CDA threatens to takeover CUC

The Commonwealth Development Authority warned that it may takeover the Commonwealth Utilities Corporation if the power firm continues to ignore demands to pay its $150 million debt.

During the inquiry called in yesterday by House Committee on Public Utilities, Transportation and Communication Chair Rosiky Camacho, CDA underscored CUC’s obligation’s to pay both the principal and the interest of the multi-million dollar loan.

The much participated meeting drew attention from the Department of Finance, NMI Retirement Fund, Commonwealth Ports Authority, Attorney General’s Office and other members of the House of the Representatives.

CDA Legal Counsel Vicente Salas argued that under the Special Representatives Agreement, the government-controlled lending agency has the right to investigate CUC’s financial management.

Mr. Salas said CDA has, in fact, the right to remove officials who cannot properly operate the utility corporation and relegate the responsibility to CDA’s appointees.

This, he added, will ensure smoother relationship and guaranteed repayment of CUC’s obligation which has amounted to $51,568,750.

On the other hand, CDA Executive Director MaryLou S. Ada explained House Bill 12-320 will violate constitutional calls against enactment of laws that would impair the obligations of contracts.

CUC and CDA entered into a loan agreement, stipulating CUC’s obligation to repay the loans plus interest. Such obligation was agreed to by CUC and bargained for by CDA but HB 12-320 will impair these contractual rights and obligations, pointed out Ms. Ada.

The executive director added that the government’s lending arm has fiduciary responsibilities that cannot be ignored, especially the need to safeguard the assets and preserve its financial vitality.

Even the finance department and the NMIRF rallied behind CDA’s demands of repayment. Fund Administrator Juan S. Torres said the bill is fiscally irresponsible and economic recession could not be considered a logical reason to tamper with CUC-CDA’s agreement.

Under HB 12-320, CUC’s indebtedness from CDA will be transferred to the Department of Finance to relieve the utility company of all obligations to pay accrued interest.

The bill also provides CUC with credit against such indebtedness for all capital expenditures made from its revenues subsequent to the date of such borrowing from CDA.

But Board of Election Executive Director Gregorio Sablan pointed out that funds used for public utilities were to be booked as loans and not grants.

“Yet CUC continues to ignore its obligation. CDA should collect from CUC the money it owed,” Mr. Sablan told the House Committee during yesterday’s public hearing.

CUC legal counsel Brien San Nicolas asked the Legislature to grant the utility corporation another month to comprehensively study the problem.

Based on the Department of the Interior’s report in 1993, CUC was created with zero capital and the concept for loaning the money through CDA was flawed originally.

The report assessed that it is essential to the CNMI that CUC be structured like a private sector utility corporation and that it conduct its affairs in a business-like manner.

In the next 30 days, CUC is obligated to submit financial reports and the impact of payments and non-repayments will entail.

CDA was also asked by the committee to submit a comprehensive report on how the collection and non-collection will affect the agency’s operations.

House Speaker Benigno R. Fitial asked Mr. Camacho to immediately convene the committee to discuss the matter explicitly. He said the Legislature should revisit the bill before the scheduled April 23 meeting.

According to Mr. Camacho the meeting with CDA and CUC will give the Legislature a better picture of the financial status of the utility company and shed light on the alleged violation of fiduciary responsibilities of CUC officials. (EGA)