SCC tells CUC: Be reliable or privatize

The Saipan Chamber of Commerce has asked the Commonwealth Utilities Corp. to provide a more reliable service, or privatize.

The business group made this statement when it raised concerns about the proposed implementation of a fuel surcharge, which could boost rates up to 3.5 cents per kilowatt hour.

“The Chamber believes strongly that CUC must find ways to reduce operating costs further, and to collect all the bills that are already owed. To ask reliable customers to subsidize the costs of delinquent customers is unconscionable,” Chamber president Alex Sablan said in a Sept. 13 letter to CUC chair Francisco Q. Guerrero.

On Tuesday, the CUC board of directors voted unanimously to defer action on the fuel surcharge proposal. Rather, the board members asked the management to provide a more thorough presentation on the proposal and be more aggressive in collecting payment from delinquent customers.

In his letter, Sablan said the imposition of a fuel surcharge would further create an unfriendly climate for business, as well as raise the cost of living for island residents.

“It is imperative that Saipan businesses and residents have an efficient and reliable electric power source. It is a basic underpinning of a stable and thriving economy,” Sablan said.

He also reiterated the group’s favorable position on the privatization of CUC. He said the Chamber has not seen evidence that CUC is capable of providing reliable electricity. To prove his point, he cited an incident during the Supertyphoon Chaba recovery efforts where CUC ran out of supplies to fix or restore power-related problems.

Privatization, he said, would bring CUC the “effectiveness and efficiency of sound business practices.”

“I wish to restate our position: the Saipan Chamber of Commerce urges that CUC, rather than impose a rate increase on its customers, instead closely examine payroll demands as well as efficiency and effectiveness of operations,” Sablan said. “We urge CUC to immediately make the changes necessary to provide a stable and reliable source of electricity. If CUC cannot take the needed steps without delay, we advocate for the privatization of CUC.”

CUC board member Joe Torres said that as far as he knows, the corporation has not taken any further step toward privatization recently.

The recommendations of Harris Group, which CUC paid $103,000 to do the scope of work and evaluation of proposals for the privatization project, are still under discussion.

“My position on privatization is the same as my position on the issue of imposing a fuel surcharge. I think CUC’s problems can be resolved if the management gets its act together, and put a good maintenance program in place. If you don’t fix the plant now, you’ll end up losing it altogether. How can you get any revenue then?” Torres said.

He added that privatizing CUC would result in an inevitable rate increase. Any investor who may want to take over CUC would have to increase utility rates to recover its expenses, he maintained.

Harris Group has advised CUC to address environmental and personnel issues in its pursuit of the privatization plan for the main power plants in Lower Base.

A 1997 feasibility study on CUC’s privatization, conducted separately by CH2Mhill and Winzler & Kelly Consulting Engineers, showed that based on the full-cost recovery analysis, residential electric rates would have to be increased by 39 cents.

At present, CUC power rates are 11 cents per kilowatt-hour for residential customers and 16 cents per kwh for commercial customers.

For areas with 24-hour water service, CUC charges $1 per 1,000 gallons for the first 3,000 gallons; $2.40 per 1,000 gallons for use of 3,001 to 15,000 gallons; and $3 per 1,000 gallons for the use of over 15,000 gallons.

For areas with less than 24-hour water service, CUC charges 50 cents per 1,000 gallons for the first 3,000 gallons; $1.20 per 1,000 gallons for usage of 3,001 to 15,000 gallons; and $1.50 per 1,000 gallons for usage of over 15,000 gallons.