CUC fuel now at $90 a barrel

The debt-laden, cash-strapped Commonwealth Utilities Corp. has never been in a worse situation, especially with fuel now costing $90 a barrel, Lt. Gov. Timothy P. Villagomez told local businesses yesterday.

Villagomez, the guest speaker at the Saipan Chamber of Commerce membership meeting, reported that CUC’s latest tanker delivery, which came just over the weekend, came in at $90 a barrel.

“This price represents the highest ever paid by CUC for fuel so far,” the lieutenant governor said. He noted that CUC was paying an average of about $40 a barrel in the first few months of fiscal year 2004.

If the current trend continues, CUC’s fuel bill could reach nearly $74 million before the end of the fiscal year, he added.

Furthermore, the lieutenant governor confirmed an earlier report that CUC was projecting to close the end of FY 2006 with a deficit of over $32 million.

CUC’s revenue estimate for the fiscal year is $84 million. This includes the 3.5-cent fuel surcharge implemented in April 2005 that generates roughly $1.2 million a month for the corporation.

However, the utility’s operating expenses are seen to reach $116 million, including the $74 million fuel cost.

The skyrocketing price of power generation fuel has not only caused a financial burden to CUC, but also brought the power plant to its current status.

“The dramatic increase in the price of diesel fuel has forced CUC to divert its funds and delay much needed maintenance on its generators. This has caused such problems as periodic blackouts and or load shedding due to lack of fuel or generator breakdowns, a financial crisis that has led to a state of emergency declaration that has placed CUC under the control of the previous administration and again under our administration,” Villagomez explained.

He reported that, because of maintenance issues and various mechanical problems, CUC engines are generating only 67 of their 116-megawatt combined capacity.

Peak load on Saipan averages 64-65 megawatts a day, leaving the power plants with practically no reserve capacity.

“A forced outage at any of its generators could cause CUC to immediately implement load shedding, or worse cause an islandwide blackout at any given moment,” Villagomez said.

In addition, he said that about half of the generators are nearing the end of their practical service life, having been running for over 20 years without proper preventive maintenance.

As a result, the engines do not burn fuel and provide power as efficiently as possible. Modifying, upgrading, and rehabilitating the power generating units will be costly, he added.

“[W]ith all of my years of experience in dealing with CUC, I can honestly tell you that I have never seen a worse state of affairs for the utility. To say that the state of CUC is pretty darn bad would be a gross understatement. The CUC situation is bleak and distressing. The utility is insolvent. It’s plagued by debt and years of mismanagement. If CUC were a publicly traded stock, its value would be zero,” Villagomez said.