‘Remove hidden costs in CUC privatization law’

The Commonwealth Utilities Corp. has lobbied a Senate committee to eliminate a host of unfunded mandates and hidden costs imposed by the Legislature upon CUC.

CUC executive director Antonio Muña, in a public hearing yesterday, said that CUC welcomes the proposed removal of the $250 million price tag set by a recently passed law for the sale of CUC’s power system. But he urged the lawmakers not to stop with this one amendment.

“The extent of our concerns with Public Law 16-17 lies beyond the $250-million price tag,” said Muña. “There are many other concerns that put an obstacle to privatization being realized and we need both the Senate and the House of Representatives to help us address them.”

The Senate Committee on Public Utilities, Transportation and Communications, led by Sen. Paul A. Manglona, held the hearing to gather testimonies on a bill that proposed to eliminate the $250-million artificial price floor the law requires any private sector company to acquire the Commonwealth’s power system.

During the hearing, Muña reiterated that any company buying CUC would eventually pass the cost of its investment to customers. The $250 million price tag, he added, would ultimately result in higher power rates.

“Whatever will be done as we privatize CUC has to be market-driven. It should all depend on what the market can bear. We cannot set a minimum dollar amount like $250 million, because we’re going to end up paying for it. Whatever the investor pays out, they will try to recover from the customers,” Muña said.

Viola Alepuyo, chairwoman of the Public Utilities Commission, said the price tag should be removed, as it “is not only unreasonable, but will increase CUC’s rates.” She also called on lawmakers to look at the other provisions that CUC and the Fitial administration had opposed.

Sen. Maria Frica T. Pangelinan echoed Muña and Alepuyo’s statements, saying it was impractical to put a price tag on CUC. Citing information from CUC’s 2005 audit report—the latest available on CUC’s finances—Pangelinan said, “We should let somebody make that decision [how much to pay for CUC] based on the financial performance of CUC.”

The 2005 financial audit report shows CUC assets at the power plant had a net worth of $100.7 million. It also reveals that CUC’s liabilities increased from $157 million in 2003 to $182 million in 2005.

The other provisions that Muña asked the Legislature to remove from P.L. 16-17 include:

-Mandating CUC to pay a $45 million obligation to CUC,

-Requiring CUC to pay for the costs of any PUC review of CUC’s actions,

-Treating business licensed for eight years in the CNMI as prequalified responsible bidders regardless of poor past performances, precarious financial condition, and defective submissions,

-Prohibiting the use of “requests for proposals” as a procurement method for privatizing CUC,

-Requiring CUC to hire a “U.S.-certified contractor” to draft the invitation to bid and evaluate the bids for the privatization project,

-Restoring the CUC board of directors,

-Putting CUC in charge of maintaining and operating all of the Public School System’s water wells without providing money for it,

-Providing residential customers up to one year to pay off any outstanding balance in their accounts,

-Requiring private sector contractors to continue hiring CUC personnel without regard to the employees’ job performance,

-Barring CUC from awarding a power contract to any business that “is not already permitted in a U.S. or international jurisdiction, or who has not operated a major source of emission” under EPA regulations for at least five years—a vague mandate, according to CUC,

-Limiting CUC’s security deposits to one month’s power usage, regardless of a customer’s poor credit history,

-Requiring separate billing and payment for power, water, and wastewater services,

-Prohibiting CUC from disconnecting service to a delinquent customer if the nonpayment is caused by the government’s delay in remitting subsidy under the Low Income Home Energy Assistance Program, and

-Capping the reconnection fee at $60.