House Bill 16-77, titled the “CUC Private Sector Partnership Act of 2008,” was offered by Rep. Victor B. Hocog, Ind.-Rota and chairman of the House Public Utilities, Transportation and Communications Committee.
Opposing views regarding the measure surfaced yesterday.
Rep. Rosemond B. Santos, R-Saipan and chairwoman of the House Committee on Judiciary and Governmental Operations, strongly opposed the full privatization project.
“I don’t think the CNMI is ready for privatization yet,” said Santos who expressed concern over the move’s impact to the islands’ potential federal grants from the U.S. Federal Emergency Management Agency among other entities should CUC is privatized.
“I’m very, very suspicious about privatization at this point. We should be very cautious about full privatization without knowing its implications,” she said.
But Rep. Heinz Hofschneider, R-Saipan, said privatization will be an opportunity for the CNMI to get a reliable and cheaper power supply.
“We have an opportunity before us now — we do not have the capacity within the next five years to borrow capital improvement project funds or float an infrastructure bond. We failed in our attempt to privatize CUC thrice. The underpinning (notion) is a corrupted process,” said Hofschneider.
“What is so scary about full privatization if it will give power to the people?” he asked.
H.B. 16-77 seeks to open up CUC to private investors.
It will also establish procurement process for a Private Sector Assistance Agreement or PSAA.
Under PSAA are several methods of privatization that CUC can choose — one is called the Performance Management Contract which gives CUC the option to privatize its power generation system for up to five years; two, the concession or franchise agreement by which CUC transfers a utility service, including the related required capital investment to the private sector for up to 25 years.
If the bill is enacted into law, “CUC shall procure the services of a U.S. certified contractor experienced with CUC’s facilities or other power generation facilities to draft a PSAA invitation for bids.”
Part of this project includes the establishment of a renewable energy portfolio standard of at least 50 percent of its net electricity sales within seven years of the PSAA.
The Public Utilities Commission is tasked to award the PSAA within 42 days.
According to the House PUTC, more than two-thirds or roughly $75 million a year of CUC’s revenue “goes directly offshore to pay for the foreign oil required to run CUC’s generators instead of flowing through the islands’ economy.”
The committee added, “This act shall authorize the full privatization of the electric utility service of CUC provided that any private entity that acquires CUC shall pay a total of not less than $250 million in cash or in cash and equivalent infrastructure improvements and provided further than any acquisition shall be for a period of not less than 40 years.”
