CUC debt writeoff bill goes to Fitial

The Senate passed on Friday a bill that would forgive the $45.5-million debt owed by the Commonwealth Utilities Corp. to the Commonwealth Development Authority.

House Bill 15-64 now goes to the governor for action.

Press secretary Charles P. Reyes Jr. expressed confidence that the bill would be enacted. “I’m sure the governor will sign it. The writeoff is a critical component of his plan to make CUC solvent again,” he said.

The Senate passed the bill in an 8-1 vote.

Only Sen. Luis Crisostimo, the chairman of the Senate Committee on Public Utilities, Transportation and Communications, opposed passage of the bill. He raised concern that the measure might set a bad precedent for other CDA debtors.

House Bill 15-64, as amended by the lower chamber, would authorize CDA to waive the principal sum and interest due from loans extended to CUC, as referenced in an 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 measure will also require any independent power producer taking over CUC’s power plants to pay half of the $45.5-million loan principal. The payment from the IPP would be reserved and used for CDA’s loan programs.

According to H.B. 15-64, CUC no longer has the authority to enter into a debt equity conversion settlement with and to issue stocks to CDA, as it is now a division within the Department of Public Works.

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.