CUC-Mobil contract hangs fire

Four days to go before its fuel supply contract expires, the Commonwealth Utilities Corp. remains undecided whether or not to accept the sole proposal it received from Mobil Oil Marianas.

CUC chair Francisco Q. Guerrero, who just came back from an off-island trip, said the board has yet to resolve various issues with Mobil, particularly those concerning price and credit limit.

CUC’s current two-year contract with Mobil will expire on Saturday, April 30.

“Mobil’s contract is high priority for the board right now. I will be meeting with the board’s audit and compliance committee soon to address this matter. Right now, neither [CUC executive director] Lorraine [Babauta] nor I have the slightest idea what to do with the contract because we have both been [away],” Guerrero said.

He added that the CUC board might consider canceling and re-advertising the request for proposals if it fails to reach an agreement with Mobil.

The contract price is one of the major issues that CUC needs to settle with Mobil. “There is so much percentage increase,” Guerrero said.

CUC comptroller Sohale Samari reported earlier that the price quotations offered by Mobil 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.

The utility firm also wants to negotiate with Mobil on the oil company’s plan to reduce the grace period given to CUC from 60 days to 30 days. Accordingly, Mobil proposed to cut CUC’s credit limit from $10 million to $5 million, Guerrero said.

“We have to sit down and seriously discuss [these],” he added.

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 in 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.”