CUC forced to dip into reserves due to shortfall

The Commonwealth Utilities Corp. will again be forced to tap into its cash reserves, in the face of a $1.8 million cash shortfall this month.

CUC comptroller Sohale Samari reported that as of Thursday morning, the utility corporation had only $2.1 million in its general fund.

He added that another $1.1 million is expected to be collected from customers between then and Oct. 15. Further, CUC is anticipating the $650,000 monthly payment from the government.

These amounts bring CUC’s total cash available to about $3.9 million.

However, the corporation has major commitments that it has to meet by Oct. 15.

On top of the list is the $4.9 million payable to Mobil Marianas Corp. CUC’s payroll, which is also coming up on Oct. 15, would cost about $550,000, while some of the miscellaneous expenditures would come to $250,000.

All of these would put CUC’s total expenditures by Oct. 15 at $5.7 million.

“And that, unfortunately, puts us in a cash shortfall of about $1.8 million,” Samari said in his report to the CUC board of directors last Thursday. CUC plans to cover the shortfall by cashing its certificates of deposit, he added.

In a Thursday interview, CUC executive director Lorraine Babauta said the corporation is “running out of money” because of the consecutive increases in the cost of fuel. Babauta said the corporation may be forced to lay off some personnel or cut their work hours, if CUC’s financial situation does not improve.

Nevertheless, she maintained that the CUC administration has taken aggressive steps to collect from delinquent customers, including the CNMI government.

Samari echoed this, saying that CUC is now pursuing collection from the corporation’s three largest delinquent customers who owe CUC a combined amount of over $2 million.

He said one customer is involved in a dispute over a power bill amounting $1.3 million, while another customer owes about $500,000. CUC also has a dispute with a customer over a water bill amounting $530,000.

The government, however, is CUC’s biggest delinquent customer, with a total debt of $18.3 million.

In April 2004, CUC notified the Department of Finance that utility services to various government agencies would be disconnected if the corporation did not receive payment on the bills.

Finance responded by asking the court to stop the disconnection and by suing CUC.

On April 23, the Superior Court granted the temporary restraining order. CUC and the government later agreed to extend the TRO until Nov. 30, on the condition that the government pays $650,000 per month.

Last Tuesday, CUC asked the court to dismiss Finance’s lawsuit and dissolve the TRO. The corporation argued that Finance has had nearly six months to address its failure to pay and to work out a plan or to demonstrate the validity of its arguments regarding the government’s utility bills. However, the matter has not moved toward resolution, CUC said.