CUC: No power rate cut • Proposal to lower cost would push the utilities company to gov’t subsidy, says Chairman Dela Cruz

Calling a legislated rate reduction as “disaster,” the Commonwealth Utilities Corporation has warned lawmakers against forging ahead with their plan to lower the cost of electricity for residential and commercial users on the island by an average of 25 percent.

CUC Chairman Juan S. Dela Cruz said the proposal would throw the utility corporation back to government subsidy as its financial standing would suffer with lower power rates.

Although the reduction stands to benefit residents and business establishments, CUC expects to lose an average of $13 million each year in revenues under the Legislature-dictated policy.

“The utility will be bankrupt,” said Dela Cruz in a letter to Senate Vice President Thomas P. Villagomez, chair of the Senate committee on Public Utilities, Transportation and Communications.

He maintained the proposed bill pending before the panel will have a larger impact on the investment potential of the Northern Marianas, dimming further once investors learn of a “debt-ridden and incapable” local utility service provider.

“All of our efforts to grow from a troubled, subsidy-reliant government agency in a businesslike success will shrivel,” the CUC chairman said.

Dela Cruz is commenting on Senate Bill 11-115 which seeks to bring down residential rate from 11 cents to nine cents per kilowatt/hour of electricity, while commercial rate from 16 cents to 11 cents.

Sponsored by Rota Sen. Edward U. Maratita, the measure aims to safeguard the rights of CUC customers following complaints against some of the services provided by the government-owned utility firm.

It will also revamp the collection system by the utility firm as well as cut by half other fees, like the cost of reconnection of power service.

The move comes on the heels of a CUC decision to reinstate government power rate from 20 cents to 16 cents in efforts to help the CNMI cope with the ongoing financial crisis.

No rate study: While utility officials contend the proposal offers benefits to island residents, Dela Cruz said it lacks rate study on the possible financial impact on CUC earnings and runs contrary to the mission of the autonomous agency as provided under the law.

In fact, an independent study commissioned by the US government to determine the exact cost of producing electricity on the island has recommended higher residential rates, which he said has not been implemented.

“The CUC board… chose instead to cut internal expenses and reduce the staff by approximately 32 positions,” Dela Cruz pointed out.

The proposal also ignores an agreement between the CNMI and Washington, forbidding “political maneuvering” in the utility management so that CUC will remain qualified to receive federal grants for its infrastructure development.

According to Dela Cruz, the corporation has tried in recent years to adhere to a cost-recovery policy despite ballooning operational costs and other expenditures, like fuel purchase.

“Increased fuel prices are hurting us. Each reduction in reconnection fees or other rates equally impacts the ability of our Board to maintain its fiduciary responsibility,” he said.

Some residential customers have also evaded payment of their utility bills, costing CUC more than $700,000 in annual bad debt. They have also defrauded the government by trying to have their power restored under a new account.

“These customers are typically the ones who complain to the Legislature. They seem to think it’s okay to defraud the government. Our leaders cannot encourage this,” the utility chairman said.

He added that about $8.4 million in uncollected debt have been written off by CUC between 1992 to 1997 alone, but they have ensured that this practice of evading payment will not happen anymore.

“(W)e feel that the majority of our customers appreciate the fact that we’re keeping their rates and expenses lower by not allowing abuse,” Dela Cruz said.