CDA clarifies position on CUC debt

The CNMI’s public utility must pay the Commonwealth Development Authority a deferred $4.32 million in debt by October next year or risk management takeover. But CDA’s executive director says they don’t intend to do that.

In an interview, CDA executive director Manuel Sablan indicated they do not intend to push the issue with CUC and risk rate increases on ratepayers.

“If CUC were able to meet the payments stipulated in that [memorandum of] agreement, then there shouldn’t be any need for the amendment [of the MOA]. As I understand it, they should be in a position to update their payments of the memorandum… If they don’t meet that payment, then obviously CDA has that right to come in and take over management at CUC or litigate, but we don’t intend to do that,” he said.

To pay this debt, CUC aims to renew a .021 per kilowatt-hour surcharge on its customers. This, however, is not expected to be an added burden on power bills. The charge expires May 1.

If the Commonwealth Public Utilities Commission approves this petition, which CUC expects to file near end of this month, the charge will be re-titled a “debt service surcharge.”

Sablan said if this prospect plays through, the agencies are “home free.”

“There is a prospect for us to bring their account current. And if they are current then we are home free and that it will not trigger a rate increase,” Sablan said.

“At the same time, we indicated to them that if we cannot do it, then we are prepared to work out further deferral payment,” he added.

The debt stretches decades back to 1985, when CDA loaned CUC $200 million from a federal grant pledge agreement they received so CUC could build its infrastructure. CUC hasn’t paid much back. A legal battle in 2001 over the money was resolved in a memorandum of agreement the next year, which was revised in 2004 to turn that debt into equity for CDA.

In 2009, the agreement was executed effectively turning that total debt of about $200 million and the total interest debt of $138,672 into equity, or $45 million in preferred stock held by CDA.

CUC’s dividend payment was set at 2 percent, or $900,000 a year of that amount. The deferred payment of three years is amortized over 15 years, for $180,000 a year.

In total, CUC has to pay $1.08 million to CDA per year, after paying off the deferred $4.32 million by October next year.