SCC says it rejects CUC privatization plan

Saipan Chamber of Commerce president Alex Sablan favors the government’s seeming inaction on the proposed power privatization, citing that the existing proposal would result in dramatic increase in electricity rates.

“We reject the privatization plan as presented. It would have a detrimental effect on consumers. Even now, it cost them (Commonwealth Utilities Corp.) 24 cents per kilowatt hour. The privatization plan would mean 5 cents more,” said Sablan.

CUC charges a base rate of 11 cents per kwh for residential and 16 cents per kwh for government and commercial users.

Right now, CUC imposes a 3.5-cent fuel surcharge fee.

“CUC is losing. Why do you think they’re in emergency? They [CUC] cannot even collect all their bills. And they’re burning more fuel than they have to,” said Sablan.

He said that if CUC enters into the proposed privatization program, the condition would be worse.

He said the Chamber has actually written the government a few months back, expressing its opposition to the privatization plan as presented by CUC consultant, Harris Group vice president Dennis Swann.

Sablan clarified, though, that he supports privatization as a concept, “but not as presented by the CUC consultant.”

He said the existing proposal would be 5 cents more expensive than the industry standard.

“He [Swann] mentioned to us that 5.1 cents per kwh is just to compensate the privatization, meaning to pay the cost of privatization,” said Sablan.

CUC and administration officials have not been forthcoming about the privatization plan, indicating that it is of no immediate concern for now.

This even as Economist.com reportedly advised the government against awarding a contract under the present Request for Proposal.

The Economist.com was tasked earlier to review the financial status of two proposers: Telesource and Rolls Royce.

Press secretary Peter A. Callaghan said the consultant has not submitted a written report on the two proposers.

Meantime, CUC executive director Lorraine A. Babauta said that the government has spent at least $3 million since emergency declaration in May 2005 for the immediate repair of the main power plant.

Gov. Juan N. Babauta said that if a decision has to be made on privatization, the government expenditure for the engines repair would have to be taken to account.

The proposed privatization contract, which amounts to at least $60 million, would involve the takeover of the eight-engine Power Plant I in Lower Base, its rehabilitation and upgrade to meet federal environmental standards, and installation of two new 15MW generators.

The contract would allow the private company to operate the machines in 20 years.