Fitial thumbs down CUC privatization bill

Gov. Benigno R. Fitial vetoed yesterday a bill requiring the Commonwealth Utilities Corp. to privatize its power division, citing numerous provisions that he said would lead to higher costs for CUC.

The bill would have mandated CUC to sell its power system for at least $250 million through a bid process. It also proposed to restore the CUC board of directors, which Fitial abolished in 2006.

In a three-page veto message to the Legislature, Fitial challenged the bill’s stated intent, which is for CUC to secure reliable services at affordable rates through privatization. He argued that affordability is relative to every customer.

“Realistically, the best that could be expected of CUC is to provide reliable services at the least amount of cost. In that CUC is successful in attaining least cost in the provision of reliable services, we are hopeful that for all customers the rates will then be affordable and within their respective financial means,” Fitial said.

The governor enumerated the deficiencies which he said would increase CUC’s costs of operations or would push the rates further up.

Factoring in the $250-million price tag for the power system and CUC’s current monthly sales of 20 million kWh, and assuming a 10 percent return on investment and recovery of principal over a period of 40 years, the power rate could increase by 10 cents per kWh, Fitial said.

He also attacked the requirement for any contractor operating the plant to have five years experience in compliance with emission standards set by the U.S. Environmental Protection Agency. He said this may preclude international companies who have experience with power plant operations and capable of compliance, but not having five years experience, from bidding.

The provisions for the protection of CUC employees, according to Fitial, are overly broad and may lead to the successful bidder retaining even those employees who are not performing well.

Requiring CUC to obtain legislative consent before getting any loan over $500,000 would be an administrative burden to the utility, he added.

The governor also said that CUC’s cash flow would suffer if residential customers are allowed to finance any outstanding account for up to one year. The same impact is expected if CUC is prohibited from disconnecting delinquent customers who are covered by the Low Income Home Energy Assistance Program.

“While I commend the Legislature for its continued efforts to resolve the power crisis of the Commonwealth, the legislation as passed presents many deficiencies,” Fitial said. “I encourage the Legislature to work with CUC to develop this measure further to achieve successfully its intended purpose.”