More CUC gobbledegook

I’m not sure if the news reporting of statements issued by CUC has been in error, or if CUC is just issuing a lot a financial data at random and hoping that no one will try to add up the numbers. But one thing is for sure, the data issued is no better now than it ever has been.

Late last week, it was reported that CUC had submitted its FY 2009 budget report to the Legislature. That report indicated projected collections of $138.8 million with $130.95 million from power and $7.85 million from water and sewer. The expenses were listed as $103.2 million for fuel, $24.7 million for operations and administrative, $10.9 million for payroll and $11.3 million for purchased power.

First, look at that balance: the listed expenses total $150.1 million and that is $11.3 million more than the expected collections. Why does CUC start off in the hole? That just doesn’t make sense already. But it gets worse: Take a look at the amount budgeted for “purchased power.” CUC allots $4.6 million for Aggreko (Aggreko will operate for the entire FY ‘09), but the contract CUC signed with Aggreko calls for a mandatory guaranteed base cost of $504,000 per month lease and $84,000 per week power cost (1.68 GW at 5 cents per kWh, guaranteed minimum) and that adds up to $10,415,600 for the year for Aggreko alone. What’s worse, that cost is for 10 MW only and CUC now insists it’s actually getting 15 MW. CUC allots only $1.2 million for purchased power from Telesource. Last time I looked, power production on Tinian called for a power purchase of about three times the allotted amount plus the monthly contract buy-down cost of nearly $300,000 per month for another $3.6 million; that’s $6.6 million for Tinian.

If you add up the purchased power from third parties and the lease or rent for their systems, you get a total of roughly $30.4 million (includes $6.7 million for power plant IV on Saipan). Even if you remove the lease or rent (some $9.6 million), that still leaves $20.8 million or so for “purchased power”—and that lease or rent is not listed in any other CUC budget category as reported. Nothing here adds up or balances, with far more in expenses, some not even accurately stated, than is expected in receipts. Now we can add up total expenses of nearly $170 million—some $32 million greater than anticipated revenue, if you believe CUC can really expect to increase its revenue by some 66 percent over FY ‘08! That’s not a “budget”; that’s just a mess.

Now for some even more disturbing reporting: As of Monday, CUC issued the statement that it had billed customers for about $110.44 million in FY ‘08, but collected only $91.466 million. That means CUC failed to collect about $18.97 million from customers, some 17.2 percent of its billing! If true, that’s absolutely ridiculous!

CUC also stated that it had produced some 274 million kWh for FY ‘08. At an average of 22.8 million kWh per month, CUC would have to produce power at a steady 32 MW. At that rate, they “collected” only 33.38 cents per kWh for the year—well below the actual cost of production. But if CUC had collected for the amount billed, the kWh rate would have resulted in collections at 40.31 cents per kWh—very close to the actual cost of production. That’s nearly a 7-cent difference per kWh. Where did that 7 cents (and the nearly $19 million) go? Will we ever know?

And here’s yet another: CUC says it collected $7.4 million in October for a production of 15 million kWh. Just for information, 15 million kWh translates to a steady production of about 21 megawatts of power. Anyway, CUC “collected” at a rate of 49.33 cents per kWh, some 16 cents per kWh more than the average for the entire rest of the same year (remember, October collections were for September production and usage)!

By the way, CUC says it collected $91.466 million in FY ‘08 but predicts a collection of $138.8 million for FY ‘09. That’s $47.33 million more, or an increase of 66 percent. Do we really believe CUC can increase its revenue by 66 percent in the coming year, which actually started over a month ago? If October is an indication, that projects revenue of only about $90 million, certainly not the $130 million expected (from power) unless CUC can increase customer usage from 15 million kWh per month to 22 million kWh per month—starting last month!

With Aggreko, CUC has a 41 MW capacity, but will customers increase usage by 50 percent and will CUC collect everything it bills at a maintained average rate of 49 cents per kWh (based on October)? But CUC just reduced its average rate to around 32 cents per kWh, so now CUC must increase customer usage even further to at least 34 million kWh per month to realize the projected revenue ($34M x .32 x 12 = $130M)—more than double the October usage rate. Question: Does CUC have the capacity, even with Aggreko, to produce 34 million kWh per month? Answer: No! CUC’s maximum capacity is now at about 30 million kWh. How was all that derived? Will we ever know?

Further, CUC says it has cancelled the RFP for repairs on engines 5 & 7 because of “non-responsive” bids. Well, how’s this for “responsive”: Mitsubishi bid $6 million and CISCo bid $1 million—for the same repairs! How is that possible? Will we ever know?

Mr. Muna is supposed to be a well respected accountant, and I certainly am not, but I can add two and two and usually come up with four, assuming that is a correct answer. CUC’s business is really nothing more than simple arithmetic, but the arithmetic employed in this sort of reporting defies all logic and arithmetical formulae that I know of. It would appear that some sort of futuristic quantum mechanics yet to be invented has been employed. And that is just not conducive to public trust, is it?

So let’s see the real balance sheet. After all, CUC is supposed to answer to the public, is it not? Legislators: Are you looking into this, or just absorbing whatever is thrown at you as if it were gospel? Or will somebody tell me that I’m supposed to add two and two and get five like everybody else?

Oh, and by the way, that proposed $103 million for fuel in FY ’09? It will buy us 81 megawatts of generation IV nuclear power with no additional fuel cost for the next 10 years! That’s a one-billion dollar saving!