But in his testimony to the Commonwealth Public Utilities Commission, Muna said he also sees “difficulties” in a dramatic rate increase.
CUC’s consultant, Georgetown Consulting Group, has recommended a 135 percent and 289 percent rate increase for water and sewer services.
“Perhaps a schedule of predictable step increases is the best strategy. It would avoid rate shock, but give the federal court and our water/wastewater divisions an ability to plan,” Muna said.
He added, “We would like to avoid a public response that addresses the frustration of increased rates without an appreciation of the ‘good deal’ that customers got for years of extremely below-cost rates (albeit with poor service and product quality, which is to be expected from below-cost rates). At this point, we do not see how the CNMI, and, in particular, our customers, can sustain a 50 percent rate increase. But we are open to discussions and problem-solving.”
For purposes of problem-solving, Muna said, “we would like to explore a stepped rate-setting approach. The goal would be to see rates meet the full expense needs of the water and wastewater division within an appropriate period.”
He said CUC needs to look at rate structure as well.
“It should reflect both the fixed and the variable nature of the many costs required to collect, treat, and deliver of water and to collect, treat and dispose of wastewater. Some of our services might better be represented by fixed fees or customer charges. These could capture basic ongoing system maintenance and predictable replacement and rehabilitation. We might see a monthly ‘transmission fee’ for water and a monthly ‘collection fee’ for wastewater. Costs that are uniquely the result of the federal consent orders could similarly be labeled.”
Muna said CUC is “aware of the 800-pound gorilla in the living room, the federal consent orders. We are also aware of the extent to which the Guam federal court has gone in its efforts to enforce a similar order over the Guam landfill — threatened jail time for contempt, and multimillion dollar fines extracted directly from Guam’s treasury, without legislative appropriation, and appointment of an expensive receiver. CUC has begun to comply with the March 11 order by developing a detailed budget and work plan. We have given that to both GCG and the commission and to the CNMI Legislature. We have outlined the expected financial impact of compliance. We have also worked very hard, and continue to work very hard with the administration to secure millions of dollars of federal grant money to help us meet our court-ordered requirements and minimize the costs to our customers.”
The stipulated orders were filed in federal court last November by the U.S. Department of Justice and the U.S. Environmental Protection Agency, citing CUC’s long history of violating federal environmental safety and health laws and regulations.
This Friday, the Commonwealth Public Utilities Commission will conduct a rate hearing for water, wastewater, and power at 1 p.m. in the Senate chamber on Capital Hill.
