Fitial blames PUC for current power crisis

Gov. Benigno R. Fitial said yesterday he suspended the procurement regulations through his recent declaration of a state of disaster emergency for the CNMI in order to ensure that the Commonwealth Utilities Corp. could get the electric power flowing quickly and avoid any explosions at CUC’s power plants in Lower Base.

In clarifying the emergency declaration, Fitial at the same time blamed the Public Utilities Commission for creating the power crisis with its interpretation of the words “public utility” and its demand for a halt in the temporary power deal with Aggreko International.

“PUC is not CUC management. It was never intended to be. And it certainly does not have the resources and expertise to manage a utility company,” said the governor in his letter to Senate President Pete P. Reyes and House Speaker Arnold I. Palacios.

Fitial wrote the letter in response to the two lawmakers’ request for the governor to clarify the state of disaster emergency declaration he issued Aug. 1, 2008.

Reyes and Palacios specifically asked for clarification on the nature of the emergency declaration and the justification for, intent and extent of application of the declaration’s Directive No. 2.

Directive No. 2 states that “the Commonwealth PUC Act of 2006, Public Law 15-35…is hereby suspended insofar as it would require the presentation of CUC procurement information, including contracts and other measures relating to the supply of power or the operation and maintenance of CUC’s generation, for PUC review.”

In his response yesterday, Fitial said the disaster declaration, and the directives that implement it, are focused on bringing CUC and the island’s community life “back to health.”

On the Directive 2 issue, the governor said his purpose is to have “no more potentially deadly delay based on legalistic interpretations of the PUC Act.” He said the PUC Act does not require PUC pre-review of contracts.

But in PUC’s July 29 letter, Fitial said, the commission insisted that PUC essentially substitute itself for CUC management, and review all contracts in advance.

“If [CUC executive director] Tony Muña is to solve our power crisis, we must not tie his hands with time-consuming, unnecessary bureaucratic pre-reviews,” he said.

Fitial said the language of his directive makes clear that PUC is to focus on its main job—rates, charges and the cost of serving the citizens—and not on trying to run a utility company.

The governor emphasized that PUC can examine contracts at the proper time.

Citing background of the daily outages, Fitial recalled that the worsening power crisis on Saipan started three weeks ago.

Fitial said CUC power plant engineers had advised Muña to shut down Power Plant I before one of the power engines blew up.

“Part of the plant was already down, so we were experiencing daily blackouts,” he said.

The governor said Muña moved quickly to hire “world-class European company, Aggreko,” to provide temporary power to Saipan with no change in the electric power rates.

Fitial said CUC had previously done a public Requests For Proposals solicitation as the procurement regulations require. The previous leadership had, however, not acted on the open solicitation, he said.

“Meanwhile our electricity generators continued to fail, piece by piece,” he pointed out.

The chief executive said the Aggreko deal was the right one to get CUC through the massive repairs that would take Power Plant 1 off line.

However, he said, PUC wrote CUC last July 29, demanding that they review the Aggreko deal and decide if an independent company like Aggreko could do business in the Commonwealth.

Fitial said PUC insisted that Aggreko was going to be a “public utility,” and would need to go through the lengthy process of getting a special utility certificate from them and a pre-contract review process.

“But the PUC has no staff, and no experience yet in such matters. It was pretty clear that Tony Muña’s efforts were going to fail, along with Power Plant 1,” he said.

The governor said he understands the PUC Act provides that monopolies for power, water and wastewater treatment are regulated.

This means, he said that CUC’s rates, charges and treatment of customers are to be reviewed by PUC similar to the law in 50 states.

Fitial, however, stressed that PUC does not pre-approve CUC’s work and that the Commission is not a board of directors. Once CUC fixes the temporary power problem, PUC can review the contracts to see if there is any effect on rates.

“But if there is no effect, no PUC action will be needed,” said Fitial, adding that such is the way things work everywhere else in the U.S.

Fitial said PUC caused the crisis because it took an overly literal view of some statutory language that seems to say that anything is a “public utility” which sells a “system” or a “facility” to the CUC.

PUC, he said, also demanded that it review all contracts before they are signed, even if there is no effect on rates.

Fitial expressed appreciation to the Legislature for its quick action that, according to the governor, helped forestall the crisis.

“You drew up a statute to exempt this temporary power deal from the PUC’s reading of the term ‘public utility’. It specifically required me to declare a disaster emergency before the definition would work,” the governor said.

Fitial compared CUC and CNMI’s economy to a very ill person that has been rushed by an overworked team to the hospital for emergency heart surgery.

And he compared PUC to an outside new committee that has just been learning how to use a scalpel.

“In a short time, we hope to see our patient well. We cannot stop the surgery while an outside committee, new on the job, learns which scalpel to use. We should not,” Fitial said.