ASSISTANT Attorney General Alison Nelson told the federal court that the CNMI government had honored its commitments with respect to the payment of its 2021 utility arrears.
In a seven-page status report filed with the District Court for the NMI on Monday, Nelson said the CNMI government also “reconciled and made payment” on its arrears accounts for 2022, 2023, and 2024, and worked toward negotiating a new Memorandum of Understanding for the hospital.
In addition, she said the CNMI has made numerous payments toward its current bills and is taking a number of additional actions to ensure that future payments are timely made.
In November 2008, after the Environmental Protection Agency cited CUC for violating the Clean Water Act and the Safe Drinking Water Act, the federal court issued Stipulated Orders 1 and 2. The CNMI government was also named as defendant in the complaint.
SO1 focuses on CUC’s management structure, drinking water and wastewater issues, while SO2 pertains to oil issues.
According to Nelson’s status report, the CNMI’s procedures for ensuring timely payment on its outstanding utility accounts include coordination of billing procedures and account monitoring; transition to prepaid meters; and identification of funding sources.
“The Department of Finance’s summary of accounts dated as of January 22, 2025, shows the total balance owed by the CNMI for all charges through December 2024 is $2,171,737.32, with $719,712.49 pending payment,” she said in her report.
Nelson added, “Of the remaining unpaid balance of $1,452,024.83, $554,143.26 is the responsibility of the central government. This represents approximately one month of utility charges. The remaining charges are the responsibility of the Mayors’ Offices and the Judiciary.”
She said that, with respect to the charges that are the responsibility of the central government, the utility accounts are held by agencies and departments.
“As a result, payment of the CNMI’s utility bills is a decentralized effort that requires the cooperation of each agency or department to address its accounts. Each agency and department has an expenditure authority that must approve expenditures and input the invoice into Munis, the CNMI’s financial management system. The payment request will then go to the Department of Finance’s Division of Financial Services for review to confirm if the information in the supporting documents matches the invoice in Munis. If there is any discrepancy, the invoice is rejected and sent back to the agency or department; if there is no discrepancy, the payment request will be approved and moved to the Division of Treasury for payment processing,” Nelson said.
She said the Department of Finance has also “developed guidance to help agencies timely and accurately enter utility invoices in the financial management system for payment.”
“On July 17, 2024, the Department of Finance instructed agency and department heads regarding online access registration and required invoice entry format to help ensure accurate reconciliation with CUC and proper application of payments to respective accounts. The CNMI Department of Finance also communicated to its agencies and departments on August 30, 2024, the urgency of addressing and settling their CUC billing statements without delay,” Nelson said.
She added that the CNMI government has assigned a main point of contact under the governor’s office for all utility matters.
“This contact is responsible for issuing monthly notifications to all agencies and departments regarding all billings issued by CUC and all pending charges. The Governor’s Office also reminds departments and agencies during bi-weekly cabinet meetings to enter invoices prior to the due date,” she said.
Going forward, Nelson said, “the Department of Finance will focus its monitoring oversight and coordination on those central government agencies and departments with an outstanding balance exceeding $10,000.”
Her report identified five agencies that, as of December 18, 2024, had an outstanding balance exceeding this threshold: the governor’s office, the Substance Abuse Office, the Youth Affairs Office, the Department of Public Safety, and the Department of Corrections.
Nelson said Finance met with each agency or department and requested that they submit an action plan outlining how they will bring their accounts current.
“Each agency provided a substantive response,” she added.
“The December 18, 2024, summary also lists the Mayors’ Offices of Tinian and Rota and the Judiciary with outstanding balances exceeding $10,000. The Attorney General sent a notice requesting submission of an action plan detailing how each will bring its account to current, and the Mayor’s Office of Tinian provided a substantive response,” Nelson said.
The Finance Department’s updated summary of account balances as of January 22, 2025, listed the following additional central government departments or agencies with an outstanding balance that exceeded $10,000: the Department of Finance, the Department of Public Works, the Emergency Management Office, the Office of Youth Affairs and the Mayor’s Office of Saipan.
“The Department of Finance is working to schedule a meeting with these departments and agencies to notify them of their outstanding balances and to request an action plan to bring their accounts to current,” she said.
Transition to prepaid meters
“The CNMI also intends to transition most, if not all, of its metered accounts to prepaid meters,” Nelson said.
“As of January 6, 2025, 175 of the 377 meters on active accounts (representing 46% of all government meters) have been transitioned to prepaid meters. The CNMI proposes to transition an additional 60 meters to prepaid meters by June 30, 2025, to reach its target of transitioning approximately 60% of all government meters to prepaid meters by such date. In addition, the CNMI proposes to transition another 40 meters to prepaid meters by December 31, 2025, to reach its target of transitioning approximately 75% of all government meters to prepaid meters by such date,” Nelson said.
Funding sources
The Fiscal Year 2025 Budget Appropriations Act or P.L. 23-26 allocates funding for utilities as follows: $1,800,000 to the central government for utilities; $300,000 to the Judiciary; $180,000 to the Legislature; $150,000 to the Mayor’s Office of Rota; and $250,000 to the Mayor’s Office of Tinian.
Nelson said the CNMI “has also identified several other funding sources to help satisfy the outstanding account balances.”
On September 27, 2024, CUC and the secretary of the Department of Finance entered a Memorandum of Agreement acknowledging that the CNMI owes outstanding utility charges to CUC and that CUC owes outstanding Office of the Public Auditor audit fees to the CNMI.
The Department of Finance had estimated the amount owed by CUC to be $18,307,155.
“Although CUC disputes this estimated amount, CUC and OPA agreed to reconcile the total outstanding balance. CUC did not dispute that a balance of at least $10,900,000 is owed by CUC. In addition, the Department of Finance had estimated the amount owed to CUC to exceed $10,900,000 through September 15, 2024. Although the parties agreed to reconcile the total amount, the Department did not dispute that at least $10,900,000 is owed to CUC. The parties therefore agreed to offset $10,900,000 from the amounts owed by each. Although the Memorandum of Agreement does not state how the total payment amount will be applied on an account by account basis, the parties agreed in correspondence in October 2024 to clear all principal/usage charges as of September 30, 2024, and to apply the remaining amount to penalties,” Nelson said.
“The parties acknowledged a credit balance after the offset in the amount of $400,899.25 across various accounts, and agreed to identify which credit balances can be transferred to other central government accounts. With the credit balance applied to the outstanding penalty amount of $1,288,591.71, the CNMI’s unpaid balance as of September 30, 2024, after the offset is $887,668.09 in penalties,” Nelson said.
On December 30, 2024, the CNMI government and CUC entered a Memorandum of Understanding recognizing that the CNMI government has agreed to allocate a certain amount of funds to cover its utility costs.
“The Memorandum states that the CNMI shall allocate and obligate $2,300,000 for the CNMI’s current utility billings for Fiscal Year 2025 and 2026, to be used solely for the payment of utility bills owed by the CNMI to CUC for services rendered during these fiscal years,” Nelson said.
The CNMI and CUC entered a second Memorandum of Understanding on December 30, 2024, recognizing that CUC is holding approximately $500,000 in unspent CNMI Utility Stimulus Program Funds.
“The Memorandum states that CUC shall apply this balance toward the CNMI’s outstanding utility arrears, following mutual agreement between the parties regarding the accounts to receive the funds,” Nelson said.
Her report did not provide details regarding the Commonwealth Healthcare Corp.’s unpaid utility bills.
According to CUC, as of Feb. 2024, CHCC, which runs the islands’ only hospital, owed over $60 million, including penalties.
Designated Judge David O. Carter will hold a status conference hearing from Jan. 27 to 31.
