CDA opposes debt relief for CUC

The Commonwealth Development Authority expressed strong opposition to a new bill that seeks to grant debt relief to the Commonwealth Utilities Corp., calling instead for the implementation of the settlement agreement signed by both parties for the $45-million loan.

House Bill 14-362, authored by Vice Speaker Timothy P. Villagomez, should be summarily rejected, CDA added.

In a written comment on H.B. 14-362, CDA noted that the measure is the fourth attempt at the House of Representatives to write off CUC’s $45-million debt to CDA.

“We have opposed it each time and submitted written comments. Please forgive us if the following appears repetitive for some members of the Legislature but CDA reiterates its previous opposition…with equal fervor,” CDA said before offering its comments.

First, CDA said, H.B. 14-362 violates the constitutional maxim that no law should be enacted that impairs the obligation of contracts.

The agency pointed out that CDA and CUC entered into loan agreements and CUC obligated itself to repay the loans, plus interest, to CDA.

If the bill is passed, these contractual rights and obligations would be impaired. “[H.B. 14-362] proposes taking an asset or benefit owned by CDA, and without consideration, wiping it out. Not only is such a transaction improper, but it blatantly abrogates the fiscal integrity of CDA as an autonomous agency,” CDA said.

H.B. 14-362 will also result in violations of the terms of specific agreements between the CNMI and the U.S. Department of the Interior, CDA said.

The government’s loaning authority said that the agreements require the payment of principal and interest from revenue generating projects into a revolving fund for the financing of additional revenue-producing capital development projects.

Furthermore, H.B. 14-362 totally ignores Public Laws 13-35 and 13-36, which both address the CDA-CUC loans and the amended memorandum of agreement wherein the two agencies have set forth their settlement agreement.

P.L. 13-35 waives $16.07 million of the principal and certain interest payments owed by CUC. P.L. 13-36 authorizes CUC to issue share of cumulative, non-convertible, non-transferable preferred stock valued at $45.5 million.

“It is unfortunate that such a bill has been introduced, and if enacted, it will have the net effect of severely damaging the fiscal integrity of CDA, CUC and the entire CNMI,” said CDA. “The settlement, as set forth in the amended memorandum of agreement between CDA and CUC, as sanctioned by the Legislature, is a more feasible and financially sound solution to the CDA-CUC debt problem. CDA has already indicated that it is willing to compromise and give some time to CUC to begin its required payments; and those concessions and negotiated arrangements should suffice.”

H.B. 14-362 also proposes to scrap the fuel surcharge and raise CUC’s electricity rates. If signed into law, the bill would increase the power rate for residential customers and non-profit groups from 11 cents to 13 cents; commercial users, from 16 cents to 18 cents; and government, from 16 cents to 39 cents.

The residential rate increase would not apply to residential customers who use less than 2,000 kilowatt hours per month. Also, the government rate would be reduced to 18 cents per kilowatt hour upon payment of its $18 million outstanding debt with CUC.