CUC-CDA debt waiver proposal gains steam

A bill that would write off the $45-million debt owed by the Commonwealth Utilities Corp. to the Commonwealth Development Authority is gathering support in the House of Representatives.

The House Committee on Public Utilities, Transportation and Communication has recommended passage of House Bill 15-64, saying that it was consistent with the governor’s order to abolish CUC as a public corporation and make it a division of the Department of Public Works.

CUC’s transfer to the department is set to become effective next week, when the 60-day state of emergency declaration for the utility expires.

H.B. 15-64 would authorize CDA to waive the principal sum and interest due from loans extended to CUC, as referenced in the amended memorandum that CDA and CUC signed in 2004.

The terms of the agreement provided for a waiver of a portion of CUC’s debt; authorized CUC to issue shares of preferred stock valued at $45 million to CDA; and provided for the repayment of debt for users fees for power consumption by the CNMI government.

The bill notes, however, that with CUC becoming a division within DPW, CUC no longer had the authority to enter into a debt equity conversion settlement with and to issue stocks to CDA.

“DPW will monitor CUC’s future financial transactions and safeguard CUC from acquiring obligations that will lead to financial crisis,” according to the proposed legislation.

The two agencies have been involved in legal dispute due to the cash-strapped utility’s failure to pay its loan.

The bill argues that CUC should not have to pay back the loan, since the funds came from a $140-million federal grant that did not require repayment. It also notes that other government agencies received amounts from this grant for infrastructure development, but CDA is only pursuing repayment from CUC.

“Arguably, CUC, too should not have to pay back the funds given to it by CDA and the funds were used for infrastructure development, i.e. power, water, and sewer projects. Accordingly, the Legislature further finds that it is in the best interest of the CNMI to write off in full CUC’s loans from CDA in order to promote the stability of CUC and to secure the continuity of public utility services to the people of the CNMI,” the bill states.