Kilowatt Kum-Bay-Ya

“Interesting” comes to mind when contemplating the proposal to have the Northern Mariana Islands Retirement Fund loan $40 million to the Commonwealth Utilities Corp.

Forty-million bucks is a whole lot of money in the Commonwealth context. This is a big issue, which no doubt accounts for all the questions and e-mail that I’m getting about it, mostly from folks who are vested in the Fund.

I’m not going to shoot from the hip on the Retirement Fund angle. This is the kind of deal that has to be correctly analyzed first, and talked about second. But quantitative analysis is about as popular in the Commonwealth as ski parkas are, so why sweat it? Not my problem.

As for the CUC’s situation, well, we’re all used to that one. I have been an analyst for a U.S. power producer, and I have analyzed projects not only in the U.S. but in Wales and Mexico and sundry other places as well. The industry is no place for amateurs, but the Commonwealth never figured that out, which is why it’s in a jam. Sound familiar?

Anyway, if and when the CUC starts charging to cover its generating costs, which is a logical thing to do, we can expect residential electricity rates to maybe double in the Commonwealth.

Based on whisper numbers I’m getting, as crazy as these costs are, it sounds like 25 cents per kilowatt hour might be about what it’s costing CUC to generate the juice. (I have not spied this data directly, so we’re in Rumor City here.) This figure seems plausible. It was floating around before oil prices did their latest leap over $60 per barrel, so maybe 25 cents, as high as that sounds, will wind up being on the low side.

Yikes!

So the specter of $300 to $400 (or higher) monthly electricity bills could become a very real deal for many households.

The collective freakout and complaining if that happens, well, it’s going to be noisy. In a locale where so many get so much for…well, for nothing, actually having to pay for their electricity usage is not going to be a popular, or even understood, concept. Thus far, the rates to consumers have been subsidized by deferred maintenance, red ink, and higher rates on businesses.

In other words, the CUC was cutting everyone, especially households, a very sweet deal. But it is simply not sustainable.

Much of this simply reflects the basic economics of high oil prices and the intrinsic challenges of a remote island setting. We can’t very well buy electricity from Guam when we want it. Indeed, remote islands generally have to build in more capacity than they would if they were connected to a large grid in, say, the United States, where locales can bum the juice off each other at the push of a button.

Furthermore, these concrete sweat boxes called “homes” are simply a means by which the Commonwealth is air-conditioning the entire west Pacific’s troposphere. Hey, maybe we’ve single-handedly kept global warming down by this, eh?

In fact, I hear all this talk about global warming so I run my aircon full blast, not only at home, but in my vehicles, too. If I get cold, I throw on a thick sweater; that’s what Jimmy Carter told us to do back in the day. Please do the same and run that aircon, every little bit helps. Together, we can save the planet by cooling it down. Kum-Bay-Ya.

More Kum-Bay-Ya: Our usual array of gadflies and econocrats will pipe-dream their schemes for Really Cute Ideas, in this case, wind energy and solar energy, but it won’t solve the CNMI’s energy woes. Solar is incredibly expensive. Wind, by contrast, in the right areas, can clock in at a very sweet 6 cents or so per kWh if capital is cheap and the wind, strong. (Some claim cheaper costs. Talk amongst yourselves.)

Nice to think about…but wind energy has as much bearing on the Commonwealth’s situation as the price of beer on Venus does.

There is no easy way out. But at least the CUC situation is finally getting the attention that is deserves. That’s a start, at least.

(Ed Stephens Jr. is an economist and columnist for the Saipan Tribune. E-mail him at Ed@SaipanEconomist.com)