Terlaje: A lot of times CUC does ‘band aid’ approach

With the CNMI government’s combined unpaid Commonwealth Utilities Corp. utility bills now reaching $77.8 million, CUC is often forced to make a lot of sacrifices and do a “band aid” approach due to lack of funds to repair and replace old power engines, according to acting CUC executive director Betty G. Terlaje yesterday.

In response to a question by Sen. Karl R. King-Nabors (R-Tinian) during a Senate committee meeting, Terlaje said they have to make a lot of sacrifices to keep afloat and that payments of their other customers are the ones keeping CUC afloat.

“We’re not reinvesting back into the utility. …We have a power plant that’s significantly outdated and…in trouble. …[It] needs major overhauls that we can’t afford,” Terlaje said.

Citing another example, Terlaje said that CUC just submitted its annual budget, which does not contain capital outlays or capital expenditures.

“[The budget] should have improvements and that’s something that we’ve sacrificed because of the fact that we’re not getting the funding coming in,” she said.

The Special Committee on the CNMI Government’s Unpaid CUC Bills was created to investigate the government’s unpaid utility bills.

At the meeting held in the Senate chamber yesterday, Sen. Dennis James C. Mendiola (R-Rota), who is the vice chair of the special committee, clarified that the special investigative body is not intended to blame anyone. Rather, their goal is to try and get to the bottom of the arrears and try to prevent this from happening in the future, he added.

Mendiola said they called in Terlaje and her team in order to gain an understanding of how the billing process works.

“So I just wanted to make sure that we put that out there and that it’s more of just trying to get to the bottom of this and allow the [Senate] president to have a course of action here,” Mendiola said.

Sen. Corina L. Magofna (Ind-Saipan), who chairs the special committee, reiterated this point, saying the purpose of this investigation is to get a clear understanding of government accounts that are in arrears and validate them to make sure that whatever CUC is claiming to be due to them is also agreed upon by the respective government entities.

“It’s a two-way street,” Magofna pointed out.

She said they want to help reconcile the accounts, even though she is sure that that’s something CUC and the government are already working on.

Magofna said they are doing this oversight at the request of Senate President Edith E. DeLeon Guerrero (D-Saipan) and they have 60 days to gather as much information as they can about these accounts and try to come to a resolution and make recommendations for the future so that they prevent these types of financial issues from arising continually.

After the end of the meeting, Magofna said she is glad to hear that CUC and the administration are taking steps to install prepaid meters in all government facilities. She said that would greatly help reduce or even prevent these arrears from occurring in the future.

“That’s a step in the right direction,” Magofna said.

She said they expect CUC to furnish them with some documents for further review and discussion with the committee members.

At the start of the meeting, Terlaje said this is not a new issue for CUC as it’s been going on every time there’s a struggle with the government’s revenues.

Terlaje said CUC is usually put on the backburner. In this case, the central government itself has payables in the amount of $13 million that are due to CUC.

With the Commonwealth Healthcare Corp.’s utility arrears, Terlaje said the total is about $60 million, including a good amount of penalties, at this time.

Terlaje said they currently have an agreement with the CNMI government as they met last month when they were in the U.S. District Court for the NMI. She said they had a closed-door negotiation and that meeting included the U.S. Department of Justice attorney and U.S. Environmental Protection Agency attorney, along with the CUC management and counsel, and Gov. Arnold I. Palacios.

Terlaje disclosed that they all agreed that there needs to be a reconciliation on the central government side and its $13-million arrears.

She said Finance Secretary Tracy B. Norita is struggling in getting her department secretaries to upload their billings to the system so she (Norita) does not see these billings in their system. Terlaje said they told Norita that that’s an internal issue on the government side and it needs to be resolved quickly because, as far as CUC is concerned, these bills remain outstanding.

She said the bills keep increasing as long as there’s no effort on the Finance’s part to do their own reconciliation and work with CUC on paying it off.

Terlaje said they agreed that, by April 1, 2024, the central government is supposed to make a 25% payment on the balance that was on the books as of 2021, which was $1.7 million.

She said Norita is saying they do not contest the $1.7 million because that had already been reviewed by their financial auditors. Terlaje said CUC confirmed at the time of that audit that that was a correct figure.

She said Norita committed to paying 25% of that, which would be about an over $400,000 by April 1.

She said their agreement was that they would also reconcile the top 15 accounts.

She said Palacios also committed that the central government would make its payments current going forward.

“So as of February’s billing, we should expect that payment at the end of the month,” Terlaje said.

As for the other accounts, she said, they work directly with the other agencies and they don’t have problems. For example, she said, when the Commonwealth Ports Authority has concerns or issues, CUC works it out with them and then shortly after that, they’ll make some payment.

She said the Public School System and other federal programs pay on time.

Terlaje said the other large account is the Commonwealth Healthcare Corp. She said CUC had signed a memorandum of understanding with CHCC in April 2023. They agreed that CHCC would pay their current billing, which was estimated at $525,000 at the time.

Terlaje said CHCC has not paid on time, but uses its grace period.

She said the MOU, which is expiring, was to allow time for CHCC to revisit and reevaluate their finances to come up with a solution.

Terlaje said they do have a draft proposal for CHCC and gave them some options.

She said U.S. District Court for the NMI designated Judge David Carter stated he wants an update within 60 days of the progress CUC has made with CHCC and the central government.

She said they do have a good amount of government accounts that are in prepaid status for the electric and that has helped the receivables stay lower.

She said one of the things that is a big concern is that CUC get so much funding from its federal partners, like EPA, and it’s not fair to them either that they continue to fund CUC, yet CUC is not collecting on its receivables.

She said Carter wants the issue resolved because he does not want to see the funding stop either.

“He wants us to be able to capitalize [and] build off of what we could get from EPA,” Terlaje said.

Unfortunately, she said, that’s only on the water and wastewater side. With respect to the power side, Terlaje said they don’t have grantors that are just going to come and give CUC power engines.