‘Question is: How to lower power rates’

How can a private company lower utility rates in the Commonwealth?

This question should be the central focus of the CNMI government’s privatization efforts, according to the U.S.-based consulting firm that drafted the rate schedule now being implemented by the Commonwealth Utilities Corp.

“From what I’ve been hearing, CUC is considering a full-blown privatization program, where a private company comes in to own and operate the power plants. I can’t see how this can be done without maintaining the power rates at their currently high level or increasing the rates,” Economists.com managing director Robert Young said during yesterday’s Saipan Rotary Club meeting at the Hyatt Regency.

“The last thing this economy needs is another increase in utility rates. So each company interested in the CUC privatization should be asked how they could lower the rates. And if they can’t answer that, CUC should move on to the next candidate. The sole purpose of privatization right now should be to lower utility rates,” he said.

Young came on-island for last week’s public hearings on the proposal to make the CUC rate hike permanent. He said the sessions were “the most gut-wrenching and most emotional” public consultation he had been in his 30-year career.

The people spoke of personal concerns—for instance, how the rate increase had prompted them to consider giving up phone service or to replace electric light with lanterns at home.

Privatizing the power plants, Young maintained, is not the ultimate solution to CUC’s problems, nor would it ease the burden on the consumers.

There are several ways CUC can bring down the cost of generating power from the current 29.2 cents to 22.7 cents in three years, Young said.

One option is to borrow $70 million to purchase five new power generators that burn the less expensive heavy fuel oil. Operating the new plant, he said, should cost only $43.7 million, including an estimated $6 million annual amortization. This amount represents potential annual savings of $12.3 million, if compared with Saipan’s 2006 estimated fuel cost of $56 million.

CUC could also reduce system losses through better metering. CUC loses about $12.4 million in revenues annually because of unmetered load.

Another way is to connect large businesses such as hotels and factories that currently generate their own electricity.

“Privatization is not a religion, nor is it a panacea—it is an alternative method of providing basic services,” he said.