Why CUC cannot afford to pay for its fuel
Our legislators are still trying to figure out how to solve the controversial issue of the fuel surcharge that is imposed on every CUC customers. Let me again explain why CUC cannot afford to pay for its fuel needs, inclusive of lubricants. The following summary will explain why CUC cannot afford to pay for fuel/lubricant:
1. The Independent Power Producer on Tinian (Telesource) has a contractual obligation for the next 10 years, at a monthly rate of $180,000 per month, for the lease of the power engines, plus $50,000 per month for operation and maintenance cost, and added to this, is free diesel fuel for the next 10 years or so, at a cost to CUC in the amount of $412,000-plus per month. The expected annual cost of $3,829,992 plus $4,950,864 for fuel is:
TOTAL COST PER YEAR: $8,780,838.00
2. POWER PLANT IV (PUERTO RICO-SAIPAN) IPP (Rolls Royce)
Cost of power production was $3,648.487 and free fuel provided again by CUC is $9,567,959.00.
TOTAL COST PER YEAR: $13,216,446
3. FOR ROTA: YEARLY COST OF $1,800,000 (No IPP contract)
With the lack of generation capacity at Power Plant I in Lower Base and the neglect of preventive maintenance and parts over the years, CUC therefore does not have the financial capabilities to pay for its fuel needs for the people of Saipan, because of the tremendous payment responsibilities it has with both of the Independent Power Producers presently under contract.
If CUC is to privatize its Lower Base Power Plant, based on the Harris Report recommendation that it be awarded to Telesource, then CUC will be required to provide FREE FUEL AND LUBRICANT for the next 20 years, and will be made to purchase a guaranteed 51 megawatts of power per month under the IPP’s proposal; anything in excess of 51 megawatt will be a different rate of purchasing power. This also includes that CUC will have to pay for whatever “capitol cost” is injected at the power plant for the purchase of parts for the repair of the existing units, pro-rated for the 20 years of the contract.
Based on the documents available, CUC needs to find $55,500,000 per year, plus capitol cost, plus free fuel/lubricant, plus the purchase of power at the present rate structure.
The most interesting part of this is that CUC has yet to find a way how to find additional funding to cover its in-house cost for power distribution and operation cost, distribution and operation cost, sewer distribution and operation cost. What about the administrative cost for Saipan, Tinian and Rota?
The solutions?
I hope CUC doesn’t hire another off-island consultant for this job. We have already lost several millions of dollars to off-island consultants. The creation of this monster epidemic should be blamed on the CUC board for its lack of fiduciary responsibility. Its members are most likely serving only their personal interest at best, while our people are made to suffer the consequences. This will also include the “Desalination Project.” Remember?
Finally, please learn that if a working team is formed at CUC, and if it stops losses, saves fuel, makes employees perform, and produces consistent power, DO NOT break the team up because it looks easy. If you do, guess what you might end up with! Looking at Tinian Telesource and Power Plant IV, the IPP costs to CUC, maybe that’s where the excess fuel surcharge goes! You will have to ask the CUC executive director and comptroller!
Ramon (Kumoi) S. Guerrero
Saipan
