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Small power firms in Pacific plan to join up to cut costs

Cash-strapped electricity companies in the Pacific islands plan to join forces to cut the high fuel costs that are making it difficult for them to stay afloat, officials said.

The Fiji-based Pacific Power Association (PPA) is tackling the problem through a plan for joint fuel-buying to lower costs and by reducing electrical distribution losses which cost power companies huge amounts of money.

PPA executive director Tony Neil said in the Marshall Islands capital Majuro that island utility companies likely would save money by banding together to buy fuel in larger quantities.

Because they separately purchase relatively small amounts of fuel from oil companies, they pay more than larger consumers. Most islands are heavily dependent on diesel generators for electricity.

PPA chairman and Marshalls Energy Company (MEC) general manager William Roberts said in an interview this week that fuel costs eat up an average 70 percent to 75 percent of the operating budgets of Pacific utilities.

For the smaller islands in the region, it's even higher, Roberts said.

"In 2000, fuel costs amounted to 65 percent of MEC's operating costs," Roberts said. "Last year, fuel accounted for 83 percent of our operating costs."

The idea of joint fuel purchases has been around for several years in response to skyrocketing fuel costs, but Neil hopes it will get fresh impetus from a new partnership with an Australian-based investment bank.

Macquarie Bank plans to provide crucial data to island leaders on hedging strategies, to help reduce the impact of spikes in the volatile oil market.

The information will also show the potential benefits of joint purchases, Neil said.

"By next year's Pacific Island Forum [meeting of regional leaders], we'll have solid data to show to the leaders," he said.

In another move, the PPA has secured US and EU funding to launch a detailed study next year of electricity losses in the distribution system of Pacific power companies.

US funding will pay for studies in the US-affiliated islands, while the EU funds will cover the rest of the Pacific.

Power plants, electric line transformers, and connecting equipment account for large losses of electricity, wasting fuel and power, Neil said.

Small island power companies could be losing as much as 20 percent of the total power they produce.
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