Villagomez skeptical of CUC’s advance payment proposal

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Posted on May 04 2005
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Vice Speaker Timothy P. Villagomez questions the long-term viability of CUC’s proposed advance payment scheme, which the CUC board of directors recently proposed in order to pay its rising fuel expenses and avert a power crisis.

Villagomez believes the advance payment scheme might prove unsustainable over the long term, as CUC struggles to offer customers a 12 percent return on advance utility payments.

Villagomez notes that CUC’s proposed 12 percent advanced payment rate is at least four times the return consumers enjoy from most financial institutions offering certificates of deposit or savings accounts. It is well above the going market rate.

“I have to wonder how long such a program can remain viable,” said Villagomez. “This could be a temporary solution that would only lead to more cash-flow problems down the road.”

After raising its recently imposed fuel surcharge fee, CUC is still struggling to pay Mobil Corp. for its badly needed fuel supplies. CUC has reportedly exceeded its $10 million fuel credit limit with Mobil and only has a very limited supply of fuel.

CUC is reportedly seeking either the full faith and credit of the CNMI government or some other means of establishing a loan guarantor for the purchase of essential fuel supplies to run the CNMI’s power plants, including a possible Commonwealth Development Authority loan guarantee or other arrangement.

The CNMI government, however, may not be in a position to incur public debt for CUC given the central government’s own precarious financial condition and financial mismanagement. The Commonwealth government is said to owe CUC more than $21 million in unpaid utility bills, which have been in arrears for several years.

“We have to be careful about employing temporary solutions that might bring us far more problems down the line,” said Villagomez. “I would caution the CUC board and management to think very carefully about all potential solutions and thoroughly consider all of the possible long-term effects of each option before proceeding.”

Villagomez is chair of the House Committee on Public Utilities, Transportation and Communications, the committee responsible for overseeing CUC.

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