To overcome this weakness, Georgetown Consultancy Group said CUC should retain the services of an independent accounting firm for its fiscal year 2008 costs.
This is in accordance with the requirement that all CUC expenses should be fully allocated to its electric, water or wastewater operations, Georgetown said.
In its report submitted to CPUC, the consultant said CUC’s shortcomings did not stall its investigation into the water and wastewater rates.
Jamshed Madan and Larry Gawlik of Georgetown said their review included traditional utility financial analysis practices and rate making principles.
They said that it was possible to follow the application of traditional rate making principles when examining CUC revenue requirements, rates and its rate structure.
They said it is important to separate the accounting for each utility and the appropriate allocation of common expenses.
Georgetown noted a “neglect to appropriate cost responsibilities.”
“Significant regulatory actions are unavoidable in order to fulfill legislative and federal mandates,” the consultant said.
It also cited the weaknesses that contributed to the financial and operational instability of CUC — some are within CUC’s control but many are not.
The shortcomings were also compounded by CUC management which lacked either the resources, in-house capabilities, or management team required to directly address these issues, Georgetown stated.
CUC’s overall utility operations were affected by its grossly inadequate water and wastewater user rates that only cover a fraction of the true cost of operation, the consultant said.
Also affecting CUC are the “unprecedented fuel price volatility experienced in world oil markets,” which raised the cost of electricity supplied to the water and wastewater systems; the tardiness of collection from the CNMI government and other CUC customers; the loss of garment industry customers; the loss of retail customers who were once employed by the garment industry; and an overall decline in local tourism.
