Senators: Suspend privatization program

Senators asked Gov. Juan N. Babauta yesterday to suspend the implementation of the power privatization program, citing a lack of comprehensive cost-benefit study.

“The Senate Committee on Fiscal Affairs stands strongly opposed to the privatization of the Commonwealth Utilities Corp. power plant until a comprehensive cost-benefit study has been conducted. …We ask that you immediately suspend any action on the RFP until such time an analysis has been undertaken,” said the senators in a June 22 letter to the governor, who currently has emergency control of the utility firm.

The senators, led by committee chair Joseph Mendiola, said the government has “alternatives” to privatization such as borrowing the $60 million needed to upgrade the power plant system, rather than letting a private company take out the loan, which would require the government’s 100 percent guarantee anyway.

“The Harris Consulting group has determined that if the CUC is to borrow the $60 million needed to upgrade the existing power plants at an annual rate of 10 percent or less, it would be a viable alternative to privatization,” said the senators.

They said the government can use future capital improvement funds as collateral for such a loan.

The letter was signed by senators Luis P. Crisostimo, Thomas Villagomez, Henry San Nicolas, Diego Songao, and Mendiola.

Mendiola said minority leader Pete P. Reyes also signed the letter.

The group said that Harris Group “indicated that the privatization would undoubtedly lead to further rate increases.”

Moreover, they said any loan entered into by an independent power producer to upgrade existing utilities would require the full faith and backing of the CNMI government anyway.

“We must be cognizant of the financial obligations the CNMI government may absorb through privatization and be aware that any independent power producer will be profit-driven. It is our duty to protect the best interests of the CNMI and carefully consider the repercussions of the privatization of power,” said the senators.

They said they know that the current situation at CUC requires immediate action. As such, they asked Babauta to form an independent task force to conduct a cost-benefit study of the power plant privatization.

“Until such time, we remain vehemently opposed to the privatization of CUC,” the senators said.

Meantime, governor press secretary Pete A. Callaghan said that rate increases would be inevitable, “whoever runs the power plants.”

He said a private company is needed to ensure proper maintenance and efficient operation of the power plants. CUC, he said, has had its chance to handle the operation for a long time.

“For so many years, it seems that the CUC has been unable to maintain the power plants at a proper condition. A private company would not want to do that because it would hurt [them],” he said.

He said CUC only managed to do maintenance work on the power plant’s bus bar, which connects the generators to the main feeder, last Saturday.

“It was never done in 13 years,” he said.

On the issue of public interest, he said, “the best interest of the CNMI is to keep the power on.”

“That’s why the governor is determined to pursue privatization,” he said.

The CUC intends to award a contract to a private company by next month. The government would choose either Telesource or Rolls Royce Power Ventures to operate the main power plant in Lower Base.