CUC: No money to pay CDA loans

Since its inception in 1985, the Commonwealth Utilities Corporation has not obtained a full cost recovery to repay the capital and accrued interest loaned by the Commonwealth Development Authority.

In fact, the Department of the Interior has recommended three alternatives back in 1993 to make the utility corporation financially stable amid continued improvement programs, CUC Corporate Communication Special Advisor Pamela Mathis said.

Under the evaluation and assessment report submitted by Kennedy Shaw of Louis Berger International, Inc., the financial situation of CUC requires immediate attention in terms of its cash flow, its lack of cost recovery and its inadequate financial records and budget.

The CNMI government and DOI are both in an awkward situation since the bond account has become a major issue because of the failure to attain the agreed-upon and statutorily mandated goal of full cost recovery.

In order to recover the initial capital, DOI named three alternatives the government may pick. First, for the Legislature to infuse needed allocations; second, to increase utility rates, and third, to retire CUC loan as a grant.

Ms. Mathis admitted that right now, CUC has no effective rate system to obtain the needed financial stability to recover the initial capital and pay off all accrued interest amounting to $51 million.

Ms. Mathis said utility improvement projects in other territories like American Samoa, Pohnpei, Virgin Islands, among others, were given as grants.

She explained that back in 1985, CUC had to improve all its facilities to better serve the public. Until now, Capital Improvement Projects and other facility developments are still being carried out.

Further, CUC has also implemented the Plan of Action which recommended five steps that may be taken in order to strengthen CUC’s financial management.

The action plan includes the hiring of a comptroller, the need for a financial consulting services, the installation of a data system, the holding of a board training and the need for a management audit.

All these recommendations were carried out after the evaluation came out in 1993, Ms. Mathis added.

Presently, the CUC Board of Directors and lawyers are preparing needed documents that will be submitted to the House Committee on Public Utilities, Transportation and Communication.

CUC on Monday also submitted supplemental documents to the Legislature to support other pertinent papers currently being collated by lawyers.

Ms. Mathis said CUC will present a comprehensive audit report, assessment and evaluation of CUC operations since its inception in 1985 to give the Legislature a clearer picture of the financial standing of the utility corporation.

PUTC Chair Rosiky Camacho earlier granted CUC another 30-day to submit all documents needed to back up House Bill 12-320 which transfers CUC indebtedness the Department of Finance.

HB 12-230 also seeks to relieve the utility firm of all obligation to pay accrued interest. It provides CUC with credit against such indebtedness for all capital expenditures made from its revenues subsequent to the date of such borrowing from the CDA.

During a public hearing Monday, CDA warned that a take over of the utility corporation will happen if it continues to ignore demands to pay its $150-million debt.

During the inquiry, CDA underscored CUC’s obligation to repay principal and interest of the said loan.

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

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

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