‘CUC should look at options for engines’

To get the power rates down, the Commonwealth Utilities Corp. should continue looking at replacement options for the existing power plant generation and bring in new engine units that can generate cheaper electricity.

Robert Young, general manager of the Economists.com, said in an interview with the Saipan Tribune that CUC could lower its power rates from about 31 cents to 23 cents based on independent research that he had conducted.

“Instead of having 23 small engines, you could have five very large ones that serve about 18 megawatts apiece, so you would have one 90-megawatt generating plant that burn heavy fuel oil,” Young said.

These large engines, he said, would be efficient since, instead of paying for diesel at about $2 a gallon right now, heavy fuel oil costs only about $1.20 a gallon.
“There would be a dramatic decrease in the electric rate if you do that,” he pointed out.
Young said his analysis shows that the new power plants would pay for the capital costs—the money that will be borrowed to buy the plants. And this, he said, will still allow CUC to reduce rates by about five or six cents.

Young, however, conceded that it will take a couple of years to build these big power plants.

Young said he understands people’s anger over the implementation of the new power rates.

“It’s a blow to the CNMI. I follow the tourism statistics, I know they’re going down. I know the garment industry is going gown. And this [new rates] is a very painful step,” he said.

In explaining the need to implement the new rates, Young cited that for the last 14 months, the CNMI government has been taking money out of savings to pay for oil.

“What happened is, even though the price of diesel went from 70 cents a gallon to 20 cents, the electric rates stayed the same,” he said.

To address the problem, Young said, the government took the money from surplus revenue that they had from the existing revenue to pay for the costs of oil. “It got to the point where the CNMI government had no more money to buy for oil and so that’s the reason why we had the rate increase,” he said.

Young conducted the CUC electric cost of service study. Based on his proposal, the utility agency started implementing the new power rates under the proposed amendments to the electric service regulations.

CUC is planning to make the power rate increases permanent. The agency had just completed public hearings on Tinian, Saipan, and Rota. In Wednesday’s hearing, many Saipan residents strongly opposed the proposal to make the rate increases permanent.

Before the implementation of the emergency rates, CUC was charging 14.5 cents per kilowatt-hour including surcharge for residential, and 19.5 cents including surcharge for government and commercial.

The new rate schedule sets a flat monthly fee of $5.60 for residential customers. It also provides households with electric fuel rates that rise with increased usage.

Commercial customers are charged a flat monthly fee of $7.67. A flat monthly fee of $7.67 has been applied to government agencies.

Customers categorized as “non-conforming load” because of their erratic usage are assessed a flat fee of $56 monthly.

The July and August 2006 electric fuel rate was 21.5 cents. For September, it was 21.9 cents, while this month is 19.4 cents.