‘Privatization is next priority’

After securing a two-year fuel contract with Mobil Oil Marianas, the Babauta administration now wants the Commonwealth Utilities Corp. to expedite its privatization of power generation to ensure a more efficient delivery of power services.

In a statement Friday, the Governor’s Office “encourages CUC to fast track the privatization of Power Plant I.” It said this is needed since CUC’s power plants are old and poorly maintained.

“The CUC has not purchased additional engines in over a decade. The capacity and efficiency of new engines will greatly improve the financial condition of the CUC,” said the office.

Gov. Juan N. Babauta, who is currently in control of CUC, said earlier that his two immediate goals are to settle the fuel supply problem—by getting a long-term fuel contract from Mobil—and to service the rundown power plant engines.

He cited that experts who have seen the engines are appalled that the plants are still operating at their present condition.

CUC’s main power plant has eight engines: four that were installed in 1979 and four that were installed in 1989 and 1990.

The administration said it is now evaluating funding needed for the renovation and other improvements to be made on the engines. It is estimated to cost over $2 million.

Babauta, who declared a state of disaster emergency on May 19, has the authority to reprogram funds from all sources to address the power crisis.

As of last week, the Department of Finance has not identified any specific funds for emergency use.

Finance Secretary Fermin M. Atalig is currently asking some offices such as Marianas Public Lands Authority and other revenue-generating agencies to provide him financial reports to assess funding availability.

In a briefing with the business community shortly after the emergency declaration, the Executive Branch sent a message that privatization of power would take place soon.

Saipan Chamber of Commerce president Alex Sablan, who attended the briefing, said an independent power producer contract may be awarded in a couple of months.

“We hear it’s very soon. …What we are talking about is an IPP contract being actually awarded. They [government] say it’s very soon. We’re hoping to press the idea that it needs to come very soon, especially during the summer months,” said Sablan.

Sablan said the business community favors privatization of power generation, which it sees as a way to lower the cost of production. He said it is a misconception that a privatized operation would result in higher rates.

Earlier, CUC executive director Lorraine A. Babauta said that her office is “working out details right now” for privatization, but she said that the awarding of an IPP contract may not happen during the emergency period.

She said CUC would follow the schedule set by its consultant, the Harris Group, which said earlier that the awarding of IPP contract would happen in October this year.

Harris Group earlier estimated that some $60 million would be needed to upgrade CUC’s main power plants. He said the privatization of power in the CNMI would cost $364 million over 20 years.

CUC is currently evaluating the proposals of two IPPs: Telesource and Rolls Royce, which is represented locally by PMIC.