According to CUC’s independent audit and financial reports for fiscal years 2009 and 2010 that the Office of the Public Auditor released last week, the government’s unprecedented revenue losses reflect a very uncertain fiscal situation.
“CNMI government revenues continue to decline and its ability to pay for its monthly utility expenses is in doubt for the foreseeable future. The CNMI government monthly billings account for about 17 percent of CUC revenues. Its rates for water and wastewater are 22 times the rate paid by nongovernment customers,” the report stated.
It added that despite the declaration of a state of emergency to avert the interruption of power on Saipan due to the government’s nonpayment, “amounts owed to CUC are again at unsustainable levels.”
The reduced government pay among employees is also viewed as having a negative impact on CUC as they also consume power and water.
“The direct and indirect impact of the CNMI government’s financial woes will undoubtedly lead to tremendous revenue losses to CUC and thus, trigger the need to re-evaluate full cost recovery rates and the provision of superior operational service,” the report prepared by the auditing firm J. Scott Magliari & Company explained.
“Revenue losses due to a decrease in customer base and a reduction in utility consumption may lead to increasing rates plus further revenue losses as affordability of utility services becomes an ever increasing financial burden to CUC customers’ dwindling economic base,” it added.
The report, however, noted that CUC’s ability to enforce policies that allow it to recover production expenses in providing power, including the 100 percent full costs recovery for water and wastewater expenses, help sustain its operations.
For instance, on Jan. 13, 2011, the Commonwealth Public Utilities Commission, which oversees CUC, approved an emergency interim levelized energy adjustment clause, or LEAC, rate tariff, to cushion the impact of the soaring fuel prices.
Last month, another electric rate tariff was added to consumers as the continued political unrest in the Middle East pushed fuel prices to rise anew.
Still, the report said, “the financial and operational outlook appears to be very positive for CUC, in that significant system improvements have been undertaken and customer rates are approaching a full cost recovery level. CUC has an established platform through the CPUC to ensure that rates allow for 100 percent full costs recovery are effected.”
The CNMI government’s arrears to CUC as of Sept. 30, 2010 totaled over $6.5 million.
In 2009, it was over $7.2 million.
Accumulated receivables among residential customers in 2010 totaled over $15.801 million and commercial users owed CUC over $12.148 million, the report added.
