Warren: Federal grants are what’s keeping CUC afloat

Funding assistance from the federal government continues to help keep the Commonwealth Utilities Corp. afloat.

Financial data that Saipan Tribune obtained from CUC show that the agency realized operating revenues of only $90.3 million last fiscal year. Compared to the $98.7 million it spent in 2013, CUC actually incurred a net loss of $8.3 million. This deficit went down to $5.1 million after the corporation earned $3.2 million from its non-operation side.

That same fiscal year, CUC received $11.1 million in federal grants. After factoring in this federal assistance, CUC actually recorded earnings, or a net asset, of $6.059 million.

CUC chief financial officer Charles Warren confirmed yesterday with Saipan Tribune that the agency did not incur a deficit last fiscal year.

“Overall, there was no deficit [in fiscal year 2013]. However, the majority of the grants are for capital items, not operating expenses, so funding is still needed for operations,” he said.

CUC’s operating loss in fiscal year 2013 showed a significant decline compared to losses recorded in the last four years.

Data indicated that CUC’s net loss in fiscal year 2010 was at $9.070 million when it generated only $82.6 million in total revenues versus operating expenses of $97 million. In that fiscal year, federal grants received totaled $5.8 million, resulting in the overall deficit’s decline to $3.2 million.

In fiscal year 2011, CUC’s operating loss was at $12.4 million (operation loss was at $9 million while non-operation loss was $3.4 million). That fiscal year, total revenue was $92.2 million but expenses jumped to $101.3 million. Luckily, Warren said, federal grants for that year amounted to $13.9 million, resulting in a positive net asset of $1.4 million for CUC.

In fiscal year 2012, CUC generated $95.9 million in revenues. However, operating expenses remained high at $103.6 million, incurring a net loss of $7.7 million. However, because some revenue was recorded under non-operation, which amounted to $2 million, CUC’s overall net loss went down to $5.6 million. Federal monies received during this time was $10.4 million but some $7.4 million was deducted as “extraordinary item”—leaving CUC with a net loss of $2.6 million.

Decline in net losses

If federal grants are not factored in, it will show that CUC continues to incur net losses: $9.070 million in fiscal year 2010; $12.4 million in fiscal year 2011; $5.6 million fiscal year 2012; and $5.1 million in fiscal year 2013.

Warren attributed the decline in fiscal year 2013’s net loss to the following: “The [Commonwealth Public Utilities Commission] approved a $3.4 million rate increase for the electric division in January 2012. This provided additional revenue for fiscal year 2013. However, maintenance costs for the engines in fiscal year 2013 was about $2.6 million higher than the costs contemplated in the rates, and bad debt expense due to slow government payments was significantly higher than planned,” he said.

To cover shortfalls, CUC utilizes proceeds from grants it receives every year.

“CUC has been very fortunate to have received grant funding to assist with engine overhauls and other power plant improvements,” Warren said.