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‘CUC deficit to hit $18.5M’
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Posted on May 05 2005
The Commonwealth Utilities Corp. has projected that its budget deficit would hit $18.5 million by yearend due to the high cost of power generation fuel.
The estimate was based on the assumption that CUC would collect a total of $11 million in revenues, including $5.6 million from fuel surcharge collections, by the end of fiscal year 2005.
Another factor considered in the projection is CUC’s current lack of a fuel supply contract. In coming up with the projection, CUC used the price of diesel on Saipan, which is $1.91 per gallon.
According to CUC, the deficit would decrease to $16.5 million if Mobil Oil Marianas’ current rate for Saipan—$1.777 per gallon—is applied.
Mobil was CUC’s fuel supplier for the past two years at least. CUC has yet to execute a new contract since its previous deal with Mobil expired on April 30, 2005.
“The increase in fuel costs was not budgeted, and it forced CUC to divert a lot of operation money to fuel expenses. We’ve been incurring this deficit as we try to meet our Mobil payments,” said CUC chair Francisco Q. Guerrero.
In its FY 2005 budget, CUC allocated $35.06 million for fuel and lube expenses. As of April 2005, actual fuel purchases and encumbrances had already totaled $29.57 million.
CUC estimated that its remaining fuel expenses would reach $27.58 million if CUC continues purchasing fuel from Mobil at its current rate.
However, if CUC purchases fuel from elsewhere at the regular rate, the utility will have to spend $29.58 million for fuel for the remaining months of the fiscal year.
Yesterday, the CUC board of directors deferred action on the plan to go into deficit spending.
While admitting that CUC has “no other choice,” Guerrero said the board could not approve the plan until other sources of funding were identified.
Guerrero expressed hope that management would succeed in securing a letter of credit to help CUC pay its fuel payments, as well as in executing a contract with Mobil at a much lower price.
“Mobil is showing good faith that they’re trying to accommodate CUC. They’re dropping the price and easing security requirements that they demanded at first. We’re also considering additional revenues,” Guerrero said.
