CUC emergency extended but questions arise

Gov. Benigno R. Fitial extended on Saturday his declaration of a state of emergency for the Commonwealth Utilities Corp. but some lawmakers question the administration’s motives for still suspending the Public Utilities Commission’s regulation and oversight of CUC over planned 20-year renewable energy contracts when PUC now has a three-member quorum, among other things.

“I really hope that they’re not using this emergency declaration to facilitate contract awards that should have gone through normal procurement process, especially now that we have a functioning PUC,” Senate President Paul Manglona (Ind-Rota) told Saipan Tribune yesterday.

Manglona was referring to Directive 2 in the governor’s latest executive order dated June 16, copies of which were distributed to the Legislature only yesterday.

The latest EO extends by 30 days the original executive order dated May 18.

Fitial cited as reasons for the emergency extension CUC’s continuing cash shortage which threatens to halt power, water, and wastewater services because of the lack of funds to buy diesel and lube oil for its operation; lack of quorum on the Board of Professional Licensing that is supposed to issue license or certificate of authorization to off-island bidders; a continuing renewable energy crisis; a continuing technical worker crisis; and a non-existing CUC board of directors.

Manglona said a lack of BPL quorum is not an excuse because it is the governor himself who is supposed to nominate people to serve on this board.

The Fitial administration is poised to award a 20-year renewable energy contract to U.S.-based American Capital Energy Co. whose local business partner is Herman Sablan.

The contract award for Japan-based Saipan Solar System is currently on hold for technical concerns.

Rep. Frank Dela Cruz (R-Saipan), for his part, wants CUC to provide more information regarding its decision to back out from a $10-million loan agreement with Rhode Island-based Independence Bank even when, he said, CUC has already been collecting additional fees from customers since “May or June” last year to help pay for this loan.

“I intend to get to the bottom of this and find out when does CUC intend to give this back to its customers,” said Dela Cruz, chairman of the Saipan and Northern Islands Legislative Delegation’s Public Utilities, Transportation and Communications Committee.

Dela Cruz said if his math is correct, “CUC has already collected over $1 million in fees for the payback of this $10 million loan from Independence Bank that is now not needed.”

Sen. Juan Ayuyu (Ind-Rota), chair of the Senate PUTC Committee, separately said CUC could no longer afford to enter into a $10 million loan and pay a monthly rate of $110,000. Ayuyu met with CUC officials last week at the Senate.

“We asked CUC to meet with the administration again and see whether future CIP [capital improvement project] funds could be given to CUC. If we don’t take care of CUC’s stipulated order requirements, we will end up facing stiff fines from EPA [U.S. Environmental Protection Agency] of maybe a million or so,” Ayuyu said.

Ayuyu said the administration needs to focus on CUC’s operational needs.

Fitial’s latest CUC emergency declaration again said that the cash-strapped central government, the Public School System, and the Commonwealth Healthcare Corp. still owe CUC over $8 million. He said residential users also owe CUC over $4 million. CUC also has $2.6 million in accounts payable to vendors.

One of the new paragraphs in the governor’s latest EO is his mention of the CNMI and the government’s severe economic distress. He said the government’s budget alone fell from $120 million to a little over $100 million.

“This has put a severe strain on the government to meet its obligation,” Fitial said.

Dela Cruz reiterated that it should be the central government-not CUC, CHC, or the NMI Retirement Fund-that has to be placed under a state of emergency. The government owes the Fund over $300 million in unpaid employer contribution.

Fitial added another line to his new EO referring to government and CUC finances.

“A unified government approach is necessary to reconcile and resolve the fiscal crises of the government with the fiscal crises of CUC. This can only be achieved through a emergency declaration,” he said.

As of last week, the Senate was poised to reject the governor’s CUC emergency declaration. Now that the EO has been extended for another 30 days, the Senate is reviewing its position on the matter.

Fitial’s EO no longer mentioned that it has a problem with a non-functioning PUC.

The Senate confirmed three of the governor’s appointees to CUC around the time Fitial placed CUC under a state of emergency.

However, the governor’s latest EO still suspends provisions in Title 4 of the Commonwealth Code and PL 17-34 “that concern PUC regulation of CUC and its actions, and potentially, any oversight of renewable energy contracts are suspended in this Order.”

Manglona said there is a reason why PUC exists-to regulate and have oversight over CUC and other utilities firms.

Fitial first placed CUC under emergency status on Aug. 1, 2008, to enable it to skirt procurement and other laws to solve rolling blackouts and imminent power generation failure. The governor had been extending the emergency declaration month to month. CUC entered its 31st month under a state of emergency in February 2011.

On March 28, 2011, he lifted the emergency declaration for CUC. Over a year later or on May 18, he placed it again under emergency.

Fitial also placed under a state of emergency the NMI Retirement Fund and CHC.