‘Utilities surcharge for govt, commercial accounts unfair’

Some members of the business community believe that it is unfair for the Commonwealth Utilities Corp. to allow only the commercial and government accounts to bear the brunt of providing additional revenue for the utilities company’s non-grant capital improvement projects should it be approved by the Commonwealth Public Utilities Commission.

Last week, majority of the CUC board of directors approved for a surcharge to be included in their rate case application to CPUC which will allow CUC to have $2.6 million a year—or $5.2 million in two years, as opposed to every year as CUC management identified as their need—for their non-grant capital improvement projects.

The board approved that this surcharge will only be applied to commercial and government accounts instead of applying it across all ratepayers as recommended by their consultant, Economists.com.

Because only 65 percent of CUC’s customers will shoulder the surcharge, it was said to be about $0.025 per kilowatt hour. Added to this is a $0.015 surcharge that will be applied to all ratepayers for typhoon recovery that the board approved in a separate motion, bringing the proposed surcharge for commercial and government accounts to around $0.04 per kilowatt hour.

The surcharges are deemed “investment of savings” by Economists.com as the overall rates will still be lower than they were two years ago because of the current low prices of fuel despite the additions—and some more that CUC can decide to fund to improve its facilities and financial health.

The CUC board was warned that they if they don’t do something with their cash flows, they will run out of money by October that would possibly affect their operations.

For Saipan Chamber of Commerce president Velma Palacios, the rate adjustment would have a significant impact on the operations of businesses.

“This rate application if approved will have a significant impact on the cost of operating a business in the CNMI.  A majority in the small business community are already struggling operationally with the existing high utility rates.  In fact some small businesses may shut down from the pressures of remaining competitive, and this opinion is backed by CUCs consultant, Economists.com,” Palacios said.

She added that the costs will more likely be passed on to consumers—possibly affecting even those ratepayers that some of the CUC board members are trying to protect from increases.

“As the cost of business goes up, so too will the cost to consumers,”

Business owner Glen Hunter echoed the sentiment.

“No matter what, at the end of the day, whenever you have those types of costs, with businesses, most of the time, they’ll pass it forward. So they are still impacting the ratepayers and the private sector no matter what,” Hunter said.

Palacios added that CUC may be able to find a better solution for all their consumers.

“This proposed rate hike may be better served if revisited by CUC to find a more equitable solution for all utility consumers.  The Saipan Chamber of Commerce will support a rate hike provided it will directly and immediately benefit the improvement and reliability of CUCs infrastructure,” Palacios said.

‘Unconscionable’

Although they understood the need for CUC to have more revenue, for the surcharge to be shouldered only by a certain rate class was seen as unreasonable.

“I think, collectively, rates need to go up to upgrade these systems if they’re not entirely subsidized by the government. If we want good utilities then we’re going to have to pay for good utilities. It is unfortunate that our system in dilapidated in the condition that it is in but if we all want to have 24-hour water, 24-hour power, and 24-hour sewer, the populous has to pay for it,” business leader Alex Sablan said.

He added that it is not fair because the infrastructure projects will only be “band aid approaches to fixing the overall system.”

“To continue to require the businesses to bear the brunt of infrastructure cost to a system that’s falling apart is really unconscionable, I think. They really need to look at fixing it right the first time and finding the means to do so instead of this band aid approach to do so,” Sablan said.

“The overall system needs an overhaul,” Sablan added, “I think it’s inherently unfair for the amount of money that’s being proposed to go into systems that are not necessarily going to fix the overall.”

Hunter said the surcharge will be adding insult to injury as businesses were also impacted by the storm but unlike the government as well as most residents, those in the private industry weren’t given any type of relief and recovery assistance.

“Its adding insult to injury, I’d like to say that. We were all negatively impacted by the storm,” Hunter said, “We’re all dealing with costs associated with that especially businesses. We’re not given any assistance by the local and federal government.”

Hunter’s restaurant, The Shack, was closed for six months after the Typhoon Soudelor. He was only able to get power back to their place late November.

Hunter said the need for the additional revenue stems from “poor oversight to properly deal with the infrastructure.”

“We’re all aware that this government is in dire need of revenue generation because they’re unable to cost save,” Hunter said.

He noted that no savings or budget cuts especially on travel expenses were put into place to help fund what the government needs for its share of recovery expenses.

Alternatives, innovative ways

Voicing out alternatives, Sablan said CUC could look into putting in place a cooperative where companies can invest to CUC and in turn can be part of a revenue scheme.

“I think it’s time for CUC to look at innovative ways. And one of those is to get a coop situated,” Sablan said, “I think there’s an opportunity as a coop where large, private businesses can come in and provide good portion of the money needed to put infrastructure in but they should be part of the revenue scheme, if you will. There should be payback provision within the coop.”

Sablan believes this is a win-win situation because “CUC could resolve a lot of its problems, the larger developers would have the infrastructure in place needed to allow them to develop, and the community wins in large because now they have an upgraded system.”

For Hunter, a simple solution is to add more revenue to the government is to pass a casino tax.

“It’s just sad for the government to turn around and surcharge us for any amount of the damage cost to the government by the storm. It’s just disgusting. They need to learn to watch what they spend and redirect that to those new costs. Simple fix, tax the casino and save everyone the hardship,” Hunter said.

“If they’re looking for a revenue source, they need to stop looking at the pockets of the victims of Soudelor. They need to start looking at, they went ahead to pass the casino, make it work then. Tax it properly,” he added.