Despite its progress on several fronts, the Commonwealth Utilities Corp. still has a long way to go to become a modern sustainable utility, according to acting CUC executive director Alan Fletcher.
To illustrate, Fletcher said that CUC has long been an underfunded utility and nearly collapsed in 2008-2009, and since 2006 the agency’s has racked up operating losses totaling over $74 million.
Fletcher vowed however, that the agency is committed to implementing the changes necessary to achieve its ultimate goal of becoming a modern utility agency.
“Financially, CUC is in not much better shape today, but despite the financial challenges, it has made great progress in re-establishing reliable power and water services and repairing the utility. CUC fully acknowledges that it has a long way to go to become a modern sustainable utility and planning for the future is of critical importance,” he said.
It was disclosed that since 2010, grants received by the agency for engine repairs and efficiency-related improvements, rehabilitated wastewater treatment plants, and improved drinking water systems have totaled more than $57 million. These funds were from the U.S. Environmental Protection Agency, Department of the Interior’s Office of Insular Affairs, Department of Energy, U.S. Public Health Service, and the CNMI Department of Energy.
According to Fletcher, in order to develop the best solution for the CNMI utility situation, CUC will be completing a series of plans and proposals designed to determine what base-load generation and renewable energy opportunities are commercially available and cost-effective.
“As many are aware, the CNMI is approached numerous times each year by sales teams claiming to have developed the ultimate energy solution for the CNMI. While many presentations appear feasible, CUC is committed to ensuring that the people of the CNMI do not invest in a system that fails to deliver reliable power or ends up costing more than promised,” he said.
He assured that CUC remains committed to that goal and in providing the best service possible through solid planning, engineering, and sound financial practices.
CUC, he disclosed, has received a grant from the OIA under the “Empowering Insular Communities” program, for funding to conduct an Integrated Resource Plan, or IRP. The IRP will help determine the type, size, and location of commercially available base-load generation and renewable-energy projects that best fit CUC’s systems and the CNMI’s needs.
“The focus will be to provide the most cost-efficient new power source for consumers. CUC is working with the National Renewable Energy Laboratory on the design and ultimate procurement of the IRP,” he said.
Fletcher pointed out that fuel costs account for the lion’s share of electric bills in the CNMI and converting to another source of base-load generation has the greatest potential for economic savings for consumers.
“The base-load analysis will help determine new energy sources to replace the current power generation system; however, objective rating criteria and thorough engineering and economic analysis on a proposal are paramount. Examples include determining if a new energy source is a proven technology, if operations and maintenance costs are readily known or determinable and the impact on rates to consumers over time—with the ultimate goal being to reduce the cost of energy in the power, water and wastewater utilities,” he explained.
Following the power-generation collapse in 2008-2009, together with the requirements of the federal stipulated order, Fletcher said that CUC has been working diligently to overhaul the utility by stabilizing finances, replacing dilapidated equipment, and installing new infrastructure.
CUC’s customers, Fletcher said, have seen the successful results of these efforts in more reliable power, water, and wastewater services.
According to Fletcher, the world oil markets are a concern for CUC. He said recent changes in oil prices and threats of heightened unrest in the Middle East have industry analysts suggesting that oil prices may again spike.
CUC’s fuel charge, which includes the power LEAC (levelized energy adjustment charge), water and wastewater electric charges, are directly tied to world markets and account for 65 percent of costs for operating power, water, and wastewater systems.
As CUC evaluates oil pricing and the other challenges, he said the primary concern is the cost of power to consumers. While there are many causes for high rates, the primary factors include but are not limited to: diesel fuel power generation; volatility of prices in the oil markets; serving disconnected island communities; a dilapidated power generation and distribution infrastructure due to a lack of reinvestment over time; and years of poor financial performance, including rates that have not recovered the cost of service.