When good news is not good enough
GOOD news for CUC’s customers. The FAC rate remains the same for December. More good news. The CNMI’s power rates are the lowest among the U.S.-affiliated islands of the Pacific.
The public’s reaction? Mostly disbelief that these facts could be considered good news.
For starters, no one thinks that paying for the FAC is a good idea — not even when it was known as LEAC or fuel surcharge. The FAC pays for the fuel that CUC needs to run its power plants. Fine. For many of us, though, it is still an objectionable and burdensome cost. Why? Because many of us can still recall the good old days when CUC rates were ridiculously low. That was when the local economy was booming, and the central government was still awash with cash and able to subsidize utility rates.
Not surprisingly, as noted by a 2017 OPA report, CUC’s “utility rate levels have been insufficient to recover the full cost of operations since FY 1988.”
According to OPA: “A review of minutes from 1990 through 2004 indicate that various [CUC] boards of directors recognize the inadequacy of utility rates as early as 1991. Board minutes note concerns from governors, [the Department of the Interior], and [its] Office of Inspector General over CUC’s inadequate rate structure and the repeated requests of its management for rate increases. Additionally, two separate board-commissioned rate studies recommended that CUC establish a fuel charge in 1993 and a 35.8 percent electric rate increase in 1997, further reinforcing the need for a utility rate increase. Despite these concerns and the apparent need to increase utility rates to adequate levels, none were adopted between FY 1988 and FY 2004.”
By 2004, however, because of a declining economy, the central government could no longer afford to cover CUC’s fuel needs. Hence, the fuel surcharge. It was about as popular as a root canal without anesthesia. But in 2006, the new administration, which had vowed to scrap the “evil” fuel surcharge during the campaign period, admitted that it could not be done because the government had no money to pay for CUC’s fuel.
The fuel surcharge was later renamed the Levelized Energy Adjustment Clause, and subsequently, the Fuel Adjustment Charge. Along the way, yet another layer of government oversight was slapped on CUC with the creation of CPUC. Like CUC, its board members are gubernatorial (political) appointees who must be confirmed by legislators (politicians), who are elected by voters, who believe that the FAC, regardless of its actual current rate, is “too high,” if not an outright abomination.
Conflation
HERE is one of the reasons we can’t have a level-headed and informative discussion about the FAC. Many of us believe that the FAC exists because of CUC’s — specifically its “high salaried” officials’ — “mismanagement.” Through the years, CUC officials have repeatedly explained that the FAC — which is mandated by CPUC — is for fuel expenses. Hence, when global fuel prices rise or drop significantly, so does the FAC.
But many of us continue to conflate CUC’s fuel costs with its personnel costs. Sure, there may be problems and issues with CUC’s management, but regardless of who’s in charge, CUC must still pay for the fuel needed by its power plants. And if CUC’s customers don’t want to pay for it, then someone else has to. No FAC, no fuel, no power. This is not a hypothetical scenario. Surely, some of us can still recall those dreary days of rolling blackouts, unannounced power outages, and the government scrambling to secure funds to pay for the fuel needed by CUC. (From a Jan. 2006 news story: “Residents may now breathe a sigh of relief, as power generation on the islands has been secured — at least for the next three weeks.”)
It certainly doesn’t help that many politicians — then and now — resort to demagoguery whenever they have to talk about CUC’s power rates. It’s as if they don’t trust voters to understand basic math — or energy conservation. For the typical politician, someone — anyone other than market forces — is always to blame for rising prices. Thoughtlessly, most of us lap it up.
So who’s in charge?
WE should stop treating CUC as if it were an independent entity free to act as it pleases. It must still comply with federally stipulated orders and remains under the oversight of not only the CPUC but also the House, Senate, and governor. As OPA has noted in its 2017 report, “No other CNMI autonomous agency has experienced this degree of legislative and executive branch interference.”
Not surprisingly, CUC “consistently operates as an unsustainable public entity, unable to recover its cost of operations and struggling to retain qualified executive officers. CUC has experienced numerous emergency declarations and executive orders by the executive branch and endured repeated modifications of laws that continually fail to address long term solutions….”
According to OPA, “To continue to assume that a politically appointed board of directors whose members are required to have minimal qualifications and who are subject to the orders and influence of the legislature and the governor will lead the corporation to success and sustainability is to ignore the realities of CUC’s financial condition and operations.”
The buck doesn’t stop at CUC. It stops on Capital Hill — whose top officials are elected by voters.
