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Wednesday, April 23, 2014

Mobil’s contract with CUC expiring in April


* RFP for proposed four-year fuel contract out
* CUC bares $7.5M owed its fuel supplier


With its current contract with its fuel vendor expiring in April, the Commonwealth Utilities Corp. proposes to enter into a new four-year contract with a fuel supplier.

CUC issued a request for proposal for the supply and delivery of fuel for power generation. The deadline for submission of bids was on Feb. 6.

CUC chief financial officer Charles Warren told Saipan Tribune that no vendor has been selected as of yesterday.

“We have an RFP out, and it does provide for a four-year contract. No vendor selection has been made,” he said.

According to Warren, CUC has been contracting Mobil as its fuel supplier since at least 2005. Saipan Tribune learned that the company’s contract is expiring on April 30 this year.

The proposal to get a new fuel supplier must first be approved by the Commonwealth Public Utilities Commission.

The CPUC earlier disclosed that CUC has notified the commission of its intent to contract for a four-year supply of fuel oil at projected ratepayer expense of $300 million. As part of the proposed contract, the supplier will be expected to loan CUC $7.5 million to retire obligations to the current fuel supplier.

“This amount has been owed for many years. CUC feels that the elimination of this obligation would allow for more competitive fuel procurements,” Warren earlier said.

Yesterday, Warren said that the $300 million is not a fixed price tag for the contract.

Saipan Tribune learned that CUC currently buys about 18 million gallons of fuel every year. Over a four-year period, these 72 million gallons of fuel is expected to cost about $300 million. CUC operates three power plants, which are all oil-fueled diesel engines.

Each year, CUC’s fuel cost totals about $60 to $65 million. The cost to customers is represented in the LEAC, which stands for levelized energy adjustment clause, the component of the customer’s bill that represents the agency’s expenses on fuel. The other component is base rate, which represents CUC’s non-fuel cost.

CUC earlier said that it projects to incur this fiscal year a slightly higher fuel cost. Just for the first quarter of fiscal year 2014—from Oct. 1 to Dec. 31, 2013—the agency already spent $16.9 million for fuel. It was disclosed that the average weekly expense for fuel is $1.25 million.

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