CUC: Reinvestments, best practices key to SO compliance

The Commonwealth Utilities Corp. admitted yesterday that full compliance with all the requirements of the court’s stipulated orders is still far from happening due to the lack, or absence, of reinvestments in public utilities—power, water, and wastewater systems.

CUC deputy executive director Alan Fletcher pointed out that for stipulated order No. 1 alone, which deals with water and wastewater services, there are 68 different issues that need to be rectified but are being hampered by funding constraints.

Fletcher could not say how long it would take for CUC to address these federal concerns or how many have so far been completely rectified.

He disclosed that since the issuance of the stipulated orders in 2009, CUC has received almost $43 million in federal funds for both power and water projects. About $23 million of that amount has been spent on water and wastewater projects, he added.

The funds were provided by both the U.S. Environmental Protection Agency and the Office of Insular Affairs.

If not for these federal monies, Fletcher said that CUC rates would be triple to what it is charging today.

“It takes reinvestment in our system. Unfortunately, we have to charge for this. We have to recover our operational costs to supply clean and safe drinking water, to treat our sewer system. The whole idea is to have CUC [become] a sustainable ongoing utility that needs compliance, not only for today but in the years ahead,” said Fletcher.

Besides reinvestment in public utilities, he said that CUC also has to ensure that it will execute the best identified practices, along with maintenance, to make sure that systems are running properly.

To address the requirements under stipulated order No. 2, which deals with the power system, Fletcher said that CUC is eyeing a $10-million loan from a bank to correct all concerns with the power system.

Fletcher said the $10-million loan will be used to buy machinery and equipment, such as new oil-water separators, oil containment, storage tank repairs and replacements, used oil programs, power transmission and distribution improvements, and overhauls to the power generation system (engine overhauls, controls, firefighting equipment, and program maintenance).

All of these projects, he said, are critical for CUC to meet its obligations under the stipulated order.

A bill is now pending at the Legislature, House Bill 17-205, that would allow CUC to borrow in excess of $500,000. Generally, the bill supports the proposed $10-million, USDA-backed loan for CUC to perform required projects.

Fletcher said this is important because the bank needs to have proof that the loan is authorized per statute. He said the loan payments have already been incorporated into the electric base-rate increase earlier this year. Therefore, ratepayers will not have to pay any more money for the debt service on this loan.

“If CUC cannot get funding to complete [these] EPA-required projects, then the ratepayers will have to pay for these projects, otherwise CUC will be subject to fines from EPA, as well as further action by the federal court,” he added.