CUC gets tough on spending

The Commonwealth Utilities Corp. has begun implementing cost-cutting measures, citing “factors beyond CUC’s control.”

In a June 24, 2004 memorandum, CUC executive director Lorraine A. Babauta directed all CUC managers “to immediately implement cost-cutting measures and tight expenditure controls.”

She said fuel cost has been extremely high, causing serious constraints on the budget. She also said the CNMI government’s continued failure to pay its utility bills is causing a shortfall in the agency’s projected revenue collections.

“Therefore, it is mandatory that we put every effort in reducing expenditures and use our current resources conservatively to reduce our serious financial constraints,” she said.

Babauta said in the next 90 days or until the financial conditions improve, the following measures will be in effect: no non-emergency overtime, freeze hiring, no off-island travel/training, no luxury or non-essential purchases, no luxury use of vehicles, termination of cellular phones, and stoppage of premium pays.

Babauta said CUC may also reduce employee hours. “If the financial condition of the corporation worsens, and alternatives to increase revenues and decrease expenses are not in place to assist our situation, the worst case scenario would leave us no choice but to reduce employee hours,” she said.

In her memorandum, Babauta said any non-emergency overtime will not be approved.

She said managers are instructed to exercise good judgment when selecting employees for overtime work, giving priority to basic operations.

She said vacancy announcements for new hires or promotions are frozen, except for those positions that have been announced.

Travels, she said, will only be approved for critical/emergency circumstances and is at the discretion of the executive director and/or the CUC board.

Babauta said managers are ordered to assess the vehicle assignment of their personnel. Any vehicles used after working hours should be authorized.

Managers are also asked to relinquish their cellular phones to the purchasing manager immediately to save on costs.

“I expect each manager to adhere to the guidelines in this directive effective immediately… I expect each employee to contribute by using our resources conservatively and making rational decisions,” said Babauta.

The CUC earlier reported that its fuel expenses would overshoot by up to $8 million this year due to worldwide oil price increases. CUC said it only allocated $31 million for that purpose for 2004.

CUC also said its collection from the central government was up $1.75 million in April compared with the same period last year. However, the government is still behind its payment schedule.

Despite this, the CUC cannot disconnect the government utilities due to a restraining order issued by the court. As soon as CUC advised the government last April of disconnection of accounts, the government petitioned the courts for a temporary restraining order, which was granted and takes effect until Sept. 1 this year.

During this time through August, the government has agreed to pay CUC a total of $1.95 million, with a minimum of $500,000 during any given month.