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Renewal of fuel contract to cost CUC
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Posted on Mar 27 2005
The Commonwealth Utilities Corp. will face an average 11-percent increase in fuel expenses, should it decide to renew its multimillion-dollar fuel supply contract with Mobil Marianas Inc.
CUC comptroller Sohale Samari disclosed that Mobil had given the utility firm three options for the contract renewal. The price quotations, he said, ranged from a variable price that starts with an 8-percent increase over the current contract price, to a fixed price with a 15-percent increase.
“Should the board [of directors] accept the contract proposal that has come in from Mobil, we are looking at an average price increase of 11 percent,” Samari said. “We haven’t started our negotiations with Mobil yet. The board still has to come together and decide on how to approach Mobil’s proposal.”
Mobil’s two-year contract as CUC’s fuel supplier is set to expire on April 30, 2005. For the duration of this contract, CUC paid Mobil a total of $73 million, of which $39.7 million was disbursed in fiscal year 2004.
CUC is currently looking to enter into a two-year contract with a company qualified to supply fuel for its power plants on Saipan, Tinian, and Rota. Mobil and at least one other company have reportedly expressed interest in participating in the bid.
Based on the recently adopted CUC budget for FY 2006, production fuel is expected to be CUC’s biggest expenditure.
Of its $83.29-million budget, CUC committed $51.56 million solely to production fuel expenses. This represents an increase to the fuel and lube budget by $16.51 million or 46.8 percent over the FY 2005 budget, and by $20.70 million or 66.6 percent over the FY 2004 budget.
CUC hopes to collect $15.12 million of the budget through the implementation of the fuel surcharge, which will be increased from 1.5 cents per kwh to the maximum allowed rate of 3.5 cents per kwh starting April.
“With the FSF projected at $0.035 per kwh, the total projected FSF collections at $15.12 million would barely allow CUC to efficiently carry on its operations,” according to CUC. “At the least, the increase in fuel prices will not, to a great extent, deplete CUC’s operational funding.”
