‘Review your Economics 101’

OK, to the CNMI government, legislative and executive branches, and in particular the Commonwealth Utilities Corp., it seems most, if not all of you, skipped Economics 101. The unconscionable, outrageous 100 percent increase in power rates foisted upon everyone on Saipan three months ago is starting to take its toll. I’m sure you’ve heard it before but it certainly bears repeating until you listen up!

Doubling the rate overnight has and is continuing to have an extremely adverse effect on individual citizens as well as all businesses, many whom were struggling before the rate increase:

1) Several businesses have closed their doors because of the rate increase.

2) Many more are laying off employees in an attempt to stay in business and many others are considering closing their doors.

Has anyone in the government considered what this means? It means:

1) No more BGRT from the businesses that have closed their doors.

2) Increased unemployment due to layoffs, closings, etc., which means the unemployed no longer have any disposable income to buy goods and services so those businesses will be paying a lot less BGRT.

3) Unemployed and all individual citizens no longer have disposable income because they have to take whatever disposable income they had in the past to pay exorbitant power bills.

The entire net effect is more unemployment, failing businesses and a whole lot less BRGT going into the government coffers which will prompt the government—if past experience is any judge—to further raise taxes and contribute to more business failures, unemployment, etc., etc. ad infinitum! Hence an economic death spiral looming for Saipan in the very near future.

CUC rates should be based on a nominal formula wherein the rates are determined by the cost of fuel! The consultant(s) who recommended the rate be doubled were obviously short-sighted and also seemed to have skipped Economics 101. Their recommendations were outlandish and were based on the cost of fuel (which was at an-all time high then) and the inefficient management and mostly non-existent preventive maintenance on power generating equipment which has been going on for many years. For the CNMI government and CUC to accept their recommendations is pathetic and extremely short-sighted. Wasn’t this supposed to be a temporary measure anyway? It seems to me that if this becomes permanent it is because the government is covering up for many past and present inefficient management practices at CUC.

Since then the cost of fuel has decreased significantly. Why haven’t the power rates gone down also?

Now, if the above reasons weren’t enough, how does the island expect to attract new investors? The minute they discover the exorbitant power rates, no investor in their right mind would want to open a business here. Come on, CUC and the government of the CNMI, open your eyes and ears and do something to change this intolerable situation before it is too late! Otherwise you can instruct the last person that leaves the island to shut off the lights (Oh, that probably won’t be necessary since there won’t be any power anyway). Force CUC management to operate efficiently or find management that can.

Saipan now has the dubious distinction of charging more for fuel than any other U.S. state, territory, commonwealth, etc. Can we afford to have such a distinction? I think not.