In his written testimony to CPUC, Muna said he concurs with the independent consulting firm Georgetown Consulting Group Inc.’s recommendation to keep the current fluctuating power rates operational for the next six months until the new electric rates under the Levelized Energy Adjustment Clause are adopted.
“[The Georgetown Consulting Group] report recommends a rate freeze….I concur. I urge the commission to recognize the difficulty of all parties in making the right conclusions from limited data in this artificially compressed time frame,” said Muna.
“I strongly agree with [Georgetown] that a rate cut would be imprudent. As for fuel rates, we would like to formulate a good [Levelized Energy Adjustment Clause] that can provide rate stability over the next six months while assuring CUC that we can collect revenues to timely pay our fuel bills. There must be flexibility that recognizes that CUC has no credit and no working capital — if we undercollect our fuel revenue the lights go out,” he added.
Huge losses
CUC incurred an operations net loss of $15.5 million in FY 2004; $16.2 million in FY 2005; and $19.4 million in 2006 for a total of $51.1 million.
Muna said although CUC monopolizes the sale of electricity and distribution of water to homes and businesses, it has not been earning since 1989.
“There was, of course, no full cost recovery during all but the tail end of the ensuing 14-year period and CUC’s ability to serve its customers suffered for it. For example, CUC incurred net losses for FY 1989, 1990, 1991, 1992 of $7.3 million, $2.25 million, $4.8 million and $13 million, respectively,” the CUC chief said. “My review of CUC financials shows that the losing trend continues.”
In Oct. 2006, CUC doubled the price of electricity to recover its actual expenses in buying imported fuel but the constant rise in global oil prices made it difficult for the agency to earn profits.
“Unfortunately, that turn toward financial health coincided with a run-up in the world price of oil, CUC’s sole fuel and the Legislature’s unilateral fixing of CUC rates below the cost of oil. By this time, CUC had no savings, or reserves, no credit, and a requirement form its sole willing supplier of oil to deliver only if CUC paid cash on delivery,” said Muna.
“So, while on the books CUC might be seen as beginning to develop the reserves necessary for quality operations, the need to buy expensive oil for a failing, inefficient generating system, with below-cost rates, wiped out any gains,” he added.
The CPUC must approve new power rates on or before the end of this year or a suspended law that sets the residential rate at 17.6 cents per kilowatt hour will automatically be applied.
CUC charges customers the actual price of fuel it pays for through a formula that allows it to increase or decrease the fuel-electric component rate every month.
CUC must raise at least $504,000 every month to pay Aggreko’s 15-megawatt containerized generators, excluding fuel costs.
Muna said the generators are currently the main source of electricity on Saipan because CUC’s Power Plant 1 is able to produce only over 8 megawatts.
Saipan’s energy demand is more than 40 megawatts daily.
