CUC tries privatization—again

The Commonwealth Utilities Corp. is renewing efforts to privatize its aging power plant on Saipan.

CUC executive director Antonio S. Muna said CUC plans to seek proposals from private companies interested in running the main power plant on Saipan and selling energy back to the utility for distribution to the community.

Muna recently told the lawmakers that CUC plans to get the “request for proposals” within the next six months.

Muna, in a memorandum to Gov. Benigno R. Fitial, said the independent power producer may consider taking over operations and rehabilitation of Power Plant. If it chooses to do so, the IPP will bear all capital costs for the continued repair or purchase of new generators and related infrastructure.

He added that if CUC is required to provide fuel and lube oil, energy efficiency will be a major factor in the selection process. “The offeror proposing the lowest purchase price per kWh will be awarded the contract, conditional to energy efficiency and minimum buy,” he said.

Muna also said that CUC had not determined the minimum generation capacity to be required of the IPP, nor the contract period for the proposed IPP. To determine these, CUC must consider its current contract with Pacific Marine Industrial Inc., which runs Power Plant 4, as well as other issues including the possible commercial production of alternative energy in the future and net metering.

Several attempts have been made to privatize CUC’s power division, but they failed for different reasons. The last privatization effort was canceled in July 2007. The Office of the Public Auditor, which ordered the cancellation, ruled that the procurement process was unfair and lacked transparency. OPA also said the exorbitant fees charged by CUC discouraged competition.

The Legislature is currently considering a measure requiring CUC to issue a privatization bid within 45 days of the bill’s enactment.

Under the House-approved bill, CUC will be able to sell the power system for at least $250 million, half the minimum value proposed in the original version of the bill. The bill calls for a bid process, a departure from the request-for-proposals procedure CUC had used in its previous privatization efforts.

The bill would also restore the CUC board of directors.

Rep. Victor Hocog, one of the bill’s proponents, said it is necessary to fast-track the privatization of CUC, as the utility is depleting government resources while failing to offer reliable and affordable service.

“[The] Commonwealth ratepayers deserve a utility that delivers high quality power on a 24/7 basis at reasonable prices, whose operations are open and transparent, whose books are balanced, whose audits are clean, and whose operations are reviewed by an independent regulator,” the bill states.