By Emmanuel T. Erediano
[email protected]
Variety News Staff
THE Commonwealth Utilities Corporation is proposing legislation authorizing it to borrow up to $40 million to stay afloat.
In a letter to Speaker Edmund S. Villagomez, CUC Executive Director Kevin O. Watson said the utility does not have enough money to sustain operations and cover the “extraordinary costs of recovery” from the devastation caused by Super Typhoon Sinlaku.
He noted that following the super typhoon, CUC “has incurred significant unbudgeted expenses, including emergency fuel procurement for water and wastewater generators and Power Plant 3 to support additional wells and booster stations, as well as critical materials such as poles, transformers, conductors, and power plant building repairs.”
Watson said without at least $35 million to $40 million in emergency liquidity, “CUC will be unable to procure critical fuel, materials, and contracted services necessary to continue restoration efforts and maintain essential utility operations across the Commonwealth.”
In other words, he said, without cash, CUC “may be forced to cease operations entirely.”
To avoid this drastic outcome, Watson is proposing legislation that would help the utility survive. The bill would authorize CUC to borrow money and provide collateral that may include assets such as customer security deposits.
Watson said the proposed measure would allow CUC to include loan servicing costs — including origination fees, loan principal, and interest — in the rates and charges billed to customers until those costs are fully recouped.
Watson said CUC’s already fragile financial condition has been further strained by the immediate and ongoing costs associated with disaster response and system restoration.
The corporation, he added, also anticipates upfront costs for mutual aid from Guam, contracted technical services and repairs, and equipment mobilization, including bucket trucks, augers, cranes, and vehicles.
Watson said preliminary estimates indicate that the cost of emergency response and initial system mobilization will reach tens of millions of dollars, with full recovery and infrastructure restoration expected to require significantly more.
Variety was told Thursday afternoon that CUC’s proposed draft bill was being reviewed by House legal counsel.
Rep. Vincent “Kobre” Aldan, chairman of the House Committee on Public Utilities, Transportation and Communications, said he is aware of the proposed bill and the request from CUC officials. He declined to further comment.
Sharp decline in revenue
Watson said CUC revenues have declined sharply due to widespread service interruptions, with an estimated $3 million to $3.5 million in lost billings for the month of April.
Delayed billed revenue collections, estimated at $4 million, have further reduced CUC’s already limited cash flow.
Compounding this challenge, he said CUC continues to carry existing financial obligations, including restoration payroll amounting to $1.7 million, fuel payables for deliveries made before the storm totaling about $3 million, and vendor arrears exceeding $7,000, all of which significantly constrain available liquidity and limit access to additional credit.
Public Law 16-17 allows CUC “to borrow money from any public or private source, either within the Commonwealth or the United States, or in any other country, and to give security in connection with such borrowing, provided that any borrowing in excess of $500,000 shall be approved by law.”
The bill was signed by then-Gov. Benigno Fitial on Oct. 2, 2008. At the time, CNMI was experiencing rolling blackouts due to the instability of CUC’s power generation systems.
Far-reaching impact
For her part, CUC Chief Financial Officer Betty Terlaje told Rep. Blas Jonathan Attao in a letter that CUC “is facing a severe liquidity and timing crisis” as it continues restoration and recovery efforts across the CNMI.
While CUC remains committed to restoring reliable power, water, and wastewater services to the community, Terlaje said the corporation’s financial condition “has become increasingly strained due to significant disaster-related expenses, reduced revenue cash flow, and escalating fuel purchase obligations.”
Terlaje said without legislative action authorizing CUC to obtain emergency financing, such as a loan or line of credit, the utility will face significant challenges in sustaining restoration operations and maintaining the ability to procure fuel necessary for continued power generation.
Fuel pricing, she said, continues to be heavily affected by the broader global fuel crisis, and although CUC had no choice but to raise the fuel adjustment charge in response to escalating fuel costs, “we fully recognize the hardship these increases place on our community.”
However, she added, “the consequences of being unable to maintain power services due to insufficient power supply would have an even greater and more far-reaching impact on public health, safety, economic activity, and the overall recovery of the Commonwealth.”
Emmanuel “Arnold” Erediano has a bachelor of science degree in Journalism. He started his career as police beat reporter. Loves to cook. Eats death threats for breakfast.
