Govt claims $34M in CUC overcharge

The Commonwealth Utilities Corp. has overcharged the CNMI government a total of $34 million for water and sewer services for the past 10 years, Finance Secretary Fermin Atalig said in a declaration filed in Superior Court yesterday.

The amount is almost double the $18.3 million that the CNMI government allegedly owes CUC.

Atalig said CUC’s flawed rate structure has resulted in overcharges to the government that averages $3.39 million per fiscal year.

He based this figure on a comparison between water and sewer bills charged to a commercial customer and the charges levied on the CNMI government for the same level of consumption of water and sewer services.

Atalig said that in FY 2001, CUC billed the government $3.19 million in water and sewer charges, at the government rate of three cents per gallon for each utility. He noted that if the bill was recalculated based on the same usage but using CUC’s regular commercial rate of .119 cents for water and .05 cents for sewer, the government’s bill would have only been $104,525.

Therefore, Atalig claimed, CUC charged the government over $3.1 million more than it would charge a commercial customer for the same water and sewer service.

In FY 2002, CUC billed the government $3.24 million for sewer and water, when the amount should have been only $106,803—resulting in a difference of $3.1 million, according to the Finance secretary.

In FY 2003, CUC billed the government $4.1 million, when the government consumed only $133,478 worth of water and sewer services—resulting in a difference of about $4 million Atalig said.

Overall, CUC allegedly overbilled the government over $10 million during the three-year period.

“The current water and sewer rate system has been in effect for the past 10 years and it is estimated that the CNMI has been billed…$33,919,200 in excess of the amount charged to a regular commercial customer for the same consumption,” Atalig said. “This price inequity for the cost of service has not been resolved in our discussions and is central to our dispute. Until this issue is resolved, any resumption of billing based on existing rate structure would be unacceptable.”

The Finance secretary filed the declaration following CUC’s move to ask the court to dissolve an April 23 order stopping the utility firm from disconnecting utility services to government agencies for non-payment of bills.

The TRO was issued upon the request of the Department of Finance. It was supposed to lapse on June 1, but CUC and the government reached an agreement to extend the TRO until Nov. 30. Part of the agreement was a condition that the government would pay $650,000 every 15th of each month starting June until November 2004.

Last week, CUC’s legal counsel, Kay Delafield, filed a motion asking the court to dismiss Finance’s lawsuit and dissolve the TRO.

Delafield said CUC had not contested the TRO because of its interest in working out a payment agreement with Finance. She added 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.

In response, Atalig maintained that the government has complied with its agreement with CUC by making each $650,000 payment on time.

In addition, the CNMI government has attempted and continues to attempt to negotiate in good faith with CUC to resolve the dispute, Atalig said.

He cited some issues discussed in the negotiation, including CNMI’s indebtedness, CUC’s billing structure, legal standards for CUC’s rate system, an interim payment plan until all outstanding issues are resolved, identification of accounts that were not metered and a schedule for meter installation, and identification of accounts that do not have 24-hour water service.

Atalig noted that, while both parties have agreed on many of the issues, they have been unable to make sufficient progress on the legal standards to be used in the establishment of rates and implementation of a rate system based on these standards.

“I am hopeful, however, that further negotiations may lead to the resolution of this dispute, as we have made progress when both sides are willing to participate in good faith negotiations,” Atalig said.