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Rise in fuel cost leads to operating loss
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Posted on Feb 13 2005
The Commonwealth Utilities Corp. incurred an operating loss of $2.6 million despite saving $1.4 million in the last three months of 2004, after fuel costs shot up by nearly $5 million.
An unaudited CUC financial report showed that the utility firm cut its general and administrative costs by 31 percent—from $4.6 million in the last quarter of calendar year 2003 to $3.2 million in the same period in 2004.
However, the cost of fuel used for power generation soared by 56 percent, surpassing the amount of CUC’s savings more than three-fold. From only $8.8 million in October-December 2003, CUC’s fuel expenses climbed to $13.8 million in the last three months of 2004.
Along with a slight hike in maintenance costs, the increased fuel costs resulted in total operating expenses of $21.2 million for CUC in the fourth quarter of 2004, a 20 percent growth from the same period in 2003.
“We have implemented every single [cost-cutting] measure that we could take. For a public corporation in the CNMI, it is monumental achievement to cut one’s operating expenses by 31 percent,” said CUC comptroller Sohale Samari.
He noted that CUC implemented a freeze on hiring and travel outside of the CNMI and Guam. The firm also stopped annual purchases and is now only buying supplies on need basis, he said.
He further cited that CUC closed its two payment branches in Garapan and Dandan starting Nov. 30 in order to save on rent.
Last month, CUC instructed Pacific Marine and Industrial Corp., the private contractor operating the Puerto Rico power plant, to keep the production level at the plant to 7.3 million kwh per month. This is the minimum amount of power that the utility firm is required to purchase under the terms of its contract with the independent power producer.
The move, Samari said, is expected to save CUC about $60,000 to $100,000 monthly.
“So before people come and say CUC should first cut costs before talking about fuel surcharge, they need to come and look at these numbers. We have cut on everything that we could, we have done everything that we needed to do. There’s just nothing we could do about the cost of fuel,” Samari said.
