HOUSE Ways and Means Committee Chairman Donald Manglona and House Floor Leader Ralph N. Yumul have drafted a bill that would allot liquid fuel tax collections to subsidize the Commonwealth Utilities Corp.’s fuel adjustment charge or FAC, which has significantly increased amid rising global oil prices.
The still unnumbered House bill proposes to offset the FAC increase with the revenue derived from the liquid fuel tax until the end of fiscal year 2023. It includes a sunset clause stating that the subsidy will terminate on Oct. 1, 2023.
The bill does not mention the amount of the current liquid fuel tax collections or the government offices, services or programs that are funded by liquid fuel tax collections.
Expected to be introduced during the House session on July 18, the bill would require the Finance secretary to establish a special account for the benefit of CUC residential and commercial ratepayers, and deposit into the special account, all liquid fuel tax collections from July 1, 2022 to Sept. 30, 2023.
During this period, the liquid fuel tax collections “shall be used exclusively for the benefit of CUC residential and commercial ratepayers for the purpose of offsetting any increases to the applicable Fuel Adjustment Charge and/or reducing or subsidizing the applicable base rates that are incurred or charged retroactive to July 1, 2022.”
These revenues “shall be transferred to CUC on a monthly basis, and CUC shall utilize them to offset FAC charges.”
According to the bill, the benefit of the subsidy “shall not apply to the CNMI government, including its branches, agencies, and instrumentalities.”
The bill stated that merely suspending applicable fees and taxes on fuel collected by the Division of Revenue and Taxation “does not guarantee that the fuel distributors will pass along the savings.”
Moreover, the bill stated, a tax suspension may cause issues with respect to how funds from the American Rescue Plan Act of 2021 may cover the resulting shortfall.
According to the bill, “There are no guarantees that CUC will pass on any savings that it will incur by the suspension or exemption of any fuel tax.”
The bill likewise noted that Commonwealth law already exempts CUC from paying the liquid fuel tax “so the FAC for fuel used for power generation that CUC applies to its ratepayers already violates the intent and spirit of the exemption when CUC assesses the FAC to its customers.”
The bill did not say who would end up paying the liquid fuel tax if CUC is not exempted from it, nor did the bill mention that the CNMI government is the public utility’s largest delinquent customer.
