$1.1M project funds diverted for CUC’s fuel purchase

Officials of the Commonwealth Utilities Corp said the reliability of its services is now in doubt if its cash-flow problems are not addressed soon.

CUC executive director Alan W. Fletcher and outgoing chief financial officer Charles Warren said they have recently been forced to divert and reprogram $1.149 million for fuel purchases to sustain the daily fuel needs of its power plants.

Records obtained by Saipan Tribune showed that CUC reprogrammed $359,000 for fuel purchase last May 27. Before this, another $300,000 was transferred for the same purpose on May 20.

Two other transactions for fuel buys were made on May 1 ($100,000) and May 6 ($225,000). Last March 20, CUC reprogrammed $165,000 for fuel.

“Yes, we have deprogrammed $1.149 million from various procurements in order to buy fuel,” Warren confirmed with Saipan Tribune.

CUC executive director Alan Fletcher disclosed at last week’s board meeting that CUC has a number of procurements, for which $1.813 million has already been set aside. Due to serious cash-flow problems, however, CUC was forced to tap $1.149 million from this obligated amount to procure fuel. After the last transfer on May 27, only $664,318 was left on the account.

These impacted eight procurements include salary administration ($161,802); warehouse rehabilitation ($210,105); transmission and distribution of typhoon supplies ($864,000); laboratory repairs ($50,000); T&D’s meter testing vehicle allocation ($24,058); Power Plant 4 Apec project ($107,949); Nighthawk Meter Retrofit ($143,250); and other planned projects ($252,154).

When asked what will now happen to these impacted procurements, Warren told Saipan Tribune that “projects will be continued as cash flow permits.”

Both Fletcher and Warren separately warned that some funds for stipulated order projects would also most likely be tapped for fuel buys. This would mean the deferral and delays in SO projects and requirements.

Warren said CUC will go to the court on this plan.

“The SO funds referred to are not grant monies, but CUC funds set aside for SO projects. We do not know if non-SO use by CUC will be allowed by the federal court,” said Warren.

As of April 31, 2014, CUC is recording an average of about $7.6 million per month in receipts and expenditures for operating activities, Warren said. For capital items and debt service, CUC has spent about $900,000 more than it has received from collections.

CUC operates three power plants, which have oil-fueled diesel engines. Procurement of fuel is biweekly and costs around $1.2 million. Each year, CUC spend about $60 million to $65 million on fuel alone.

Current load

At present, CUC has what it describes as “adequate” power production for all its customers.

Fletcher disclosed that on Saipan, current power generation is 45.9 megawatts; Rota, 5.2MW; and Tinian, 20MW.

Saipan Tribune learned that most power production on Saipan is sourced from CUC’s Power Plant 1. Repairs, maintenance, and rehabilitation are required in other power plants.

Fletcher admitted that even short-term maintenance needs are being hampered by the lack of cash while repairs and supplies are mostly deferred for the same reason.

CUC relies heavily on the revenue it collects from ratepayers.