CHCC non-payment would reflect in FAC rate

The Commonwealth Utilities Corp. reports that the Commonwealth Healthcare Corp.’s nonpayment of utility arrears will reflect on the fuel adjustment charge imposed on all CNMI residents.

CUC chief financial officer Betty Terlaje and executive director Kevin Watson held an FAC presentation before the CUC board of directors during yesterday’s regular board meeting.

During the presentation, Terlaje explained CUC’s “bad debt” and how it is factored into the FAC charged to each CNMI resident.

Terlaje explained that “bad debt” includes unpaid receivables like CHCC’s unpaid utility balance of over $60 million.

According to Terlaje, bad debt is factored into the FAC essentially passing on the charges to consumers.

“There is a small portion in the FAC rate, a small element that is essentially ‘bad debt’ and it takes into account bad debt that is related to fuel. So, in order for our rate to be full cost recovered, we also need to recover what wasn’t paid to CUC. It’s a normal cost of business,” she said.

Using goods sold in stores as an example, Terlaje says CUC must also recover the cost for fuel used to provide utility services to CHCC.

“For example, if you go to the store and buy a can of soda, there are a couple of pennies in there reflecting bad debt. So same with CUC, for a full cost recovery, we need to recover the portion of fuel that was not recovered or paid. We have to pay for that fuel, who is going to pay for it?” she said.

Overall, Terlaje says the fuel used to power CHCC is a business expense that has to be recovered somehow.

“Theres just a difference here whether it should reflect on the fuel rate or the non-fuel rate. If it comes out of the base rate, whether it’s in the fuel or the base rate, it’s still going to be part of the rate. If they prefer not to include it in the fuel rate, that’s fine that’s the board’s decision but even if I write it off on the books it’s still going to be factored into the non-fuel rate as an expense. I understand the public’s concern that they’re paying for this, whether they’re paying for it in the fuel rate or the non-fuel rate, it’s a business expense that has to be covered,” she said.

“It will be reflected in the fuel adjustment charge as long as the Commonwealth Public Utilities Commission does not change the rate or remove the element. They might consider it now as it’s been a long time, but that element was put in there in 2012,” she added.

Currently, CHCC owes CUC nearly $70 million in arrears and penalties.

However, CUC and CHCC are actively finding ways to work together to pay off this outstanding balance.