The most direct impact falls on electricity customers. Under Section 23(c), Whipps reduced funding for the residential electricity subsidy from $1.7 million to $425,000, limiting the appropriation to cover costs already incurred under the prior fiscal year budget.

As a result, households will not receive the broader subsidy relief approved by lawmakers for FY 2026. Whipps said the subsidy was not designed to prioritize low-income families or those most affected by utility costs and was introduced during a period of unusually high regional energy prices, which he said have since stabilized.

In a separate action, Whipps vetoed in full the $2 million Government Efficiency Rebate for Palau Public Utilities Corporation customers under Section 23(d). The rebate would have provided a one-time payment to customers regardless of income or financial need.

Whipps said the rebate was an untargeted subsidy that would have diverted public funds away from targeted assistance programs such as the PPUC Lifeline Subsidy and provided government money to individuals who do not require assistance.

PPUC Chief Executive Officer Frank Kyota had warned lawmakers that the rebate would offer only temporary relief while leaving deeper utility challenges unaddressed.

In a December letter to legislative leaders, Kyota proposed redirecting the $2 million toward legally mandated upgrades to Palau’s water treatment and distribution systems. He said investing in infrastructure would improve water quality, reduce operational inefficiencies and energy use, strengthen service reliability during droughts and emergencies, and create conditions for permanent reductions in water tariffs.

Those infrastructure improvements are not funded under the FY 2026 budget unless lawmakers revisit the issue in future appropriations.

Beyond utility subsidies, Whipps vetoed eight state-level capital and development appropriations affecting Aimeliik, Airai, Melekeok, Ngardmau, Ngatpang, Ngeremlengui and Peleliu, along with a related statutory amendment.

The vetoes halt funding for projects including road improvements, water pipeline construction, community facilities, boat purchases and maintenance, and land development. States affected will need to delay or scale back those projects or rely on state block grants and other funding sources.

Whipps acknowledged the importance of the projects but said committing significant national resources before completing a comprehensive review of statewide infrastructure needs would be premature. He said the projects could be reconsidered later, noting that state block grants are already increasing and provide flexibility for urgent local needs.

Whipps also reduced general fund support for the Palau International Coral Reef Center, cutting its appropriation from $400,000 to $200,000.

The reduction limits PICRC’s general fund allocation for FY 2026, though Whipps said the impact would be offset by the center’s dedicated share of the Pristine Paradise Environmental Fee, which is expected to grow as tourism rebounds. PICRC will rely more heavily on that revenue stream to sustain its operations.

Whipps said the reductions and vetoes were necessary to prevent the government from entering an unsustainable fiscal position and to shift resources away from broad subsidies and discretionary projects toward long-term obligations.

While the changes mean less direct financial relief for utility customers and delayed projects for states, the president said the actions preserve resources for future planning, institutional needs and fiscal stability as the government moves into FY 2026.

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