Power rate cut could realize $1M savings

A plan by the Commonwealth Utilities Corporation to lower electricity rate of the government by four cents to 16 cents will translate to more than $1 million in savings each year for the local coffers, according to officials.

The move would also wean the utility firm away from government subsidy which it has been enjoying over the past seven years following a serious financial crisis that had plagued the previous management, said CUC Executive Director Timothy P. Villagomez.

But the new power rate — similar to those charged to commercial users — will only take effect once the CUC board adopts the findings of a series of public hearings on the proposal which began yesterday on Tinian.

A town meeting is scheduled tomorrow on Rota, while CUC holds the last hearing on Friday at the Multi-Purpose Building in Susupe.

Last November, the utility corporation agreed to revert back to the old rate of 16 cents for electricity used by the public sector in a bid to help the cash-strapped government deal with the current economic crisis.

“(The higher rate) was not intended to bankrupt this government,” Villagomez explained in an interview. “We view that as a subsidy and CUC has a goal to be self-sufficient and we have to meet this mission of the corporation.”

He admitted the government has been behind in their utilities payment in recent months by at least $2 million, covering two-month billings, but said CUC is not bailing it out from the financial obligations.

The management estimates between $1 million to $1.5 million in revenue losses from the lowered rate and Villagomez said they will step up its efforts to improve its collections from customers to prevent any serious cash shortfall.

Despite the anticipated impact of the move on CUC income, the reduction will boost government savings by $1.5 million a year from the nearly $8 million it pays annually for electric bills.

“There is no other utility firm that has the government pay a higher rate,” said Pamela Mathis, CUC chief information officer. “Our rate structure right now is upside down.”

Gov. Pedro P. Tenorio has implemented several measures, including travel ban and freeze hiring in government offices, aimed to cut down expenditures and boost savings in the wake of the sharp decline in revenue collections in the last one and a half year.

The Northern Marianas is reeling from its worst economic crisis in years spawned by the continued financial turmoil gripping much of Asia. The region is the island’s main source of investments and tourism income.