Despite three electricity tariff increases since January, “the national power utilities are projected to face an estimated shortfall of $17.5 million to $21 million over the next 12 months assuming the global trend continues,” said President Litokwa Tomeing in a nationally broadcast statement Thursday. This deficit amounts to close to 20 percent of the entire national budget.
The Marshall Islands has enough power plant fuel on island to keep the lights on until the end of August. But if it cannot come up with $8.5 million by this weekend to pay Seoul-based SK Networks for last month’s diesel shipment and a down payment on the next shipment, the possibility of running out of fuel looms large. The Marshalls Energy Company told the cabinet that without an immediate cash injection, it cannot raise the $8.5 million by next weekend.
In declaring the state of economic emergency, the cabinet ordered the Ministry of Foreign Affairs to seek funding help from the United States, Taiwan, Japan, Australia, other diplomatic allies and donor agencies for fuel to prevent a shutdown of power services to the country that has a population of about 54,000.
“Without electricity everything will come to a standstill,” Finance Minister Jack Ading told visiting officials from the Asian Development Bank earlier last week. “The adverse effects of this global fuel crisis, its intensity and severity, are even more acute and destabilizing on small island states like the Marshall Islands with practically no means to protect itself from external pressures and shocks.”
Not addressed in the state of emergency declaration is the government payroll or more than $33 million — about 30 percent of the national budget — that has doubled since 1999. “The Marshall Islands has the highest salary cost (as a percentage of its budget) in the Pacific region,” said Kiyoshi Nakamitsu, ADB’s Marshall Islands desk officer, who was in Majuro last week for talks with the government. He said ADB is keen to help the country, but needs to see fiscal reforms put in place by the government.
The cost to run diesel-powered generators in the two urban centers and three outer islands is estimated at $2.8 million a month. But despite tariff rates that have nearly quadrupled in two years, utility companies generate only about $1.3 million per month, according to figures provided by the Marshalls Energy Company, the main utility company in the country.
Tomeing announced as part of the state of emergency that the country’s parliament will consider legislation at its session in August to give tax exemptions for selected staple food items, and tax holidays and legal protection as sole suppliers of electricity for the government-run utility companies.
The government’s fisheries department is being directed to “take steps to put in place agreements with all vessels that transship in our waters, and all vessels licensed to fish in our waters to purchase fuel exclusively from the Marshalls Energy Company.”
While over the past three years a big alternative energy push has led to nearly half of the remote outer atoll homes getting donor-funded solar units, the state of emergency has ordered government agencies to redirect their alternative energy efforts to the two urban centers to help get people off costly electricity supplied by the government’s diesel-fired power plants.
The Cabinet has called for an immediate study on the feasibility of ocean thermal energy conversion as an alternative to using fossil fuels for power generation, while also ordering the cost-cutting measure of parking government vehicles immediately after work to end the current practice of workers using government vehicles for personal needs after working hours.
