Chamber to House: Don’t override Fitial’s veto

The Saipan Chamber of Commerce is urging House lawmakers against overriding Gov. Benigno Fitial’s veto earlier this month of legislation to privatize the Commonwealth Utilities Corp., saying the bill could lead to higher utility rates.

Fitial on Sept. 15 vetoed H.B. 16-77, saying in a letter to the House and Senate that key portions of it will “increase CUC’s costs,” an added expense that would be passed to consumers. However, the Senate later overrode the veto and the House will soon vote on whether to follow suit.

Now Chamber president James Arenovski, in a Sept. 26 letter to House Speaker Arnold Palacios, is pushing for lawmakers to uphold the governor’s veto. While the Chamber supports privatizing CUC, he writes that sections of the bill threaten to force major utility rate increases.

“While the Chamber is generally in favor of the ultimate goal of the privatization of [CUC]…we are quite concerned that the bill will unquestionably lead to utility rates that include, in effect, a hidden, ongoing and significant tax on utility consumers paid to the general fund of the Commonwealth,” Arenovski writes.

This hidden tax, the letter adds, stems from the $250 million price tag the bill requires prospective private sector buyers to pay in order to acquire CUC and a provision giving CUC the power to settle disputes with the Commonwealth Development Authority by issuing $45 million in preferred stock.

“Any purchase price attached to CUC’s electric power generation operations will ultimately be passed on to utility consumers by the purchasing company through utility rates above and beyond what would otherwise be required to operate and maintain the utility system in a fair and prudent manner,” Arenovski writes.

Any preferred stock offered to CDA, he adds, would come with guaranteed dividends, a cost to the purchasing company that “could be repaid only through an increase in utility rates to consumers.”

H.B. 16-77 saw a host of major revisions when it was under review by lawmakers, according to a draft version of the bill that notes which sections were removed or changed. For example, lawmakers struck a major portion of the bill opening the door to full privatization of CUC during a 40-year period and lowered the original $500 million price for buying control of the utility service.

Despite the reduced price tag for CUC, the Chamber contends that many of the changes to the bill will prompt higher utility costs.

“To cause a further, artificial, increase in rates would not only harm residential utility consumers, but also likely prove an insurmountable challenge to the remaining businesses in the Commonwealth and deter new business investment,” Arenovski writes.