‘Fuel contract will have nominal impact on CUC customers’

The Commonwealth Utilities Corp. said yesterday that the six-year fuel contract it signed with Mobil Oil will have minimal impact on the agency’s power customers.

CUC legal counsel James Sirok told the Commonwealth Public Utilities Commission that for users of 350 kWh per month, the impact of the fuel contract is just $0.37 cents a month. For those consuming 500 kWh a month, the bill will increase by only $0.53 cents, while users of 1000 kWh per month will see a $1.05 increase each month.

For 500 kWh/monthly users, Sirok said the increase is equal to only one-tenth of a cent.

CUC and Mobil signed the six-year contract on May 1. It includes the option for CUC to terminate the contract at its discretion after four years. This option, Sirok said, is for CUC alone and has never been allowed by Mobil in any of its other contracts.

Sirok said that the early termination provision was included so that in the event CUC needs to move to renewable energy sources, it can do so. He believes, however, that these alternative energy plans will not happen anytime soon.

Under the contract, CUC is required to purchase 108 million gallons of fuel in six years, equivalent to 18 million gallons every year. If CUC reaches the 108-million gallon mark during the term of the contract, rate will automatically drops by $.0611 per gallon.

Saipan Tribune learned that the amount of the six-year contract is $360 million.

Sirok told the CPUC that the utility agency owed Mobil Oil $7.6 million under a previous contract. Of this debt, $1.3 million represents penalties CUC incurred for not consuming up to the minimum contracted amount of fuel. The remaining $6.3 million represents all the debts CUC owed the company.

The benefits of the new contract, Sirok said, include forgiveness of the $1.3 million fine and Mobil giving CUC a $3 million unsecured line of credit at no cost to the utility agency.

Mobil Oil will also provide CUC $6.6 million under its “Marketing Assistance Program” at no interest. Sirok said this MAP is not normally provided to an entity like CUC but was done so because of the new contract.

Of this $6.6 million, CUC will receive $5.7 million on June 6 this year, while the remaining $900,000 will be disbursed in April 2015.

CUC officials earlier said that to terminate the $6.3 million debt to Mobil Oil, all $5.7 million from MAP will be paid to the company upon receipt, while the $600,000 shortfall to retire all $63 million debt will be paid using CUC revenue and collection.

Once these debts are terminated by CUC, customer security deposits will no longer collateralize the Mobil payable.

Based on CUC records, the new contract amount of $61.465 million is a slight increase from the previous contract of $61.253 million.

CUC operates three power plants that are all oil-fueled diesel engines. It spends about $60 million to $65 million each year on fuel.