‘Consultant to push rate hike for water, wastewater’

A consulting firm hired by the Commonwealth Utilities Corp. is poised to recommend increases in water and wastewater rates, saying that current rates have become a losing proposition to the agency’s Water and Wastewater Division.

Speaking before members of the Saipan Chamber of Commerce, division deputy director Bruce Megarr said that Georgetown Consultants’ recommendation couldn’t come at a better time, after the Water and Wastewater Division accumulated a shortfall of $3.6 million in Fiscal Year 2008.

Megarr disclosed that his division amassed the shortfall after expenditures of $9.6 million far exceeded revenue of $9.9 million in the last fiscal year.

“It’s like bringing in three boxes while spending four boxes,” he said.

Megarr also pointed out that the current wastewater rate was set way back in 1987, while the water scale was established in 1995.

Megarr said Georgetown Consultants is expected to propose rates that will balance both the islands’ economic condition and CUC’s needs.

“We need to put the revenue side of the fiscal equation into the hands of a group that is independent and reflects the well-being of the island as a whole,” said Megarr, adding that the consulting firm will also use enterprise accounting methods to separate the division’s revenue and expenses.

The federal court recently enforced an agreement between the CNMI government and the U.S. Environment Protection Agency based on the requirements set forth in the Clean Air Act and Safe Drinking Water Act. The stipulated order provides a roadmap for providing improved water and sewer service to the CNMI.

The initial estimate for the first year of compliance calls for CUC to receive $3.2 million, broken down as follows:

-$2.087 million for management and operation;

-$50,000 for master plan scoping; and

-$1.125 million for and short-term infrastructure.

The marginal cost of compliance per area of focus under the management and operation, meanwhile, includes:

-$200,000 for management structure;

-$40,000 for organizational structure of CUC;

– $15,000 for procurement procedure and training;

– $561,000 for waste water maintenance and operation;

– $1.07 million for water maintenance and operation;

-$100,000 for drinking water sampling and monitoring; and

– $100,000 for an interim financial management.

Megarr cited three main areas of focus under the stipulated order. These include management operation, which he said has seven deliverable groups; drinking and wastewater planning with four deliverable groups; and short-term infrastructure with six projects.

Of these six projects, Megarr said three are already done, while two are on their way to completion, with one more to go.

Megarr said that CUC faces serious consequences if federal codes and standards are not met, as stipulated in the order.

“This may result in contempt charges and receivership, fines, and penalties associated with not meeting the deliverables,” he said.

He emphasized the importance of complying with the standards, saying that “CUC has been repeatedly cited as unable to respond effectively and in a timely fashion to fiscal and operational challenges.”

Complying with the standards “would mean better quality service for our customers and improved public health, and that’s the ultimate goal. It would also provide healthier environment and more stable and predictable operations.”

Although there are indications of a possible rate hike for water and wastewater because CUC’s existing rates do not meet current operational needs, Megarr is reluctant to admit that a higher rate is in the offing.

“That’s why we hired a very capable group of consultants to research our needs, balancing that with the economic realities of the CNMI,” he said.

He cited two challenges in the possible rate hike for water and wastewater.

“Nobody likes increased costs…and an expedited procurement regime,” he said, adding that CUC would do its best to minimize impact and come up with a fair cost for customers.