CUC underpayment at $7.3 million in just 3 months

The Commonwealth Utilities Corp. incurred a $7.3 million underpayment in the first three months of the fiscal year, October to December 2013.
CUC executive director Alan Fletcher and chief financial officer Charles Warren told the newly installed board of directors on Thursday that this huge underpayment was primarily due to the inability of its largest customers—including the central government—to pay their bills on time.

Records obtained from CUC showed that for the first three months of fiscal year 2013, CUC billed its customers a total of $79.193 million, of which only $71.820 million was actually collected.

Warren revealed that a large share of this underpayment is from the central government, the Public School System, and the Commonwealth Healthcare Corp.

He disclosed that the $79.193 million total billings is composed of the following:

– residential, $20.669 million, of which payment received was at $19.479 million;

– commercial customers, $41.854 million, of which $40.772 million was collected;

– autonomous agencies, $5.727 million, and was paid $5.1 million;

– healthcare corporation, $3.507 million, of which only $1.214 million was paid;

– PSS, $1.9 million versus payment of $1.182 million; and

– central government, $5.433 million, of which only $4.062 million was paid.

According to Warren, the $7.372 million underpayment is spread out among the following: central government, $1.371 million; PSS, $817,381; CHCC, $2.292 million; autonomous agencies, $617,259; commercial customers, $1.082 million; and residential customers, $1.190 million.

Because LEAC, the levelized energy adjustment clause, comprises 60 percent of a customer’s bill, these underpayments have resulted in CUC incurring a significant shortfall in its funds to procure fuel, the two officials said.

Saipan Tribune learned that fuel expense in the three-month period totaled $79.029 million—resulting in a shortfall of $7.2 million when compared to the $71.8 million collected in that period.

In response to board members’ queries last Thursday, Warren and Fletcher said the huge underpayment and late payments of customers “really exacerbated” CUC’s cash flow situation.

Compared to other utilities that usually have cash reserves of 90 to 180 days, CUC’s cash reserve is only good for 10 to 15 days, according to Fletcher and Warren.

“Our main challenge really is the ability to stay in business,” said Fletcher.

Settlement with PSS

CUC legal counsel James Sirok, meantime, told the board that CUC and PSS are currently negotiating a settlement deal on the system’s unpaid utility obligations.

CUC earlier filed three collection lawsuits against the central government, the hospital, and the school system to collect on these outstanding receivables.

Sirok disclosed that the central government has filed a motion to dismiss the suit, arguing that CUC, which was created by the government, cannot sue the entity that actually established it.

As for the CHCC, Sirok said the agency seems to be in a wait-and-see mode on what will happen to the motion filed by the government.

“[With PSS], there’s negotiation of some kind of settlement,” said Sirok, who further updated the board during an executive session.

Based on financial records, the aging receivables from the CNMI government, CHCC, and PSS as of March 2014 have already ballooned to $22.556 million.

Of this amount, the bulk is incurred by CHCC with $11.786 million owed; PSS, $6.846 million; and the central government, $2.923 million.