This was the recommendation of Jamshed Madan and Larry Gawlik of the Georgetown Consulting Group, an independent regulatory consultant hired by CPUC to investigate the water and wastewater rates.
In a testimony submitted by Robert T. Torres, counsel for GCG Inc. dated March 6, the consultants said the “uncertainty associated with CUC’s water and wastewater sales convinced them to propose the setting up of provisional rates as the practical and prudent course of action.”
They said the provisional rates will be subject to review periodically, every six months or annually over the course of the next 24 months until water and wastewater sales can be forecast with greater certainty.
Madan and Gawlik said under the provisional rate mechanism, adjustment will be made to generate the required revenue.
They recommended the first review to take place in December.
P.L. 16-7 required CUC to implement a plan by Dec. 31, 2008 that establishes rates, meter, bill and collect fees in a fair and rational manner so that it will be financially independent by Oct. 1, 2009.
The stipulated orders require CUC to prepare interim and final financial management plans.
If fully implemented, the provisional rates will have an impact on a typical residential customer consuming 10,000 gallons of water per month, the consultants said.
If a residential water customer currently pays $25.80, this amount will increase to $60.63 under a full recovery provisional rate scenario.
Residential waste water customers currently pay only $5.50 including the monthly service charge and a small additional amount based on metered or estimated water. Under the new rates, this will increase to $21.40, they said.
CUC’s current combined total rates of $31.30 are well below what other rate payers are being billed, the consultants added.
In Sept. 2008, the average combined electric, water, and wastewater bills totaled $332.90, with electric consumption of 750 kwh, and water and wastewater at 10,000 gallons.
Under the current electric billing and the new full recovery provisional water and wastewater billings, the total will $284.54, some $48 less than the previous rates, the consultants said.
Madan and Gawlik said the rates currently in effect are so low that if it will be continued it will have a disastrous impact on CUC, its customers, business interest, tourism, and the government of the CNMI.
“The stipulated orders will not permit continuation of the status quo,” the added.
They said CUC and CPUC are faced with a difficult situation that will only deteriorate further unless an affirmative action is taken to improve the financial health of CUC.
While it will be necessary to bring CUC’s rates into full compliance with the requirement of the stipulated orders, the consultants are also recommending the implementation of lower rates in the near-term.
“This will start the process of moving CUC to full cost recovery, but will do so over a period of time which will allow for removal of the uncertainty associated with recent sales levels and will allow CUC time to implement some of the cost saving efficiencies that have been identified by CUC management,” they said.
