‘Offset law is blocking CUC’s cash flow’

The Commonwealth Utilities Corp. says its cash flow problem has been made worse by a recently enacted law on security deposit offset.

Under the law, CUC must first apply a customer’s security deposit toward any past due amount. The utility cannot cut service to the customer while there is money remaining in the security deposit.

“Not only is this requirement an administrative nightmare,” said CUC executive director Anthony Guerrero, “it is also blocking our cash flow.”

CUC’s old practice already allowed a customer to consume power for 62 to 81 days without making a payment. The offset requirement made the “grace period” even longer.

CUC now depends largely on daily collections for money to pay for fuel. Last week, the utility came close to running out of fuel. But it was able to raise enough funds from customers.

Guerrero reported that the offset requirement had helped expand CUC’s receivables, currently about $14.6 million. Some of these receivables go back 15 years.

They have been outstanding for various reasons. Some are abandoned accounts, and others involve longstanding disputes between CUC and the customers. Some are businesses gone bankrupt.

Some autonomous agencies owe CUC, but commercial and residential customers account for a large bulk of CUC’s receivables.

The central government, which used to be CUC’s single largest delinquent customer, has made advance payment for consumption until July 2008. The $7 million the government has paid CUC represents its entire budget for utility this fiscal year. The government has yet to find the money for its CUC bills for August and September.

The security deposit offset program is part of a larger measure regulating the disconnection of utility service to residential customers.

The law, which was passed despite a governor’s veto, reduced the power reconnection fee from $75 to $60. It prohibited CUC from disconnecting any service before the disconnection date, and from disconnecting all utility services if the consumer is only delinquent in the payment of one service.

Further, the legislation prohibited CUC from cutting off service to a consumer who is receiving subsidy from the Department of Community and Cultural Affairs if DCCA is delayed in remitting the funds.