CUC: Govt subsidy should continue

Following Gov. Juan N. Babauta’s lifting of the emergency declaration for the Commonwealth Utilities Corp., CUC board chairman Frank Guerrero said the new administration should think about placing the utility firm under an emergency declaration or look for other ways to subsidize power generation, or the CNMI faces power load shedding and rate adjustments.

Guerrero said he would immediately call for a board meeting possibly on Wednesday next week, not only to formally adjourn the suspended May 19, 2005 meeting but also to discuss about the CNMI’s power crisis.

“We need to respond to the crisis now,” Guerrero said. “I want the transition committee…[to consider] to continue the emergency [declaration]…or CUC will not provide 24-hour electricity.”

The incoming administration has designated CUC board member Joe Torres as transition committee chairman handling CUC matters.

Guerrero said the CNMI government has infused a total of $13.5 million to the CUC to alleviate the power situation during the seven months when the utility firm was under the control of the governor through the emergency declaration. Of that amount, approximately $7 million went to maintenance of power plant engines, while the rest went to fuel cost subsidies.

With the average monthly fuel cost hovering around $6.2 million, Guerrero said the central government needs to subsidize fuel cost by close to $2 million monthly. He said the average monthly collection from customers has reached only over $4 million.

“The state of emergency gave the government the ability to reprogram funds,” Guerrero said.

Guerrero said the fuel surcharge has also alleviated the CUC’s financial condition, generating some $1.4 million monthly.

RATE ADJUSTMENT AS OPTION

The CUC should also look into raising its power rates, which, according to acting executive director Bernard Villagomez, are the lowest among U.S. states and territories.

“Eventually, I think the incoming administration should consider raising the rates,” Villagomez said.

In a separate interview, Guerrero agreed that the CUC’s rate structure should be studied, saying that it has been in effect since 1989.

The CUC pegs residential and commercial rates at 11 cents and 16 cents, respectively, for every kilowatt-hour consumed. On Guam and in Palau, residential rates reach 21 cents and 22 cents, respectively, added Guerrero.

Guerrero said the Attorney General’s Office has commissioned a U.S.-based consulting firm, Economist.com, to look into the CUC’s power rates and related issues and come up with recommendations.

Should the consulting firm come up with a recommendation to raise power rates, Guerrero said the CUC would look into a graduated implementation of the increases, conditioned upon the central government’s subsidy of fuel costs.

Without a subsidy or an adjustment of rates, Guerrero said the CUC would have no choice but to resort to power load shedding to save on fuel consumption.

Right now, the CUC generates approximately 68 megawatts of power, just enough to meet peak demand. Executive director Villagomez said one of the engines, which has been undergoing overhaul, would be functional by mid-2006 and is expected to generate 6.5 megawatts. Villagomez said another 6.5-MW engine would be repaired and would be functional possibly by September 2006.