Georgetown Consulting Group, Inc., or GCGI, told the Commonwealth Public Utilities Commission that although CUC has no control over world fuel price, the economic downturn and decline in the local tourism industry, it can control its finances and the condition of its power plants with the right management.
“The issues of customer receivables and the catastrophic failure of a number of CUC’s generating units are not beyond its control,” GCGI said in its report.
Government records show CUC is owed $31.2 million as of last month — $9.6 million from governmental accounts and the rest from delinquent commercial and residential customers.
GCGI said the $31.2 million receivables can finance the rehabilitation of CUC’s troubled engines.
But of the figure, $12.7 million is deemed uncollectible and $2.4 million has been written-off as “bad debt.”
“Clearly, CUC has a significant accounts receivable problem — one that if corrected would provide most of the needed cash for rehabilitation projects,” GCGI stated.
The consultant added that there is no certainty when CUC can collect its receivables.
By law, CUC should be able to achieve financial independence by Oct. 1, 2009, or the start of fiscal year 2010.
But studies have shown that it’s far from reaching this goal as it struggles with steadily declining sales of electricity, aging facilities, among other factors.
GCGI said the law mandates CUC to develop a business plan by this year’s end.
“CUC…has indicated it has not yet initiated the development of a business plan and cannot provide a completion date,” GCGI stated.
It advised CPUC to require CUC to complete the plan on or before June 1, 2009.
“Specifically, the business plan should set as an objective the identification of tactical and logistical strategies that if implemented by CUC would lead to its financial independence from the CNMI government and access to credit markets,” GCGI stated.
To date, however, CUC has no credit rating, making it difficult for the agency to access financial institutions.
CUC’s total energy sold to the public dropped by 15.5 percent over the past two years compared to the previous 24-month period.
Last year’s sales dropped by close to 40 percent.
“More disturbing is the fact that electricity sales for the 12-month period ending August 2008 are down a total of 39.3 percent from the sales level ending in FY 2006…. This issue is very significant since CUC electric revenue is derived from electricity purchased by customers. Base rate revenues will be lower if the trend is not reversed,” GCGI said.
