CUC is back under emergency

Gov. Benigno R. Fitial placed the Commonwealth Utilities Corp. under a state of emergency again, effectively suspending regulations and allowing the reprogramming of funds to address cash, procurement and hiring crises, barely 14 months after lifting CUC’s prolonged emergency status. Some lawmakers said yesterday such emergency declaration is either “unwarranted” or “surprising.”

With CUC under a state of emergency, it again operates under the Fitial administration’s watch and its procurement regulations and other statutes are suspended until the emergency declaration is lifted.

“I find that CUC is facing cash shortages [that] threaten to halt power, water and wastewater services to the CNMI because of the lack of funds available for CUC to buy diesel fuel and lube oil for its operation,” Fitial said in his May 18 executive order that was transmitted to the Legislature only this week.

The emergency declaration is for 30 days but can be extended or shortened.

Sen. Juan Ayuyu (Ind-Rota), chairman of the Senate Committee on Public Utilities, Transportation and Communications, said the governor’s emergency declaration for CUC is “unwarranted,” although he said he respects the governor’s decision.

“I just don’t see any reason that warrants an emergency declaration. There is no alarming situation that CUC cannot address. I met with CUC’s Mr. Fletcher and there’s no sign that CUC needs to be placed under a state of emergency. CUC is now in a much better position, we don’t have rolling blackouts,” Ayuyu told Saipan Tribune.

Even without a Public Utilities Commission, Ayuyu believes that CUC can move forward with its renewable energy projects.

“If anything, what people are most concerned about are still the high CUC rates, although they understand that CUC is also in a tight financial situation,” he added.

Rep. Stanley Torres (Ind-Saipan), chairman of the House Committee on Public Utilities, Transportation and Communications, said he has yet to fully read the text of the emergency declaration but he thought all along that CUC can now operate on its own.

“That [emergency declaration] is surprising,” he said.

Rep. Frank Dela Cruz (R-Saipan), chairman of the Saipan and Northern Islands Legislative Delegation’s PUTC Committee, said he’s also “very surprised” that CUC is under a state of emergency again.

“I just got back from San Diego [California] with [CUC executive director] Abe Malae and Wallon Young at CUC. We went to attend a presentation on new generation nuclear technology [that] is not conventional but safe. I will have more information on the emergency declaration by the governor. I am very surprised,” he said. Dela Cruz returned yesterday.

When asked which reason for the emergency declaration is the most urgent, press secretary Angel Demapan said, “All of it.”

“All these issues need to be addressed in order to reach the administration’s ultimate goal—to bring affordable and reliable utilities to the people,” Demapan said.

Fitial first placed CUC under emergency status on Aug. 1, 2008, to enable it to skirt procurement and other laws to solve rolling blackouts and imminent power generation failure. The governor had been extending the emergency declaration month to month. CUC entered its 31st month under a state of emergency in February 2011.

On March 28, 2011, he lifted the emergency declaration for CUC.

Fitial’s latest emergency declaration for CUC allows him to (1) suspend all statutory or regulatory provisions as required; and (2) reprogram the funds necessary to meet the emergency.

The governor, in his seven-page EO 2012-05, said that CUC is owed over $8 million in unpaid obligations by the cash-strapped government, the Public School System, and the Commonwealth Healthcare Corp.

CUC is also owed over $4 million by residential users and is facing $2.6 million in accounts payable to vendors who have, in good faith, provided materials and other services, the governor said.

“CUC only has days’ worth of purchased diesel fuel to power its system because it lacks the funds to buy oil from its sole, cash-only supplier. CUC has no credit or other means to buy fuel than the revenue it collects from its customers,” Fitial said.

CUC also has shipments of urgently needed transformers, transformer pads and poles en route or on island that will not be released unless it pays approximately $930,000 to vendors.

“Without these materials, CUC faces great danger to its system if a typhoon or any natural event interrupts service, and CUC will not be able to quickly recover,” he added.

The Fitial administration has reportedly been having difficulty awarding contracts to companies engaged in renewable energy projects because of the question whether a nonfunctioning PUC must still review CUC’s contracts once a request for proposal is complete. PUC lacks a quorum.

If a procurement crisis is one of the reasons for the emergency declaration, Torres said this should be a wake up call to the Senate, which has yet to confirm the governor’s three nominees to PUC.

The House confirmed three PUC nominees last week even before receiving the results of their drug tests.

Sen. Frank Cruz (R-Tinian), chairman of the Senate Committee on Executive Appointments and Governmental Investigations, will be holding a public hearing on the three PUC nominations today.

Fitial said CUC has gone through the RFP process for several renewable energy projects, which would bring some relief to high utility rates.

“There is a question open as to whether the PUC must review CUC’s renewable emergency contracts once an RFP is complete. These contracts must be brought to completion as soon as possible or the customers of CUC will continue to suffer from high oil prices,” he said.

The governor said that CUC, which requires employees with specialized training, also faces a manpower crisis.

There are many non-U.S. citizens that CUC needs to retain on technical and professional contracts or CUC’s operations would be severely compromised.

With the governor’s emergency declaration, CUC would still be able to hire “approximately two dozen essential foreign expert workers” regardless of a legislative prohibition.

Fitial added that CUC remains without a board of directors.

His latest emergency declaration has three directives, including assuming all of the executive power of CUC, which shall include all powers vested in the board of directors and the executive director.

The second directive involves the suspension of all provisions of Title 4 of the Commonwealth Code and Public Law 17-34 that concern PUC regulation of CUC and its actions, and potentially, any oversight of renewable energy contracts.

The third directive lifts restrictions on government employment at CUC.

“As a result of my suspension of 3 CMC 4531, CUC shall have the full power and authority to retain staff which may include employees other than citizens and permanent residents of the United States,” he added.