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Privatization negotiation down to cost, personnel
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Posted on Jul 23 2005
The remaining issues on the awarding of a power privatization contract involve costs and personnel matters, according to the Commonwealth Utilities Corp. consultant Dennis Swann.
In an interview, Swann, who is vice president of U.S.-based consulting firm Harris Group, said the contract has not been awarded because parties are still discussing key issues, particularly costs and personnel.
CUC is believed to be choosing between two proposers: Telesource and Rolls Royce.
Swann earlier said that CUC would be able to make a decision on the privatization program in less than two months. Both companies have agreed to absorb all of CUC’s permanent employees.
He said, though, that one offer is “a bit better” package than the other.
“I would hope that if we go forward, it can be awarded in less than two months. We still have some series of negotiations to get the details worked out,” said Swann.
CUC is inclined to award soon a 20-year contract to a private company for power generation on Saipan. The contract involves the takeover of the eight-engine Power Plant I in Lower Base, its rehabilitation and upgrade to meet environmental standards, and installation of two new 15MW generators.
Swann said that both proposers are amenable to not raising power rates within three years of privatization. After this period, a rate increase would be between 1 to 2 cents per kilowatt-hour—upon the approval of CUC.
CUC charges 11 cents per kwh for residential customers and 16 cents for commercial and government users. In addition, CUC currently charges a fuel surcharge fee of 3.5 cents per kwh.
CUC said it now spends $60 million on fuel—a 50 percent increase from the $30 million it was spending in 2003.
Once privatized, CUC will be providing fuel for the operation of the power plants.
