House wants in on power privatization program

Hinting of secret negotiations that could take place on power privatization, House Speaker Benigno R. Fitial asked CUC if the awarding of a contract to an independent power producer would result in any potential financial liability or debt for the government.

At the same time, Fitial expressed interest in the Legislature being involved in the ongoing efforts to privatize power.

He reiterated that the CUC, under the Constitution, cannot incur any public debt without the Legislature’s approval.

“The legislature must be a party—and a partner—to the successful operation of our public utilities,” said Fitial.

In his June 7 letter to CUC executive director Lorraine A. Babauta, Fitial said he and his colleagues want “to be informed of any potential government liability that might accrue as a result of the privatization.”

“We specifically want to know if the reported $300 million contract with an IPP would constitute a financial liability or debt on the part of our local government,” he said.

CUC consultant Harris Group earlier estimated that the privatization of power would cost some $364 million over 20 years.

Fitial also asked for the most recent financial audits of the two leading IPPs: Telesource and Rolls Royce, represented locally by Pacific Marine and Industrial Corp.

“Please make sure to keep us well-informed on the status of the privatization of CUC,” he said.

Earlier, the House speaker wrote Bank of Guam, warning of potential constitutional liabilities if it allows the government to tap into a $10 million letter of credit without legislative approval.

He said the Constitution also prohibits the creation of public debt for government operating expenses.

“The governor is seeking funding through the standby letter of credit in order to have the operating expenses of CUC. No matter what the governor calls the letter of credit, the minute a penny is drawn upon it, a debt exists. The debt, without legislative approval, is a violation of the CNMI Constitution,” said Fitial.

The bank earlier approved a $10 million standby letter of credit for CUC’s use to buy fuel from Mobil.

The Governor’s Office said it managed to secure a two-year fuel contract with Mobil without using the $10 million guarantee. It said it used CUC’s own account with the bank.