AGO tells CUC to stop awarding of 80-MW project • Utility corporation ignored recommendations, says legal opinion

The Attorney General’s Office had strongly suggested to the Commonwealth Utilities Corporation board to withhold awarding of the Saipan power project to Enron until technical specifications and contractual issues on the new proposed plant had been met.

Because majority of the board members went ahead and ignored the AGO’s recommendation, the government-owned utility corporation is now again in hot water as the House of Representatives steps in on the heels of its decision to hand out the estimated $120 million contract last Friday.

The House is scheduled to meet this afternoon in a special session in which the issue of the controversial 80-megawatt power generation is one of its top agenda.

According to House Floor Leader Oscar M. Babauta, the legislative scrutiny has been prompted by the board’s failure to reconsider its action in light of the legal opinion provided during its meeting last Friday.

He said they would have passed an amendment to the recently enacted law that would prevent filing of lawsuits against any decision on the power project.

“It’s now too late to do that because the contract has been awarded,” Mr. Babauta told in an interview yesterday. “The leadership is concerned whether CUC was given ample guidance to come up with their decision.”

He cited in particular the two-page legal opinion issued by the AGO last Friday before the board meeting in response to a request by CUC Chair Jesus T. Guerrero.

AGO’s legal opinion

The board had inquired whether it could extend the 60-day deadline imposed under Public Law 12-1 to make an award on the power plant.

Signed by Gov. Pedro P. Tenorio last March 31, that law specifically allows for an extension upon finding of “clear and convincing evidence that an award within the 60-day period is not in the best interest of the CUC,” according to the legal opinion, a copy of which was obtained by Saipan Tribune .

The board voted 3-2 in favor of granting “conditional” award to the Texas-based conglomerate — a decision they said was compelled by the deadline on May 30 and the desire to begin the negotiation process with Enron.

During the meeting attended by Attorney General Herb D. Soll, the five board officials went into closed-door discussions which stretched the proceeding to three hours.

According to sources, they had met a day before with members of the Legislature to consult with them before reaching a decision.
Mr. Guerrero also discussed the matter with the government lawyers last May 24.

In fact, the memorandum containing its legal opinion indicated that the CUC “is not prepared to make an award at this time,” citing the lack of technical specifications for the 60-MW plant, low-speed generators mandated by law as well as absence of expertise to compile or evaluate such specifications.

Likewise, the AGO noted that the utility corporation has no contract document for award and that it has not retained experts to draft or review such contract.

It also said that none of the current offerors have submitted or have been given a chance to submit proposals complying with the 60-MW plant requirements.

“Under the present circumstances, there appears that a clear and convincing finding can be made that it is in the best interest of the utility to delay an award until the specifications, contract documents and revised proposals have been compiled, submitted and evaluated,” said the AGO.

Defer action

Although it reinstated the original request for proposal issued in 1997 for the 80-MW plant that was scrapped by the board last January under former chair Rosario M. Elameto’s leadership, PL 12-1 allows phasing in of the 60-MW capacity as recommended by CUC’s power consultants from Burns & McDonnell.

Ms. Elameto and member Zania M. Fleming were the two who abstained from voting in favor of Enron after their attempt to defer the award pending the hiring of a private legal counsel was defeated.

The board is expected to sole-source the contract for legal services necessary during the negotiation process after it rejected the lone proposal submitted by Steve Woodruff, the Senate legal counsel, under the 15-day emergency procurement issued by CUC.
Assistant Attorney General Bill Ohle, who has served CUC for the past four years, has resigned effective June 15.

According to Ms. Elameto, they were pressing deferment of the award until a new legal counsel comes in and experts are hired because she said there were still many issues left unanswered, such as specifications for the 60-MW plant.

“We are not engineers and lawyers. We need those special expertise to guide us in making decisions,” she said in an interview.

Board members who voted to award the contract emphasized the selection of Enron over competing firms such as the Tomen Consortium and the Saipan Power Partners/Hawaiian Electric was based on the provisions of PL 12-1 — a decision that is now courting potential lawsuits.

CUC has come under fire since 1998 over its handling of the power project touted to be the biggest deal ever in CNMI’s history. It is to be installed through the build-operate-transfer scheme under a 25-year agreement.