers containing PCB fluids have reportedly been removed from Kosrae, Pohnpei and Yap, but are not known to have been removed in Chuuk. Low voltages in aU states, in combination with poor maintenance, leads to the break-down of compressors in air-conditioners, refrigerators and freezers, leading to excessive pollution from CFC gases. 4.38 In Chuuk and Yap, lube oil is leaking into the sumps in the powerhouse, from where it passes into cable ducts and leaks outside, threatening ground water supplies. In Pohnpei, the iUl-maintained ALCO-barge presents a serious environmental hazard. The floor of the engine hall is covered in oil, m places in pools. Spiflage causes polution of the harbor; if the barge deteriorates further, serious environmental damage could result. -52 - V. INVESTMENT AND TECHNICAL ASSISTANCE PRIORITIES 5.1 The following priorities are recommended for technical assistance and investment to refurbish the energy infrastructure in FSM, and to address some of the deficiencies identified in the report. Most of the recommendations made in previous chapters which involve little or no external costs (e.g., policy changes) are not repeated here. As FSM has recently become a member of the Asian Development Bank, Annex 2 contains a suggested scope of work for ADB assistance and potential financing of projects. ENERGY PLANNING AND COORDINATION 5.2 The FSM does not need a fully-fledged Energy Ministry to handle energy matters effectively. However, it is recommended that the government appoint a competent senior official within the Department of Resources and Development to oversee the energy sector. He or she should have sufficient government backing to be able to implement accepted recommendations. If no qualified FSM citizen is available to fill the post, it is recommended that an expatriate energy expert be appointed for 12 - 24 months to advise the government and train a local counterpart. Although in the long term the official is expected to be mainly concerned with power sector issues, complex negotiations with oil companies to improve supply conditions, prepare for a possible national tender, and to renew contracts which expire in 1992 justify the appointment of a petroleum expert for 12- 24 months. This is recommended, as discussed below. 53 Two expatriate advisors, each appointed for 24 months, would cost in total in the range of $240,000 - $280,000. POWER SUBSECTOR 5.5 Generation Technical assistance is recommended to investigate whether refurbishment of any of the eight second-hand 2 MW ALCO engine generator sets in FSM (two in Chuuk, four in Pohnpei and two in Yap) is technic;Wy and financially feasible. It would be advantageous to organize a single national tender for this investigation and subsequent overhaul work, if warranted. The technical assistance should include appointment of an experienced mechanical engineer to supervise the feasibility study for all three states. The cost of the technical investigation, including three months of supervision, would cost approximately $50,000. 5.6 In Kosrae, a power development study is recommended to determine the tariff level required to recover costs; realistic future load growth trends under rising tariffs; the suitability of the older machines in the power house to serve as peaking units; the cost of installing synchronizing equipment; and requirements for new capacity. Such a study would cost at least $50,000. 5.7 Distribution It is recommended that the 4.16 kV line segnents serving the urban areas in all states be upgraded to 13.8 kV in order to reduce losses and improve voltage to consumers. Technmcal assistance is recommended for analysis of load flows, voltages and losses in all 4.16 kV distribution systems. It is recommended that revised designs for substations be developed in Chuuk and Pohnpei and protection schemes using circuit breakers, sectionalizers, fault indicators, etc., be designed with the objectives of ensuring -53 - safe operation and maintenance of substations, minimizing the risk of system-wide outages due to line faults, and reducing the outage time and the number of consumers affected by line faults and maintenance work. It is recommended that inexpensive fault indicators be installed on branching points of all 13.8 kV networks and that the potential of capacitor banks to reduce voltage drops and electrical losses be analyzed, with concurrent load monitoring of the distribution transformers with one or two transformer-mounted voltage recorders supplemented with inexpensive hand-held and line-mounted volt meters. Most of the results could be obtained through computer analysis of loading data, apart from some equipment needed to optimize the location and number of capacitor banks and to measure voltages. 5.8 It is recommended that a 'system map' for each state be established, preferably on a desktop computer. This need not be sophisticated considering the relative simplicity of the distribution systems. The emphasis should be on collection of system inventory data, not exact geographic information which can be extremely costly. It is recommended that utility personnel be actively involved in the implementation and should later take over complete responsibility for maintenance of records and maps. The initial cost of developing the map and carrying out the recommended evaluations of the distribution system would be at least $100,000 each for Chuuk and Pohnpei and somewhat less for the other states. 5.9 Training. In view of moves to 'corPoratize' the utilities, an education and training program with timne away from FSM for both managers and engineers is recommended so that local staff can take over responsibility for running the utilities within the 1990s. Minimum permanent power utility staff in each state should include a General Manager, an Administrative Manager, a Senior Distribution Engineer (superintendent), a Senior Power Station Engineer (station manager or superintendent) assisted by an Electrical Engineer and two Mechanical Engineers. It is recommended that an orgamzation chart be prepared and approved by the Board of Directors of each utility. The senior engineers should attend formal courses in relevant engineering disciplines; overseas training and apprenticeships should be established as soon as possible. It is recommended that linesmen and station operators be trained in preventive maintenance, and senior managers be trained in accounting, investment planning, and personnel management. Outside assistance programs could sponsor appropriate staff members or recruits for overseas technical courses of up to one year; longer courses would be handled by FSM or U.S. scholarship programs. There are technical courses for linesmen, power station operators, mechanics, electricians, etc., of 1 - 2 months duration available throu&h other power utilities in the region such as those in Papua New Guinea and Fiji; outside assistance programs could provide funds for travel and subsistence for such training at comparatively little cost. Assistance required for both technical and professional power sector training in the FSM would be likely to exceed $100,000 per year for five years. 5.10 Accounting and record keeping. Technical assistance is recommended to support the utilities in creating and maintaining adequate financial accounts and operating records of the type and standard suited to commercial corporations. It is recomnumendad that accounting and record keeping procedures and formats be standardized in all FSM power utilities to simplify oversight of operations by national authorities and to facilitate the exchange of expertise and data among the state utilities. Assistance required to support these efforts, involving design of procedures, collection of initial data, and training of staff is estimated at $25,000v- $35,000 per utility including software costs, if all states are assisted under a single contract. 5.11 Cost study, asset valuation, and tawiff review. In conjunction with the establishment of an improved accounting system for the utilities, it is recommended that a detailed study be -54- carried out of power production costs, the value of assets, and the tariff required to recover costs. This would assist the utilities in defining their financial objectives and advising the national govermment on subsidy policy. The work would combine well with assistance to create standard accounting and record keeping systems. The estimated combined cost is $200,000 for all states or $100,000 if done without the accounting and record keeping work. 5.12 Metering and billing. All consumers in all states, including all government consumers, should be metered and billed for their consumption. Technical assistance is recommended especially for Chuuk and Kosrae to design and install new computerized billing systems which, to save costs, should be based on the same software; it is recommended that eventually all states adopt the same billing software and collection procedures. The systems in use or under development in Pohnpei and Yap could be used as a model for all states. The estimated cost is $75,000 for all states. 5.13 Dublon (Chuuk). It is recommended that a feasibility study of rehabilitating the Dublon power system be carried out, to include a technical investigation of the power facilities and an assessment of needs on Dublon. The estimated cost is $20,000. PETROLEUM SU13SECrOR 5.14 It is recommended that a petroleum expert be appointed for at least 12 months to assist FSM in improving fuel supply terms and administration. The expert would assist the states and national government to negotiate improved supply conditions with Mobil, and to extend, renegotiate, or replace existing contracts as necessary; to assess the feasibility of organizing a national supply tender by 1992; and if a national tender is feasible, to negotiate the terms and conditions of a national supply contract. In addition, it is recommended that the expert be required to provide training to local counterparts in the states and national government to conduct negotiations and monitor contracts. An expatriate petroleum expert would cost in the range of $60,000 - $100,000 per year, depending on the source of assistance. 5.15 It is recommended that standards be adopted for the siting and operation of petroleum storage facilities and that land use in the vicinity of storage sites be strictly regulated in all states. Tbe FSED Petroleum Section is working to develop petroleum storage and handling standards appropriate for the Pacific Islands region. It is recommended that the government approach the FSED for assistance in specfying such standards. It is likely that assistance from FSED will be available to FSM at no cost to the government. 5.16 It is recommended that retail gasoline prices be monitored and pricing guidelines be established and enforced in all states. It is further recommended that a study be undertaken of the gasoline retail market in FSM to determine: (1) the optimum number of retail service stations to operate in each state and (2) the optimum number of fKades and octane r&tings of gasoline to be marketed, in order to minimize costs to conWimers. A consultancy or a study of the retail gasoline market in the four states, including Proposals for establishing retail price monitoring and regulation, would cost $50,000 - $100,9. HOUSEHOLD AND RENEwABLE ENERGY 5.17 Photovoltaics. Technical assistance is recommended to help establish a long-term photovoltaic program including assessment of staffing needs, suitable equipment and -55 - appliances, and establishment of a permanent organization. The estimated cost is $30,000 excluding any expenditure on measuring the solar resource. 5.18 Hydro. It is recommended that further investigation of hydropower development opportunities be carried out or completed on selected sites in Pohnpei and Kosrae. Feasibility study and design costs would vary according to site conditions, but would be in the range of $500 to $1,000 per kW of a proposed scheme. 5.19 Biomass. Monitoring of the biomass resources of all states, especially forests and mangroves, is recommended to prepare for and mitigate the long term effects of possible increased use of biomass resulting from higher user charges for electricity and other forms of commercial energy. It is recommended that a forest cover survey in all states, costing $80,000 - $ 10C. 00, be completed every ten years. 5.20 ConservationL It is recommended that the national government and proposed power utility corporations establish an energy conservation and management program to assist households and businesses to reduce wasteful electricity consumption, through advisory services, import duties, taxes which encourage efficient appliances, and assistance to importers on sources of efficient lights, refrigerators, stoves, etc. A consultancy to train loca officials to carry out energy audits, develop promotional materials, and advise on appropriate tariffs for energy-using appliances in each state would cost $50,000. 5.21 Wund Further monitoring and analysis is recommended of the wind regime in the FSM, possibly through the services of the Forum Secretariat Energy Division (FSED). However, due to the expected poor wind regime, this recommendaton has low priority. The estimated cost is $30,000 for a two-year study at one site, or less if part of a regional assessment program. 5.22 Household and rural energy planning. It is recommended that the government carry out household energy end-use surveys in the urban areas and selected rural communities of the four states to provide basic data for planning energy assistance programs for low income households. The local cost would be about $2,000 per survey if carried out and funded through the FSED, through which funds are available to meet the majority of costs. t1 - 56 - ANNEX 1 STATISTICAL TABLES - 57 - TABLE 1 SELEC1ED DEVELOPMENT INDICATORS FOR THE FSM 1985 1986 1987 1988 1989 1990 GDP 1 (US$ m) | $120.5 $128.1 $136.1 $144.7 na na Per capita (US$) $1,383 $1,428 $1,473 $1,520 na na Total Imports 2 (US$ m) 41A 44.2 41.9 67.7 na na Total Exports I (US$ m) 5.1 4.0 4.0 5A na na Inflation Rate 4 na na na na na na Sea Area ('000 mi 2) Land Area (mi 2) Wage & Salary Employment5 na na na na 12,560 na Ave Wage/Salary 6 (US$/hour) na na na na S3.17 na eonomically Active _23,336 24,270 25,240 26,250 27,300 na I-otal Population 7 87,100 89,700 92,400 95,200 98,100 101,000 Urban'8 (%) _ na na 29% 29% na na Overseas Development Assistance Annual ODA9 (US$ m) $100.) $115.0 $126.0 $136.7 $114.4 na ODA (% GDP) na 90% 93% 94% na na ODA 10 (% Current Government Revenue) na na 90.2% 82.8% 73A% na Bilateral | 100% 100% 99.8% 99.8% 96.7% na ODA per Capita (US$) | $1,148 $1,282 $1,364 S1,4361 $1,166 na I Sources:1) Economic Report on the Federated States of Micronesia (ADB, December 1990). 2) 'he Second National Development Plan (Office of Planning & Statistics, FSM, 1990). 3) Mission estimates. Notes: 1 Provisional, current market prices. 2 FOB, excludes petroleum products except 1988 ($4.063 million). 'FOB 4 Neither consumer nor producer price indices are compiled in the FSM. f From mission estimates, based on preliminary data released from a February 1990 manpower survey. 6 Mission estimate from sources 1 and 2. Approximate only. 7 Estimate assuming 1990 is correct and 3% pa growth; census dates and accuracy differ state-by-state. 8 Urban defined as Kolonia (Pohnpei), Weno (Chuuk), Colonia (Yap) & Lelu (Kosrae). 9 Exact figures unavailable. 10 Soue 1. 1 Source 1. - 58 - TABLE 2 SELECTED PROJECTIONS FOR FSM (1990 - 2000) 1990 1995 2000 Population1: 100,789 115,600 132,400 GDP ($ millions; 1988 prices)2: high growth (4% real) 150.5 183.2 222.8 medium growth (3% real) 150.5 174.5 202.3 low growth (2% real) 150.5 166.2 183.5 GDP/Capita3: $1,494 $1,510 $1,528 Electricity Generation4 (GWh): 1987 - 1990 growth rate 67.4 94.9 133.6 reduced growth rate 67.4 78.1 90.5 Fuel Cons-mption ('000 USG): Gasoline 3,824 5,109 6,412 Jet Al 2,232 3,271 4,728 Kerosene 284 322 347 ADO 7,854 10,265 12,529 IDO IFO Lubes 112 Avgas 62 66 73 Solvent LPG Others Total Iland 14,369 19,033 24,090 Bunkers none none none Total FSM trade 14,369 19,033 24,090 Sources: 1) Total population from Second National Developmeut Plan (FSM, 1990). 2) Govt fuel data inconsistent; mission estimates based partly on oil companies. Notes: ' Midyear medium growth scenario. 2 GDP in 1988 constant dollars. Assumes 2% annual real growth from 1988 - 1990. In 1988 dollars. Assumes medium GDP growth. 4 Mission estimates for grid systems of Chuuk, Kosrae, Pohnpei & Yap. 'Reduced growth" assumes tariffs increase to true cost by 1995. - 59 - TABLE 2a Petroleum Demand Projections, Federated States of Micronesia Low Growth Scenario ('000 USgal) Product1 1994) 1991 1992 1993 1994 1P9.9- f. 1996 1997 1998 1999 ~~~~~~~~~~~~~.: .. -. R . P1:......::::::. E:ag.P :: .S Gasoline2 4,0.1 4,214 4,340 4,470 4,604 4 434,885 5,031 5,182 5,338 L49s Jet A13 2,274 2,410 2,555 2,708 2,871 3,043 3,226 3,419 3,624 3,842 4$71 Kero . . 302 305 308 311 -14 317 321 324 327 3. 3 ADO5 8,429 8,682 8,942 9,211 9,487 :.7 10,065 10,367 10,678 10,998 13 Avgas6 60 61 61 62 62 6 64 64 65 66 : Total 15,669 16,204 16,759 17,336 17,935 18,556 19,202 19,873 20,570 2 Notes: (1) 1990 figure for Pohnpei, Chuuk, Yap and Kosrae (2) Gasoline 3% growth (3) Jet Al 6% growth (4) Kerosene 1% growth (5) ADO 3% growth (6) Avgas 1% growth Medium Growth Scenariol Product ;.:0 1991 1992 1993 1994 199$ 1996 1997 1998 1999 2000 Gasoline 4091. 4,275 4,468 4,671 4,885 .5109 5,344 5,591 5,851 6,1256AJ- Jet Al . t2274 2,445 2,628 2,827 3,040 3,7 3,520 3,788 4,078 4,390 4,72 Kero 299 303 308 313 317 .322 327 332 337 342 . 4 ADO .:42 8 ,766 9,118 9,484 9,866 10,265 10,680 11,114 11,566 12,037 14 Avgas .. 61 62 64 65 - 6.6. 68 69 70 72 fl Total Si1$.3. 15,850 16,585 17,359 18,174 .L9,033 19,939 20,894 21,902 22,966 Notes: (1) All demands are mid points of low and high growth. High Growth Scenario Product1 .190 1991 1992 1993 1994 1995 1996 1997 1998 1999 2.00 Gasoline2 ..4,091 4,336 4,597 4,872 5,165 :.45:$.:S 5,803 6,151 6,520 6,912 6. Jet A13 2,274 2,479 2,702 2,945 3,210. 3,49. 3,814 4,157 4,531 4,939 .3ft3 Kero4 29 305 311 317 324 331 337 3.' 350 357 -. A D O5 .. :.,4 .29. 8,850 9,293 9,758 10,246 10187S 11,296 11,86t, 12,453 13,076 13,730 Avgas 60 6 2 64 66 68 --70 72 74 76 78 : 81: Total 155 16,032 16,966 17,958 19,011 . 204.21,321 22,586 23,931 25,362 2 Notes: (1) 1990 figure for Pohnpei, Chuuk, Yap and Kosrae (2) Gasoline 6% growth (3) Jet Al 9% growth (4) Kerosene 2% growth (5) ADO 5% growth (6) Avgas 3% growth TABLE 3 ENERGY BALANCE ESTIMATES FOR THE FEDERATED STATES OF MICRONESIA (190) (OO TOE) Fudsvood Coconuit Total Elydro Electricity Gasoline Jet A1 Kerosene ADO IEtO Avgas LPG Petroleum Total Residues Bioms Primary Supply Production 0.99 5.09 6.08 0.62 6.70 Imports 12.50 7.56 0.97 28A5 0.18 49.66 49.66 Bunkeringlexports GROSS SUPPLED 0.99 5.09 6.08 0.62 0.00 12.50 7.56 0.97 28.45 0.00 0.18 0.00 49.66 56.35 Conversion Public Power Generation (0.62- 18.50 (17.88) (17.88) 0.00 Transformation loses (12.81) (Z2.81) Station Use (0.26) (0.26) TransmissionlDistribution Losses (0.76) (0.76) NET SUPPLIED 0.99 5.09 6.08 0.00 4.67 12.50 7.56 0.97 10.57 0.18 31.77 42.521 Final Consumption 4.67 4.67 HouseholdsU .99 3.11 4.10 SaL 0.97 0.97 5.07 ransport Air 7.56 0.18 7.73 7.73 Sea 11.86 7.47 19.33 19.33 Road 0.64 3.10 3.74 3.74 Government/Commercial na. Industria1Construction n.a Agraindu tries 1.98 1.98 1.98 Other n.a. TOTAL .99 5.09 6.08 4.67 12.50 7.56 0.97 10.57 0.18 31.77 42.52 Notes: (1) Cookingand lighting. No indicative data available (11,802 bb & 8.54 peoplelbh). Population growth - 3%/yr. Assume hb growth - 2%/yr. (2) Biomass cooking: Assnume AhaiangrTamna/Vaitupu/Tongatapu rural cooldng patterns Large hh size therefore 5,000 kg/hb/year (1.6 kgs/cap/day) Assume 20% of all households cooking entirely/mainly with biomass assume: 100,789 people * 02 * 1.6 kg/capita/day * 365 days/ /1000 kgB/tonne 11,772 tonnes Total cooking (assumed to be 80% coconut waste, 20% other biomass) (3) Agroindustries: 1990copra production assumed apprcs. average 1974-1988 production of 2500 tonnes Fuel consumption for drying aumed at 2.4 tonnes coconut tesidueAonae copra produced (open fire drying) 6,000 tonnes (4) Indudes Pohapei, Chuu, Yap and Kosrae Sour: Mion Estimates 1990 TABLE 3a ENERGY BAIANCE ESMATES FOR THE FEDERATED STATES OF MICRONESIA (1990) (Original Units) Fuelwood Coeonut Total Hydro Electricity4 Gasoline Jet Al Kerosene ADO IFO Avga LPO Petroleum Residues Biomaw (to-nea) (tone) (tong") (GWb) (kUSRW) (kUStalb (MUSaa l) ( kUSsa WSW) (kUSxa (kUS5al) (kUSdl PfimaySupply Production 2,355 15.419 17,773 2.49 Impor 4,091 2.274 299 8,429 60 15.153 Ban adeXlort I GROSS AVAILABLE 2.355 15.419 17,773 2.49 4,091 2,274 299 8,429 0 60 0 15.153 Conwrion Public Power GenertiDn 67.37 (5.298) (5298) Trnsformation kosse Station Use (3.08) ThnsthsionlDistribution Losms (9.00) I NETSUPFJED 2.355 15,419 17,773 2.49 55.29 4,091 2,274 299 3,131 60 9.855 Fiu Consumption HouseholssU 2.355 9.419 11.773 na. 299 299 Tnsot Air 2274 60 2,334 Road 3,881 919 4,800 Se 210 2212 2,422 Governmenatommerciul na. !udustrialCoustruction n.a. AriWdustries 6.000 6,000 Otber n.a I TOTAL 7,355 15.419 17,773 4D091 2.274 299 3,131 60 9,855 Source: MIbon Estuimates 990 Ns: (1) Cooknt and ligting. No lidicative data available (11,802 hb & &54 people/b). Population growth = 3%Jyr. Assume hh growth = 2%/yr. (2) Biomau cooking: Assume Abaiangrramana/VaitupufTontapu rural cooking patterns. Luge hb size therefore 5.000 kgjhb/year (1.6 ks/capIday). Asme 20% of ll m ehboda (20,160 people) cooking entirelyhnainlywith biomas 20.10 people * 1.6 gcapit/day * 365 dap /1,000 kgs/tonne 11,773 Total ooking (asmed to be 80% cownutwaste, 20% other bksmas) (3) Agroindmtriec: 1990 copa production asumed appof average 1974-1988 production of 2500 tonnes Fuelconsmp fordr amed at 2.4toa nescoconutresilued tone spoduced (openfiredrying) 6,000 (4) ludes Po?npei, Chunk Yap and Kotne TABLE 4 ENERGY BALANCE ESTIMATES FOR THE FEDERATED STATES OF MICRONESIA (1995) (V000 TOE) Fuehrood Coconut Total Hydro Electricity' Gasoline Jet Al Kerosene ADO IPO Avgas LPG Petroleum Total Residues Bioans Energy PriaySupply Production 1.15 5.58 6.73 0.62 7.35 Imports 15.61 10.67 0.99 34.64 0.20 62.13 62.13 Bunkerina nzot GROSS SUPPLIED 1.15 5.58 6.73 0.62 0.00 15.61 10.67 0.99 34.64 0.00 0.20 0.00 62.13 69.481 Conversion Public Powr Generation (0.62) 22.74 (22.12) (22.12) 0.00 Tranformation losses (15.68) (15.68) Station Use (0.33) (0.33) Tnsmnnssiow/Distribution Losses (0.95' (0.9S) NET SUPPLED .15 5.58 6.73 0.00 5.78 15.61 10.67 0.99 12.53 0.20 40.01 52.521 Final Consumption 5.78 5.78 Householdsr 1.15 3.60 4.75 0.99 0.99 5.74 Transport 15.61 10.67 12.53 0.20 39.02 39.02 Government/Commercial N IndunrialConstruction Agrindustries' 1.98 1.98 1.98 Other TOTAL 1.15 5.58 6.73 5.78 15.61 10.67 0.99 12.53 0.20 40.01 52.52 Notes: (1) Cooking and lighting. No indicative data available (11,802 hh & 8.54 peoplelhh) Population growth = 3%/yr. Assume hh growth = 2%/yr. (2) Biomasscooking: Assume AbaiangJramana/Vaitupu/Tongatapu rural cooling patterns Large hh size therefore 5,000 kg/hhlyear (1.6 kgs/cap/day> Assume 20% of al housholds cooking entirely/mainly with biomass assume: 100,789 people 0.2 1.6 kg/capita/day * 365 days/ 1,00 kgs/tonne 11,772 tonnes Total cooking (assumed to be 80% coconut waste, 20% other biomass) (3) Agroindustries: 1990 copra production asnumed appre. average 1974-1988 production of 2500 tonnes. Assumed constant over net 5 years Fuel consumption for drying assumed at 2.4 tonns coconut residuestonne copra produced (open fire drying) 6,000 tonnes (4) Includes Pohapei, Chuuk, Yap and Kosrac Source: M;isJon Estimates 1990 TABLE 4a ENERGY BALANCE ESMIMAIlS FOR THE FEDERATED SIATES OF ICRONESIA (1995) (I0 TOHe F|uewood Coconut Tolu Hydro Ekeciricity Gasoline Jet Al Kerosene ADO IFO Avgas LG Petroleum h Residues Biomass (tonnes) (tonnes) (GWh) (GWh) MUSph (kUSaa (kSl) (kUS%tal) (kUSgal) (kUSqAr) (kUS=D USgan Primaty Supply Production 2,729 16,918 19,647 2.49 Imports 5,109 3,211 306 10,265 69 18,960 Bonkerinezxprts iGROSS SUPPIJED 2,729 16.918 19,647 2.49 0.00 5.109 3,211 306 10,265 0 69 0 18,960 COMrion Public Power Geneation (2.49) 84.14 (6,553) (6,553) 1WaSadgmtion lse Station Us (3.85) Transmission/Distribution Loose (11.24) r TSUPPUEi) 2,729 16,918 19.647 0.00 68.44 5,109 3,211 306 3,712 69 12.407 Fmal Consumption 68.44 Householdt 2,729 10,918 13,647 n.a. 306 306 Transport 5,109 3,211 3,712 69 12,101 Govnmentlommercial n. IndutrilWvcstuction n.a. Agromduries 6,000 6,000 Other n.a. TOTAL 2,729 16,918 19.647 68.44 5a109 3,211 306 3.712 69 12,407 Notes: (1) Cooking and lighting. No indicatiw data avallableo(1102 bh & 854 peopk/hh). Population rwth 3%1yr. (2) Biomacooking AsumeAiangIrmana/Vaitupufoongatapururalcookingpatterns. Largehhsizethereore 5,11000 kgobyr(1.6kg6bapAday). Assume 20% of all houholds in 1995 (23,370 peopl) cooking entiremynainly with bioms: 23,370 people ' 1.6 kgAapitaAtay ' 365 days /1,000 kgsAonne 13,648 tonnes Total cooking(umed to be 80% coconut waste, 20% other biom ) (3) Agroinduas: 1990copa producfion assumed awfrag 1974-1988 production of 2500 tonneL Assumed constant to 99S. Fuel conmmption for drying assumed at 2.4 tones coconut resduenlAonne copra produced (open fire dying) 6,000 tonnes (4) Includes Pobnpei, Chuk, Yap and KosRae Source: Mtison 8stmats 1990 TABLE 5 FEDERATED STATES OF MICRONESIA PETROLEUM MARKET 1985-1990 DEMAND VOLUMES (KL) 1986 1987 1988 1989 1990 Product: Avgas/Avtur 113 134 110 40 50 Kerosene 278 275 274 275 276 Gasoline 3,244 3,536 3,837 4,074 4,091 ADO 7,108 6,979 7,096 7,243 8,429 Jet Al 1,598 1,777 1,926 2,142 2,297 IFO Lubes 89 92 110 72 122 Solvents LPG Others Total Inland Trade 12,430 12,793 13,353 13,846 15,265 Bunkers1 Avgas/Avtur ADO IDO IFO Total Bunkers Total Trade 12,430 12,793 13,353 13,846 15,265 Sources: Oil companies., Note: (1) Data on liunkers (minor in FSM) are not available. - 65 _ TABLE 6 FEDERATED STATES OF MICRONESIA NATIONAL PUBLIC ELECTRIFICATION (Chuuk. Kourna, Pohnpoi and Yap State Systems) ) Chuuk Power System 1985 1986 1987 1988 1989 1990 Consumers (num ber 1) Residentfa; metered na na na na na 70 Residential flat rate na na na na na - Gov/commercial metered na na na na na 30 Commercial flat rate na na na na na - Estilm&Led na na na na na 1100 Capacity (MW): Inst 1iPd Diesel I na | na | 8.31 8.31 8.31 9-9| Firm Diesel na na 1 2.8 2.8 2.8 6.5 Max Demand na na 3.0 3.1 3.21 3.4 utput (MWh): Generation Diesel na na 18,285 19,171 19,626 20,607 Staffon usage na na 822 863 883 927 Tota! sent out na na 17,463 18,308 18,743 -19.680 Technical losses na na 2,445 2,563 2,624 2,755 Non-technical losses na na na na na 13.325 N e w i s w tG or~ _ _ _ _ _ _ _ : n a _ _ _ _ _ _ _ _ _ _ _ 3n a B Kosrae Power System consumers (number) Residential metered na na na na na 772 Residential flat rate/est _ na na na na na Govt/commercial metered na na na na na 142 Commercial flat rate/est. na na na na na Estimated _ na na I na na na Capacity (MW): Installed Diesel 1 na 1.80 1.801 1.80I 1.801 3.30 Firm Diesel j na 1.13 1.131 113 1.131 1.29 Max Demand i na 0.73 0.77 0.941 1.151 1.30 Output (MWh): Generation Diesel na 4,791i 5.075s 6,154 7,671 8,489 Station usage na 216 228 277, 345 382 Total sent out na 4,5751 4,847 5,877 7,326 8,107 Technical losses nia 641, 679, 823 1,026 1,135 Non-technical losses na 471 4351 1,268i 2,0331 2,1351 Sources: 1) Pohnpel State Yeabook (199) and minon estimates; All State data are extremely limited and inconsistent. Notel: 1)ybe number of ¢coaume is unknown. Cuuk Ste Government esimate over 90% unmeteed. Al figures are roughbgvu 2) Estimated 14.%96ofenagrsentout. 3) Urmetewed consumptloa including street light 4) Sala otelectricIty. - 66 - TABLE 6 (continued) FEDERATBD STATES OF MICRONESIA NATIONAL PUBLIC BLECTRIFICATION (Chuuk, Koarne, Pohoped and Yap State Systems) 3) Pohnpel Power System 1985 1988 1987 1988 1989 1990 Consumers (nu ber 1) Residentiai metered na na na na nao | 1590 Residential flat rate na na na na na - Gov/oommeroai nmetered na na no na na 481 Commercial flat rate na na na na na Esmatimed na , na na na na Copoi'ty (MW): Installed Diesel I na no na I 15301 15301 1530 Firm Diesel J na na I na 8641 8641 864 iMiax Demand I na na I 3.751 3. 4.41 1 5.22 Output (MWh): Generation Diesel na na 20.683 21 958 24.331 25.098 Station usage na na 931 988 1.0951 1129 Total sent out na na 19,752 20,968 23,236 23,969 Technical losses 3 na na 2,765 2,936 3,253 3.356 Non-technical losse 4 na no- 3.787 2,432 na 3,402 Ne _osi to - no< [ na- 1320 j; 1 ; 17,211 4) Ysp Power System Consum ers (nu mbr ) __ _ _ _ __ _ _ _ _ __ _ _ _ Residenal mfatrate/e L na na Ina ona nna 770 Govt/commorcial metered na na na na na 138 Commercial flat rats/eat na no no n n na 13 Esimated na no n: na no , Capacity (MW): I Installed Disel I na I no | 7.101 7.10 10 7.10 1Firm Diesel I na n 1 4.351 4.351 4351 435 IMax Demand I na I na I 2041 2.131 2241 245 Output (MWh): Goneration Diesel na na ! 10,852 11,4291 11.922 13,181 Station usage I na I na 531 559 584 645 Total sent out J na I na 10,321 10,870 11,338 12,536 Technical loseo 1 na na 1 1,4451 162 1,5687 1,755 Non-technical losses na na na na na 6,386 * 1,s onupionj non 4395 5) Chuuk, Koraee, Pohnpol and Yap Consumers (numbor) Reidontial na o na I na no oa 3,311| Commerciai/Government na na na n! na 1_ 804 Estimated na na I n a I na 1.100 Capaclty (MW): Installba Diuesl I na na I na 32.501 32500 35.80 Firm Die na I no I na 1 18.871 16.871 20.731 Max Demand I no no i na 10.151 11.001 12371 Output (MiWh): Generation Diesel no na noa 58,710 83,S601 67,375 Station usage no na no _§ 1 ,871 2,907i 3,083 Total sntout na no na 568,023 80,843 64,292 Technical loss na na no 7[ t .84 .......: . 6 0 9.001 Non-technical losses na na na: na__ na 25,248 N44$01' 666Won - no ____ ____ ___ 7777WV7 .04 - 67 - TABLE 7 FEDERATED STATES OF MICRONESIA STATE ELECTRIFICATION PERFORMANCE INrJICATORS (1990) CHUUK KOSRAE POHNPEI YAP Fixed Assets (millions US$)1 8.7 5.2 22.5 6.3 Average Revenue (USc/kWh) 0.4 3.5 2.5 4.1 Average Cost (USc/kWh) 20.2 19.0 26.2 23.2 Capital 7.2 8.3 12.7 9.1 Fuel 9.3 8.2 8.0 8.7 Other operating 3.8 2.6 5.5 5.4 Estimated RO2 (%) -38.6 -20.9 -19.9 -38.0 Fuel Consumption3 (kWh/USG) 11.5 13.0 13.1 12.4 Households Electrified4 (%) 22.3 > 95.0 42.7 41.9 KWh/year/consumer5 3,000 3,432 5,196 2,933 KWh/year/employee6 588,781 446,805 597,578 387,673 Employees/MW installed 4.6 5.8 3.7 5.4 Outages Number 50- 100/yr 50-70/yr > 100/yr > 100/yr Average duration (hours) 1-3 1-3 1-3 1-3 Customers affected (%) 50-100 100 100 100 Voltage drop/increase 10-20% na 5-10% 10-20% Source: Mission estimates. Notes: 1) Fixed Assets as of 30 December 1990. Covers grid systems of each State only. Includes Nanpil hydro station in Pohnpei. 2) Rate of Return on estimated fixed assets. 3) Ratio of total output produced and automotive diesel oil used. Pohnpei includes output from Nanpil hydro station. 1989 data for Chuuk. 4) % of State households. 5) Consumption per household consumer. Data are from available billing records and actual consumption is probably much higher, particularly in Chuuk where few customers have been billed in recent years. 6) Generation. - 68 - TABLE 8 FEDERATED STATES OF MICRONESIA ELECTRICITY TARIFF STRUCTURE (1990) Residential Commercial Government CHUUK Estimated bills (S/kWh)' S0.06 $0.10 $0.10 Minimum (S/month) $4.00 $4.00 $4.00 Flat rates (S/month) $1.50 na na KOSRAE Metered customers ($/kWh)2 $0.05 $0.05 $0.05 Minimum (S/month) na na na Flat rates (S/month) na na na POHNPEI Metered customers (S/kWh)3 0 - 1,000 kWh/month $0.03 $0.03 $0.03 1,001 - 10,000 kWh/month $0.08 $0.08 $0.08 > 10,000 kWh/month $0.23 $0.23 $0.23 Minimum (S/month) na na na Flat rates ($/month) na na na YAP Metered customers (S/kWh) 0 - 1,000 kWh/month $0.09 $0.09 $0.09 > 1,000 kWh/month $0.11 $0.11 $0.11 Minimum (S/month) S5.00 $20.00 $20.00 Flat rates ($/month) $17.00 $32.00 $32.00 Notes: 1) Most consumers in Chuuk were unmetered at the time of the mission's visit. 1,200 single-phase and 60 3-phase meters are reportedly to be installed in mid-1991. 2) All consumers are reportedly metered in Kosrae. 3) All consumers are now reportedly metered in Pohnpei; 61 were reported uunetered in 1989. - 69 - TABLE 9 NON-CONVENTIONAL ENERGY RESOURCES AND USE IN THE FEDERATED STATES OF MICRONESIA (1990) Systems Installed Chuuk Kosrae PohnpeiI Yap Total Photovoltaicst number 50 none 22 18 90 kW0eak 3.5 2.4 1.3 7.1 Hydro2 number na 1 1 na 2 kW na 35 2,000 na 2,035 MWh na 0 2,487 na 2,487 Biomass number na na na na na kW na na na na na Resources Chuuk Kosrae Pohnpei Yap Overall OTEC9 Temp. difference (CC) na na na na 23-24 Dist. offshore (km) na na na na 1-10 Tides Mean range (metres) na 1.6 1.0 0.6 0.6-1.6 Solar Insolation (kWh/m2/day) na na na na na Average daily hours na na na na na Hydro Potential (MW) none 0.5 6.4 none 6.9 Output (MWh) none 800 16,700 none | 17,500 Sources: 1) TenitorialEnergyAssessment(USDOE, Dec 1982). 2) Ocean Energ Gwude (ESCAP, 1990) 3) Mission estimates. Notes: 1 Chuuk includes 30 communications systems. Percentage operating unknown. Excludes about 2 kW of new systems being installed. 2 The minihydro station in Kosrae has never operated. Pohnpei (Nanpil) 1990 data. Sea level to 1000 metre depth. - 70 - TABLE 10 BIOMASS RESOURCES OF THE FEDERATED STATES OF MICRONESIA (Hectares, 1983) Land class Total and type Pohnpei Chuuk- Kosrae Yap hectares acres Forest Upland 12548 677 5,090 2,556 20,871 51,573 Swamp forest 214 0 345 155 714 1,764 Mangrove forest 5,525 306 1,562 1,171 8,564 21,162 Plantation forest 6 1 0 0 7 17 Dwarf forest 1 0 69 0 70 173 Casuarina forest 0 0 0 0 0 0 Atoll forest 6 0 0 0 6 15 Palm forest 1,383 2 0 0 1,385 3,422 Total forest 19,683 986 7,066 3,882 31,617 78,127 Secondary vegetation 1,843 252 1,272 553 3,920 9,687 Agroforest Agroforest 1,945 66 1,659 1,515 5,185 12,812 Agroforest (w/coconut) 9,796 2,312 926 864 13,898 34,343 Coconut plantation 124 0. 0 159 283 699 Total agroforest 11,865 2,378 2,585 2,538 19,366 47,854 Nonforest Marsh, fresh 149 234 25 165 573 1,416 Marsh, cultivated 0 0 0 0 0 0 Marsh, saline 29 0 0 6 35 86 Grassland 1,476 174 17 2,175 3,842 9,494 Strand 0 5 0 0 5 12 Cropland 79 3 2 46 130 321 Cropland/secondary vegetation 0 0 0 0 0 0 Urban 180 129 51 244 604 1,493 Urban/cropland 62 0 67 61 190 469 Urban/agroforest 0 0 0 0 0 0 Urban/secondary vegetation 0 0 0 0 0 0 Barren 2 5 2 8 17 42 Watei 125 4 99 38 266 657 Tota', nonforest 2,102 5541 263 2,743 5,662 13,991 Total area 35,493 4,1701 11,186 9,716 60,565 149,659 Source: Vegetation survey(s) of Pohnpei, Truk, Kosrae ai'd Yap (US Dept of Agriculture, Forest Service; PSW- 17, 18, 20 & 21; 1986/1987) TABLE 1 1 FSM ENERGY SECTOR CAPITAL INVESTMENT PLANS: 1990-1991 Externally Financed Technical Co-operation Projects and Activities Activity Source of Assistance Year Project Begin-End Description and Location Finance Committed Status Dates of Project Chuuk 2.2 MW Caterpilar genset US Govt S0.8m 1991 Del ivery to Chuuk of engine/generator addition to the Moen power station. (Installation not included.) Kosrae 15 MW Caterpillar genset, US Govt SO.9m 1990 Purchase and installation of new radiators, switchgear work 1.5 MW Caterpillar genset and related Power house building extension, S1.Om 1990 completed equipment; extension of power house, installation, dist extension, etc. of power lines, new substation. Pohnpei none planned before end 1991 Yap none planned before end 1991 - 72 - ANNEX 2 SUGGESTED SCOPE OF WORK: ADB TECHNICAL ASSISTANCE AND POTENTIAL FINANCING OF PROJECTS As detailed in Chapters m (Enery Supply) and IV (Policy Issues and Priorities), the four state power systems in the FSM need to resolve urgent problems, both technical and institutional. To generaLize the main technical problemns, the utilities appear to have generating capacity greatly in surplus of their needs but which, because of serious breakdowns due to poor maintenance, is insufficient to meet load throughout the year in three states1; the urban 4.16 kV distribution grids are over-loaded and ill-maintained, causing excessive voltage fluctuations and power losses, and should be upgraded to 13.8 kV. Institutional problems, evidenced by poor budgeting for maintenance and spare parts, poor training of personnel, poor billing and poor revenue collection, relate mainly to the fragmentation of utility management responsibilities across two or more Ministries with no overal control over utility operations or planning. Load growth in 1987 - 1990 has been high (over 6% in all states and tariffs are well below costs, resulting in very large operating deficits covered by subsidies, mainly from U.S. assistance. Many desirable reforms in the power sector wil not be possible without large (but gradual) tariff increases and reduced subsidies, in concert with institutional restructuring. The following four main areas are suggested for ADB technical assistance and possible projects for Bank finance in the FSM: 1. Teclnical investigations. Generation. The states of Chuuk, Pohnpei, and Yap each have two or more second-hand 2 MW ALCO medium-speed generators, refurbished and supplied in about 1986 with U.S. assistance. All of the ALCO machines are required for baseload power but are in need of overhaul if they are to continue in service. However, the extent of the refurbishments in 1986 is unknown, and maintenance records since 1986 have not been kept. A technical study is needed to determine whether they are technically and financially worth overhauling, or shoi . instead be replaced. A negative result would imply an immediate need for new baselo.d equipment in Yap, Pohnpei, or both. In Pohnpei, additional investigation should be made of the feasibility of refurbishing the barge; an examination by a naval inspector is recommended. An investigation should also be made of the potential for further hydro development in Pohnpei. In Kosrae, a new 1.5 MW CaterpiUlar engine/generator was instaled in November 1990 and is relied upon for 100% of power requiremewnts (peak load is 1.3 MW); for technical reasons, other machines in the power house (insufficient in themselves to meet load) cannot be operated in parallel with the new machmne at this time and several of them require refurbishment. A tecbnical study is needed to determine the feasibility of refurbishing the old machines and synchronizing their outputs with the new Caterpillar. A negative result would imply that Kosrae requires additional baseload capacity. Distribution. The distribution systems in Chuuk, Pohnpei, and Yap2 all have aging 4.16 kV segments serving their most populated areas, and it is recommendud that these be 1 Kosrae, Pohnpei, and Yap; in Chuuk, firm c_:ity is presently adequate but will decline rapidly if maintenance continues to be neglected. 2 Distribution upgrading work has recently been completed in Kosrw. - 73 - upgraded to 13.8 kV (see Chapter m for details). Assistance is needed in the three states to develop the technical specifications for this work. 2. Power development study. FSM is notable for its lack of power sector planning. A load forecast should be developed for each state, based on reasonable projections of economic developments. A ten-year least-cost capacity replacement/expansion plan should be designed to meet the projected load, covering both generation and transmission/distribution. Closely alied with this effort, a detailed financial review of the power sector in each state, including an asset valuation study, should be carried out to determine costs and required tariffs. 3. Support for utility reorpnization. Chuuk and Pohnpei3 have prepared legislation to form a public power utility m each state; Kosrae and Yap are moving m similar directions by consolidatng utility operations within a single government department. The new organizatons will need to develop new accounting methods and financial reporting systems, new methods of recording technical and financial data and keeping records, and in some states will need to computerize some operations, especially billing. Technical assistance is required to help the utilities to set up such operations and train staff to use and mnaintain them. Appointment of a Bank-funded utility financial expert for each state utility should be considered. ADB technical assistance is needed in all states to advise on utility corporate structures, manpower requirements, the relationship between the utility and the rest of government, etc. Esting legislation should be reviewed and amendments recommended, if appropriate. Thme concept of consolidating the four state power utilites into a national utility, as has been suggested by Pohnpei, should also be evaluated. 4. Possible projects for Bank finance. In all states, considerable refurbishment, replacement, and/or expansion of capital equipment is required soon. Much of the work could be financed through U.S. assistance as in the past; however, the potential extent and terms of future grant assistance for the power sector is not known. Under conditions of centralized management in well-restructured utilities, combined with gradually rising tariffs and a determined effort to reduce govermment subsidies, it is reasonable to expect that grant aid would be directed away from the power sector, forcing it to rely increasingly on loan finance for capital projects. Such projects would include new power generatin facilities in all states and transmission/distribution refurbishments in Chuuk, Pohnpei, and Yap. 3 Paud by Parliat in Pohnpoi in Febmary 1991. - 74 - ANNEX 3 ESTIMATED POWER PRODUCTION COSTS IN EACH STATE IN THE FSM The estimated cost of power in the IFSM for FY 1990 ranges between 19.0 cents (Kosrae) and 26.2 cents per kWh consumed' co ared with estimated average revenue ran ing between 0.4 cents (Chuuk) and 3.5 cents (Kosrae), as shown in Tables 1 - 4. Costs incrude operating costs (fuel lubricants, personnel costs, administration, spare parts, bad debts, etc.) and annual capital charges (interest and depreciation) for the utilities' productive assets. Much of the data is estimated since detailed financial records do not exist. For example, bad debts in each State were estimated based on a simple ratio of the latest available month's total collections and total billings, and an assumption that the ratio in each State is fairly constant throughout the year; administration is assumed to be 5% of operating costs (excluding bad debts). These values should be revised with appropriate financial records when thcy become available. Fuel costs, spare parts, and personnel costs are based on records from the relevant Ministries. The estimated values of total assets were based on initial construction cost estimates where available; otherwise on "typical" values per kW (generating plant) or per mile (distribution assets) from other countries in the region. Asset values should be revised with actual construction cost figures, if available. Chuuk Revenue collections were extremely low in 1989 and 1990 -- about four-tenths of a cent per kWh consumed -- because few customers are metered or pay electricity bills. Operating costs were higher in 1990 than in 1989 (13.04c compared to 11.82c), due mainly to increased prices and volume in the total value of fuel and lubricants. Capital costs accounted for 7.6c and 7.2c/kWh consumed in 1989 and 1990 respectively; higher in 1989 because total consumption was less. Final cost per kWh consumed was 19.4 cents and 20.2 cents per kWh consumed in 1989 and 1990. Kosrae. Of all States, revenue collections were highest per kWh consumed in Kosrae, but still recovered only 3.5 cents/kWh in 1990 and 3.4 cents in 1990 of costs totalling 19 cents/kWh consumed in 1990 and 21.1 cents in 1989 including capital costs. Operating costs appear to be lower, at 10.75 cents/kWh in 1990 in Kosrae compared with 13 - 14 cents in the other States, but are probably underestimated as they do not include consumables or maintenance equipment. There is no record of such expenditures, and they are difficult to estimate. A more thorough accounting of operating costs in Kosrae should be carried out; the estimate could easily mcrease by one or two cents per kWh consumed. Pohnpel. Revenue collections in 1990 were about 2.5 cents per kWh consumed, down from 3.8 cents in 1989 due to an increase in nonpayment of bills; actual billings increased. Capital costs, at 12.7 cents per kWh consumed, were higher than other States' due to the presence of the Nanpil hydro station, valued at $7.2 million but producing energy only part of each year and adding some 2.6 cents to the cost of power per kWh consumed. Yap. Collections in Yap in 1990 were as poor as in Chuuk, due to a lengthy breakdown of the billinB te i that year. Collections in 1989, however, were almost 3 cents per kWh consumed. Operating costs were 12.3 cents in 1990 and an extraordina-ily high 21.5 cents !n 1989, reflecting a staggering value for bad debts in that year of almost one million dollars, reported in the Yap Government's audited accounts2. The low value of bad debts shown for I *kWh consmd" includes metered sales, estimated sales and unbilled consumtion - i.e., all energy which comprises the total conumption of electricity customers. Thus it excludes technical losses which ane treated as put of the cost of operation. - 75 - 1990 reflects the low billing in that year. These figures illustrate the importance of bad debts on a utility's costs and the value of enforcing collections through a rigorously-applied disconnection policy. Capital costs were relatively high at 9.1 cents in 1990 and 10.1 cents in 1989, reflectng the large amount of reserve capacity (mostly inoperable) in the Yap power system. 2 Financil Sbaemf and Indemndew Auditor's Repqo, Year Ended Septembr 30,1989, Touch. Ron Intimmaom. - 76 - Table I CHUUK POWER SYSTEM PRO FORMAOPERAIN0 INOOME AND E)BENDMIREA0C0UNT FOR EIKECTC UTIUTY OPERnoNl8 YEAR ENDEDSEPTEMBER30 FY ING FY 19M GM gross gnm'a Vo 20.807 19.626 GWh ffnal oonsump*an (1) 16.926 16.119 REVENUE Ebasity saWes (2) $6,838 68,638 Other utfUty Income $0 $0 Total utiliy rwnut 668,88 68,88 Sanb revenue per kWh sold, cents 0.41 0.43 EXPENDfIURE 1. OpratIng Coats Fual t Lubdoants (3) $1.568,215 SIO1AD swarise & peronnel cat (4) $WIND00 :410M. ad D03 (C) $147,00 6147, Consumable (60 *2000 $20D0 : Eyipmcnt "() $10,000 410.00, Tn urn_e. Tr"__ . Olhr pnss hd admbilntratlon (4) 96,036 705 Tot opers*ng cos o2*0,851 106,40 Total oprating coat per kWh sold, cnts 13.04 11.62 2. Capital Coats. annuWieed at 6% Aset V*lue l* (yr.) Powr plant &6wtcM7) $.00,000 15 690 0*072 Po"f?Stson bulldne 68,000.000 25 *2,0 _W eP enIal bullding (no data 90 0 61,140752 $1,140,752 Asse Value Uf. (yrs) Olatbon system 61,000,000 25 $76*27 8X- Pwtntwhinevywi1left (no 5 d0 *8*7 l2w I1nl1o (nodas 5. Toal nnual oal coas *1.218,979 . 1, 9 Total capital cot per kWh sold, oents 7.20 7.68 Total Cost (operatng plus capitl coa, onertlon Pus deitbutlon) 3,425,330 t3,124.380 SURPWS of EKPENDIrURE over REVENUE: 63,356,492 $3.055.542 Total coat per kWh sold, cents 2024 10.80 Ncm: (t) ciudw unblMhd eoncun.p5, Ilig.i vid lse_ due t bhuly udlmdlon d p_ bilc ucb t1-1cawiod fo mam IGWh dw wioA hi rnl. a Om on a1 uUfl -atcuw In Chuuk us .i smlf,hS cd/ we Waft* vi bw. Adhi lo ma Dwt d Fkunc callcle evasced lud ca $5,7OnmoU, h In go haw morf I M This a_ a Oa m hnckt fk W or k5 tud hl In bL _ us en in_ iand in pow I w id avpg primte S10A*S id 1114.7011 fat fWt mid Mms. oirli *l hI IsN and 07 d50 hm $4 B_d - an rpinwit r I d hi In , OMea d Pam., mid P nnd ag _ umd 1- ' of b4,O0. IAdmhbel. pmel oone we Icuded und. Ohmr _pumc hnaudiq sdmlnbetsor. Idmhi- WAmIs ehnvanldoi %alapwng cmb inIingbed ilmb pi Ths we no di n bed ddb wmd vw ImNd Wiatnlm ahng hb Hl. vm. tend an a rei Iou_hld I _urdy, It cbo silndd Oat oi 30QU0 kWh p r Is bIWg bhd lo - mern whIc. di stsh iN pg - idmbW ". tehied A 5114m Shie , I d d beQ SUwN _n ftel, egueai,dy SAD Is uaMadW pW Wm. t of147m10 p. yeW. As Sims us p nummil line r . to edma eSdu,Sisd "I ftbIt IsmSic_dr 'bed ddt. 14 ~ ~ l llwadflam ouidle c_bowisd v i_e 50 Thuss acd.o emalrnM I -mI.c,uuiwl krwfat ia'ume imosepuspub (7) No b d Ow hllc caM di o Mwuk' dsl*-pmlg S mle _ Ic t .b ODf tTe PW CMc do hiilsd pl Is meluad at * 1.000W III* T ti gm'ftiditAn Wmu s _ dM 5at 0D prm alelathldam ,atrSvllal.O,D.f - 77 - Table 2 KOSRAE POWER SYSTEM PRO FORMA OPERATING INCOME AND EXPENDITURE ACCOUNT FOR ELECTFAC UTLITY OPERATIONS YEAR ENDED SEPTEMBER 30 FiY 990 FY 1989 GWh gross generation 8.489 7.671 GWh final con umptIon (1) 6.972 6.300 REVENUE Electricity sales (2) $241,879 $153,600 Other utility Income $0 $0 Total utility revenue $241,879 1653.600 Sales revenue per kWh sold, cents 8.47 2.44 EXPENDITURE 1. Operating Coats Fuol and LubrIats (3) $670,151 $470,o Saladso & personnel cods (3) $75414 S74,002 Bad Debts (4) *72,000 $178,000 Taxes Insurance Professonal fees Travel Other expnses ncl adminrstration (5) $32,278 $27,201 Totat operating costs $749,843 $750,560 Total operating cost per kWh sold, cents 10.75 11.91 2. Capital Costs, annutiUed at 6% GonereWon Asst Valuo Litb (yra) Power pluR & ewvtc(6) *3,381,623 15 $N45,161 $346,11 Power Station buildings $2,000,000 25 $156,463 $166,453 Residential buidings (no data) 30 $0 $504,635 $0 $504,635 Distribf on Aset Value Ut. (yrs) DisMbiution sydsem (7) $918,000 25 $71,612 $71,812 Plntm achinery etc In 1990: (no date) a $0 $71,812 $0 $71,812 In 1989: (no dat) 5 Total annual capitl costs $576.447 $576,447 Total captal cost per kWh sold, cents 8.27 9.15 Total Costs (operating plus capital costs, generatlon plus distribution) $1,326,290 $1,327,007 SURPLUS of EXPENDITURE over REVENUE: $1,084,411 $1,173,407 Total cost per kWh sold, cente 19.02 21.08 Nam: (I) tncludc unbli1d consumption, stlghtlg snd lona, due to bulty mtring, which toger account for morelthen 2 GWh of nrgycont outin 90E. (21 Actual reported sales revenu for FYtS9 (source: Independent Audltoran Rport - Toucho Rose InnIonal; revenueo rFY190 baed on scub deectr etimatd from powe angnation records. (3) From power ation monthly repoeto FYIA-00. (4) n b repoted In he lIndwndent Auditort' Peport an enel Purpous Financa etemontl, Year Ended September 30, 1E8 for Kosras oiat utility coliction. (presumably Including arer and seweage) wer 5153,577; colectoa for elctrlIty must have ben somewhat is. Thh s esquhnlt to less then 70% of the elcftlty bil hssued that year (213351. As shown In tho list of consumers bUs for the month of November *eMo (provIded by OPS), accumuated unpeld bWis amountfd to epprolimatly 50,000. do whIch 172,000 (30% do th tobl edctriclty bills for FYItO Is mumed to have ben bncurmd In FYISO, end te babnce (S17g,O000 In provlouo yes. The whole of unpaid bie wre ded asn 'ad t since thme we reportedy no dlsconnctons for nonpayment do ssctrlcly bilb In Koerm. (5) Thee we no ndaa for Adminiatton epene. AdminlIretson Is onumed to be 5% do c6w op rating IMPenss,1 eacludingbaddable. (a) Incoude rportd vlue da new 1i00 kW Cat gonat and oci_d worts tind in November 1960 (source CPS). Omh wpantveluad at 1 000kW. iPI Valued t 540.000/mIl of me the nsmieontdltrlbution syetem, Inctuding conductors, transfo.-mers, pol, and sevlo drope. - 78 - Table 3 POHNPEI POWER SYSTEM PRO FORMA OPERATING INCOME AND EXPENDITURE ACCOUNT FCR ELECTRIC UTIULY OPERATIONS YEAR ENDED SEPTEMBER 30 FY 1990 FY 196 OWl, grgen graAon 25.098 24.331 GMW fndoon.ump on (1) 20219 19.933 RE!VENUE Esotlty ase (2) $5061421 6633000 Othruty income S0 60 Total utit reenue $506%421 663000 Sake nc enue pcr kWh sold, cents 2.0 3.17 EXPENDIlUFE 1. Operaing Costs W ndlMubdIbIt $(4 46 $1 ,211 ,27 DLe &pesoel $8254 $52B 4 Sad betas (6) 6 OOOD *23,700 Consumdsee ~~~ ~~(6) $12000 `1206000 E.ipment (a) S1o 000 $25,00) To"n Othrwupnse kW sidin*linkdon (4) 6118769 $6852 Tow op g cft 12,292 $,364,171 Totlope ng cot perskWh old, cents 13.50 11.83 2. Cial Cots, nmultisd at 6% --,s = Vui Ulf .y. Di" 0Vsolloh $1800,000 15 61.76830 11,675 = 0*WIChO $7,1300,000 30 6123072 $523n swon bulldw 1,300010, 26 2$4060 $ 680 Siies&WA buldnp (no dte 90 $0 6333,ol $0 $2,333,00 Andt Vu Lf U yr) OAtbilonydsm 12,90,000 25 62422 $226422 PAltmaill"ecki1l9f (nodud* 6 $0 22,422 $0 12242 . h lkg196 Ino ds 6 Toblivul olW ostst 1861,S05 $2,561,806 Totl osplt oot per kWh sold, cnbt 12.67 12.J2 Total Cost (opoeing plus coplW costs, pnerdon plus dtibutlon) 1S5 Q6290,431 .4.925.675 6UFLJS of EXPENDrrUFE owr FEvENLE S4.784,016 64,202,675 TotW soet per kWh sold, cents 2617 24.65 Notes: (h) h11haise lOdW conaion, etgifth id tossew we to tmui sebytton d poww bib, ch t_tererPu hiwasol d nsmeSa Sw~o a Ceat et hi INC a COa 0 W bldd by Rio 0.0 o Fhinee an mha _ e_ h PrneI we Soled toe 1 l d tem 1 alieri a new OmNAwlsed NS¶ sysm we Visteled Thes show evane mews coedtm d 4i41 MON. o rt ev r 5.000 per yw (OW) Re_m e dsr tor S bsed an St old _mal beb eIdaintwidte k mShiShO Chd o wUew eb St h 10. i PrmmOt 0det Wae reCoat. f Oda fo IMS brted an DOr d Puble Wae bxtd demait. PWAee Iw IMl we om1itelft bbt astnd gwtlw to 1550. Adnhbfrdtv" perenncel costr we Includ d iundr 'Other mpemnes hckeudhig nrdult Mitenbiuitc tnaes 5%0 Pili d as eps*etuhai ed des * The we no di en bed dbskl, nad maw4 hianU en t hi gtrl Nowwcn. ted an on mneal 0 far n'Wt5 bti die d IN d 11 the etlinded rdi 0 oesotln to Stee t tal mued td t 0l t wgh Ste btbcot a sad to be wm d ol as bed debtts. Thk ea P. _tplsd to bhet 1000 * Thvewreneruodr wsdae _ en.0ld caen udau tareem_Inabaae wera ats. ThFe5tn ethe ifmlte estedgepede uenc. dstehre ram 9 me" , Ste htttM cost d Pdw-e l slficely-predaft phi wae siolat to te mtraten. St _memn of Se aW. _ hydr sa. aimilvelwWd hi 1 Ith a rwh ated hilW tost d .20000. The s o e to a hUt diesel pild tc ehed at SlOOMs. The liemiwedisiltM tan dvt tenm 1vs. at 545.00 af rmiSiserd tdta n hmlets aSasEw - 79 - Table 4 YAP POWER SYSTEM PRO FORMA OPERATINO INCOME AND EXPENDITURE ACCOUNT FOR ELECTRIC UTILLY OPERATIONS YEAR ENDED SEPTEMBER 30 FYi990 IF1199 GWh gros goneraton 13.181 11.9t2 GWh final Vonumpton (1) 10.781 9.751 REVENUE lectrioity ales (2) 646,825 $288,167 Other utility Income SO $0 Total utility revenue $46,625 6288,167 Salos revenue per kWh sold, cents 0.43 2.96 EXPENDITURE 1. Operating Costs Pelada. &peronnl csts(4) 8S78,63. . $ -.'; 0.8 -abt. - {0t 4(5) -144113 997 0-64 Ooinlunabtes - a$1,627 - wj- Equlpmint .56,929 - ,6; tidtssc . -- $26,Ui44- sra nosrtaff .. - .-,. .; ProfesIonl fes $2L625 - *69-1 -- Tinawl - -4,1 - 4s4ntl. In ranisttfJ n (4) . $7,490 . Toa operdng coots -,23,869 = , 9777 Total operating cost per kWh sold, cents 12.28 21.51 2. Capital Costs, ant uted at 6% Aset Value* Lfe (y.s) Power plent & aito(S) 67,100,00D 15 *731,038 $7381,03 Power taon buildings $2,000,000 25 $156,453 111,46=.. siilddnUal buildings (no d1ta) 30 $0 887.489 - t0' .43 .tY*Ibuton.;- :: AsseA ValueW wl). U.. (wes) dlsidbutlon system $1,200,000 25 493,872 , *3,78 Plat mAehInety' tc In 1990: (no deat) 6 SO $63,87$ - *3,872 In 109 (no dae) qtal annuel oapitol cods 481.381 1,811 Total cpttal cost per kWh sold, cents 9.10 10.06 ToW Costs (operaing plus capital costs, Ieneration plus dlsribution) $2205,230 63,079,139 SURPLUS o EXPENDITURE over REVENUE $2,25,405 $2,790,972 Total cost per kWh cold, cents 21.38 31.58 Ne: (1) Incldes unbled consumpton, eeslfting, and loo. due to feuly metertng, which togther mcounbd form wrthnd GWh cwagy sentout In s9c. Actul utily collcons of 58255.0, Includng pow end wer, wns mcorded In FYlUS by Wi Frec aroo, be low vlwu due to a br kdmn of th bEIng ee tn. From blWng dat (same source wr bMle w ebout 5% and leckiol1y ble eueut *s oi Md totl. FYIS rewue colcon from ln*psnddt AudW rspo.es, nded eptJ0 t, TouchRose Intnonal. (31D notcudforube ued In UfliorWolel.Soum: 0111 ocSudgect nmd St e. (q Petonnel coas Inchude blIng.1 pmw genekcn, mnd poe d_teibution: edminetron peonnel comb we Included In 'Other spwness Mel admlnltlon'. In eaordnnc wIth PiSC pratcot. 8.5% of PU&C edmiWlilon Is sboced to po_ _eatons. Scuom: Olbo dBudge tmdS Ws. (a No ddb on IMn bad debc, I.. mmmosecehvbble rbom elcleal ees whIch how bee n dlf by Ste -rco Dept. wets llebleo to t mIsIon. An av_g mnnuel c_eton r_e of about 10% of bnge kt ban wumed;tbelnc ellocdedto'bed dlM.de oobtn fromTucheRoessI_ntsfonsl. (q No bsekd_we d bt. inNl cot of YWp elcb lty-pmducng plant wr v ble to go meslon. The InUe cost d hntfld plant I vaued ct 81,UWQkW. The mumed value of the tnm dnbueon sm Issquelly ,b5my. - 80 - ANNEX 4 AFFORDABILITY OF INCREASED ELECTRICITY CHARGES To what extent can the general public and the business community in the FSM absorb higher electricity costs without a significant rise in the cost of living or a threat to new investment? Although data required to estimate this are poor, experience elsewhere indicates that people are generally more concerned about the reliability of power than its cost, will reduce their consumption by reducing waste as the cost increases, and with few exceptions do not make the cost of electricity a key criterion in investment decisions. There is strong evidence that this experience also applies to the FSMi. 1. Residential consumers. Average household electricity consumption in FSM (250-400 kWh/month) is high by Pacific Islands standards but lower than it is in the Marshall Islands (700 kWh/month) or Palau (600 kWh/month), althor h the RMI has about the same per capita income as FSM (higher in Palau) and both countries have generally higher electricity tariffs. As shown in Figures 1 and 2 below, residential consumption in FSM is not skcewed toward the high consumption bands to nearly the same extent that it is in the other two countries. For example, in the RMI about 60% of residential electricity in 1990 was consumed by households using more than 1,000 kWh per month, compared to only 22% and 15% in Pohnpei and Kosrae respectively2. About 43% and 35% of residential usage in Kosrae and Pohnpei was consumed by households using between 200 and 500 kWh/month. Kosrae Pohnpei tos 10=a3.02 0.05 ~~~~~~~~~~~~~~~~~~~~~~~~~~~0.01 IO a ato."w 0-1oW 101-201 201-500 501-1000 01001 0-100 101-200 201-500 501-1000 >1001 kWh consumption per household per month kWh consumption per household per month *Households EConsumption EHouseho:.-s 0Consumption Figure 1 Figure 2 FSM households spend significantly less of their income on electricity than do households in the RMI, Palau, and other Pacific Island countries. In 1989, annual household income in Pohnpei averaged about $6,400 or a little less than $533 per month; in Kosrae it was about $8,740 or $728 per month3. For an average-income family in Pohnpei consuming 300 kWh/month, expenditure on electricity is $9 or 1.7% of monthly income; in Kosrae the 1 The folowing presents data for Pohnpei and Kosrae, but the pattern for the other states is similar. 2 based on available biDling data, which are known to be poor in Kosrae but reasonably complete in Pohnpei. However, the proportional distribution of bils in Kosrae presented here is believed to be valid. 3 From Raeuls of the Household Income and E&pend,ture Survy in the Federated States of Micronesia, 1988 1989, Final Report, UNDP Project ATP/86/203, Febrary 1990, p. 27. Monthly hous hold income iL Chuuk - 81 - corresponding figures are $15 and 2.1%. Average-income households in the Marshall Islands spend about 5% of household income on electricity, 7% in Fiji, and at least 10% in }iribati and Tuvalu. As there is no discernable economic reason for the lower expenditure in FSM, it is probably due to the comparatively poor quality and the unreliability of power produced in FSM characteristics severe enough to constrain consumption. If the technical standards of the power systems in FSM were to improve significantly, households could be expected to increase purchases and use of appliances and consumption would rise; i.e., households in FSM would spend a significantly larger share of their income on electricity. Raising the tariff, however, will have the opposite effect, i.e., induce reductions in consumption by most consumers through reductions of wasteful uses. Hence the issue of raisin tariffs in FSM is very closely intertwined with improving the quality of power; it would be a mistake to proceed with one without the other. The more that power quality improves in the FSM, the easier will average-income households agree to absorb tariff increases, since better services will accompany households' higher costs. The effect of a tariff increase on residential consumers who use 100-300 kWh per month or more is expected to be a mixture of increased expenditure (especially in the short term) and reduction of non-essential uses. For example, users could at no cost switch off non- essential lighting and air-conditioning, could close windows and doors in air-conditioned spaces, then (at some cost) insulate spaces, install timers on air-conditioners and water heaters, switch to more efficient forms of lighting and to non-electric fuels for cooking, etc., al at substantial reductions in electricity use, thereby limiting the financial impact of the tariff increase to each consumer. Such a response to higher tarifs would also reduce energv requirements in the power sector and hence the need for cperating subsidies, and would reduce peak demand allowing capacity additions to be deferred, to the benefit of the country overall. However, adjustment will be much more difficult for consumers at the very bottom of the income scale, since their already low consumption (less than 100 kWh/month) is concentrated in "essential uses" (i.e., minimal lighting and refrigeration, no electric water heating or air-conditioning) with few opportumties to conserve. It is estimated that 100 kWh:/month provides for such "essential uses" a follows: a small refrigerator (60 kVh/month) plus three 40W incandescent light bulbs (not efficient but common in low- income households due to their low initial cost) used for six hours per night (22 kWh/month) plus two 20W fluorescent lights (7 kWh/montii) plus radio, fan, etc. (11 kWh/month). Therefore, it is recommended that residential consumers using 100 kWh per month or less be protected from the tariff increases applied to other consumers by means of a "lifeline" tariff. A lifeline tariff, in fairly common use in develoning countries4, is a subsidised tarif' applied to a small initial "block" of electricity consumpiion defined as essential use, for which only residential consumers are eligible. Thus the rate per kWh for the first 100 kWh consumed per month by a household would be less than the rate charged for electricity in excess of 100 kWh per month. The tariff for consumption greater than 100 kWh/month would be set to recover the utlity's full cost of production plus a slight margin to recover the cost of the subsidy. Althouph the subsidised tariff is designed to benefit only low income consumers, for ease of admlnistration it would in fact apply to all residential consumers. However, only aveaed $378 ($4,536/yr) and $481 ($5,772/yr) in Yap. Average monthly income in FSM was $465 ($S5,580/yr). 4 Counties in the Pacific region with *ifeline rawt strucues for residental consumes are: the Cook Islands (initial block 120 kWh/month), Papua New Guinea (100 kWh), Tuvalu (100 kWh), and Vanuatu (60 kWh). - 82 - consumers who use 100 kWh/month or less would benefit significantly from the subsidy; higher charges to other consumers would cancel the subsidy to them. A lifeline tariff has the advantaes of being fairly easy to administer and not very costly to the utility's other customers, smce low-income domestic consumption is usually a very minor portion of total sales. In FSM, a lifeline tariff would benefit the estimated 20% of residential consumers who use 100 kWh/month or less and account for an estimated 2%6-5% of all residential consumption. In total, the subsidy would apply to roughly 10% of total electricity sales (5.6 GWh of total sales of 55.3 GWh), rather than to 100% of sales, as at present. A lifeline tariff of 50% of full costs, say $0.10 per kWh, with all other consumption charged at full cost would imply a total subsidy from the state governments of $560,000, or only 5% of the total 1990 subsidy of roughly $11.2 million. 2. Commeidal consumerm Electricity in most of the commercial and industrial enterprises found in the FSM and elsewhere in Micronesia is usually a small proportion of their total costs, rarely exceeding 5%. Increases in the cost of electricity in these commercial activities can be passed on to consumers without a significant increase in the price of the final product. In any case, there is evidence that the private sector in the FSM (as in other countries) puts more importance on reliable electric service than on cheap electric service: many commercial enterpises in all states have invested in their own standby generating equipment to use when public power system fails. The commercial sector, despite initial vocal complaints, can be expected to respond to higher electricity tariffs in a variety of ways, includmg investment to improve the efficienc ofelectricity consumption and perhaps raising the price of what they produce or sell, although final product prices will not be affected significantly. Substantially lowered production or employment or much higher prices for consumer goods are very unlikely results of higher electricity tariffs. IBRD 23187R FEDERATEE STATES OF MICRONESIA E O I ENE5RGY SUPPLY < /3ENORtH PACIFIC OCEAN STATE OF POHNPEI, F0OHNPEI ISLAIND C-FEDERATED STATES OF MICRONESI . ESILPOWERrrAToNS' OLNAA ENERGY SUPPLY -rnstSlFUR sUNES ' E K K$A STATEOFKO KS IND * IESL PO%ItSTATION '- E$1N GPOWERASTMBUTONLNES /* SAT Of GOVOThl NORT^H RAC)F*C OCEAN 4 (r , , -. 5 CIAO r - ~ ~ ~ ~ ~ ~ ~ ~ V ~K 7~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ - M-4AL,W T1p v H UfflOC OL~~~~~~~~~~~~~~~~CAUON II ~~~~~~~~~~MARSHALL sm, ' N ISLANDS LJ~~~~~~~F ~~~~PACIFIC OCEAN % ,s"'N EDERA RSTATES .CIFIC on'. n J OF ACWNE5.A r I ~~~~~~~~~~~ILANDS FEDERATED STATES OF MICRONESIAcw c-- osn Xa~{< \hgf @.'-, \J ~~~~~~~~ '~~~~~~( F--- ~~~~~~~~~~~NORTH PACIFIC OCEAN P~~~ _< .5. '. _ I #t _ _v _ . _=~ . I .= _ IIS -- UNescr>C^mK>N _ K- _rEnvS *^ INDONESIA f - | | fll PACIFICOCEAN OF THE E / 5- A.* Moril rv r I oShFRi Dumung //= ~~~~~~~~~~~~~~~NORIH PAC!F1( 'DX EV^P FEDERATED STATES OF MICRONESIA 4 w NOT A J ENERGY SUPPLY STATE OF YA! YAP ISLAND POWER STATO0N ( E ST NG DSTRIBUTION LINES o - =' - PLANNED DISTRIrETION LINES / - AIN ROADS 1 I /- SELECTEDTOWNSANDVILLAGES \ 0 SEATOFGOVERNMENT M,E , _ _ _ _ _ / 0i i 0,0/.;'SE53 1 3 4 5 6 7 0 o22 Da,C ,*> .Z wsp FEDERATED STATES OF MICRONESIA ior.o, MX - - COLONA , ENERGY SUPPLY STATE OP CHUUK, CHUUK ATOLL, WENO ISLAND Fo6ooO,J oj-2 _dV oss;> n> \ , * POWER STATION -b _' EXISTING DISTREJ7ON LINES 5/_ / - M N ROADS SELECTED TOWVNS AND VILLAGES ,NORTIj Ph0; C * * SEAT OF GOVERNMENT . < ]51 jo I d:~~~~~~~~~~j srYs | - ~~~~~~~~~~~~~~~~~INTERNATIONAL50OUNDARY YKp re Uln wa -- ~~~~~~LINES50FDEMARCATION r ; MARSHALL _ 91l _~~~ Al 8 Mrb L.d YAt W l or FbS CHUUK F (NUUi CHKUMt \ ISLANDS~~~~~~~~~SLAND I _-X | 01' Y 8t c VUK NNt O~~~~~~~~~~~~RYm. _ .s { : TRUST | r ,eL EeEL EbH~~~~~~ERRIo UK'Mn Nmu OPE Pone FLE, 1-, EO7Ia . I _ _ \ ~~~~~~~~~~~~ ~~OF THE -IUCib HE b., ZbV<