CUC for sale for $250 million

The Legislature has enacted a measure requiring the Commonwealth Utilities Corp. to sell its power system for $250 million.

The House of Representatives voted 15-3 yesterday to override the governor’s veto of the CUC privatization bill, meeting the two-thirds threshold needed to enact the legislation over the governor’s objections. The Senate had voted to override the veto last week.

The legislation requires CUC to privatize its power system through a bidding process, as opposed to a “request for proposals.” It provides a $250 million price tag that prospective private sector buyers must pay in order to acquire CUC. Further, it gives CUC the power to settle disputes with the Commonwealth Development Authority by issuing $45 million in preferred stock.

Gov. Benigno R. Fitial vetoed the bill, saying it could lead to higher utility rates. Any company that ends up buying CUC, he said, would try to recover the $250 million and other purchase costs by passing them on to utility consumers.

Proponents of the measure maintain that the legislation is urgently needed to avert an emergency declaration by the governor that would result in another sole source privatization contract. They note that, whenever the governor declares a state of emergency, the Legislature has been unable to do anything about it.

The proponents, particularly Reps. Heinz Hofschneider and Victor Hocog, also tout the bill’s prohibition against “requests for proposals” in the procurement process as a strength. They note that a bidding process will prevent protests that hampered previous privatization efforts.

Yet the proponents also acknowledge there are problems with the bill, but they contend the Legislature “can always come back and amend it.”

Rep. Tina Sablan, one of the three members who voted to uphold the veto, argues that, if the concern is that Fitial does not do “a sole-source firesale privatization of CUC,” the Legislature can pass a law that prohibits that. She insists that the Legislature not pass the privatization bill until the flaws have been addressed.

“That mentality—that we can always come back and amend a law—is part of the problem. It undermines the already-deteriorated credibility of this government,” she says.

Press secretary Charles P. Reyes Jr. said the override “represents a major blow to our efforts on behalf of CUC, for the reasons mentioned in the Governor’s veto message.”

Simon Sanchez of the Guam Consolidated Commission on Utilities said the agency did not expect the CNMI Legislature to proceed with the override. “We encouraged them not to tie in that kind of number,” he said, referring to the price for CUC, adding a company would be “forced to get that money back through rates.”

For his part, Saipan Chamber of Commerce president Jim Arenovski said, “I guess we’ll have to take a look at that bill and see how we can make some lemonade.” The Chamber of Commerce, also pointing to sections of the bill that threaten to force major utility rate increases, had urged lawmakers against overriding the veto.

In addition to Sablan, the House members who voted against the override are Representatives Edward Salas and Francisco Dela Cruz. House Minority Leader Oscar M. Babauta abstained, and Rep. Ray N Yumul was absent.