House passes CUC debt writeoff bill

The House of Representatives yesterday passed the bill allowing the Commonwealth Development Authority to write off the $45.5-million debt owed by the Commonwealth Utilities Corp.

In a 14-4 vote, the lawmakers approved the amended version of House Bill 15-64. Those who voted against the bill were House minority members Ramon Tebuteb, Benjamin Seman, Manuel Tenorio, and Joseph Deleon Guerrero.

The amendment, initiated by House Minority Leader Arnold I. Palacios, provided that any independent power producer who would privatize and control CUC’s power plants should be required to pay half of the $45.5-million loan principal.

The payment from the IPP should be reserved and used for CDA’s loan programs, the amendment added.

CUC and CDA have been involved in legal dispute due to the cash-strapped utility’s failure to pay its loan.

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 had 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 the utility soon becoming a division within the Department of Public Works, CUC no longer had the authority to enter into a debt equity conversion settlement with and to issue stocks to CDA.

The bill also states 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,” reads a portion of the bill.