Villagomez proposes ‘tit for tat’ to resolve CUC’s financial mess

Vice Speaker Timothy P. Villagomez has introduced a bill proposing to raise the Commonwealth Utilities Corp.’s electricity rates. In exchange, he wants the fuel surcharge removed and CUC’s $45 million debt with the Commonwealth Development Authority written off.

In House Bill 14-362, Villagomez aims to raise the electricity for residential and non-profit groups from 11 cents to 13 cents; commercial users from 16 cents to 18 cents; and government from 16 cents to 39 cents.

Villagomez said the residential rate increase shall not apply to residential customers who use less than 2,000 kilowatt hours per month.

He said the government rate shall be reduced to 18 cents per kilowatt hour upon payment of its $18 million outstanding debt with CUC.

Minority bloc leader Arnold I. Palacios said the proposal is “a worse option” than the existing 3.5 cents fuel surcharge fee per kilowatt hour.

Palacios said that, unlike the fuel surcharge, the electricity rate would be permanent regardless of oil prices.

“It just kills the government. The government’s rate is more than double. We even had a hard time paying up the regular rates. So doubling it would mean doubling our potential liability with CUC,” said Palacios.

Further, the bill, he said, is actually “three bills in one” as it also aims to write off debt with CDA and repeals the fuel surcharge.

The governor had just disapproved a Villagomez bill that aimed to repeal a portion of the law that allows CUC to impose the fuel surcharge.

Likewise, a bill that aims to write off CUC’s debt with CDA, which was also authored by Villagomez, did not pass the House of Representatives. Last March, H.B. 14-285 was narrowly defeated, with eight “no” votes from the minority bloc and seven “yes.”

In his previous bill, Villagomez argued that the money loaned out to CUC by CDA was part of a $140-million federal direct grant assistance to the CNMI that required no repayment. He said that CDA merely acted as conduit for the distribution of these funds for infrastructure development in the CNMI.

In his new bill, Villagomez said that CUC is in dire straits and is unable to make payments pursuant to the CDA-CUC 2004 amended loan agreement.

“CUC’s main struggle [comes from] its fuel cost payment every month and maintaining the power plants. Moreover, the CUC-CDA loan negatively affects CUC’s financial status, which has prevented CUC from obtaining low-interest loans to maintain and upgrade its power plants and other facilities.”

On power rates, he said that CUC has not changed its electricity rates since the beginning except the government rate, which was reduced a few years back.

He said the current rates “do not reflect full cost recovery of producing power today.”

H.B. 14-362 aims to mandate CUC to conduct and complete an independent rate study on electrical power, water, and sewer within six months.

Meantime, Villagomez said that based on his proposed rates, CUC would collect an additional $20 million from residential and non-profit customers, $38.8 million from commercial customers, and $19.3 million from the government.

He said this would “cover the additional cost of fuel without having to impose a fuel surcharge fee.”

He said that CUC generates 420 million kilowatt hours a year. Earlier, CUC said that Saipan consumes about 360 million kilowatts a year but about 25 percent of it is lost or unaccounted.