The mess at CUC

For the readers, and some at CUC, it is important to understand that high-speed engines run at above 950 revolutions per minute (rpm), medium speed engines run at above 700 rpm to 950rpm. The faster the engine, the less efficient is the fuel consumption. For base load operations (i.e., full time power production), utilities use low to medium speed engines. For peaking, high-speed engines such as the Aggreko units are used. Now, we are doing the reverse, using high-speed peaking machines for base load. The result will be higher costs, to be passed on to the residents and business community.

Let do some industry comparisons. The specific fuel consumption of a medium-speed engine today is around 7600 btu per kilowatt hour or uses about 175 grams of fuel per kWh. The Aggreko engines will operate around 9400 btu per kilowatt hour or use about 230 grams of fuel per kWh, perhaps less if the equipment is new. Power Plant 2, if properly rehabilitated should operate around 8,200 btu per kWh. Obviously, efficient utilities with more than 10MW power demand use medium-speed or, if demand warrants, slow-speed engines. You don’t see Guam or even our friends in Palau, Fiji or even the minor islands in the Philippines using 1MW machines for base load, except of course on Saipan, and we are being proudly told we got to use more. All over Africa, the excessive use of high-speed engines is causing economic havoc due to high fuel costs. Now, the cost of a medium-speed engine running and producing 20MW of power—using Caterpillar, Wartsila, or a Man engine including fuel—should be about 29 cents per kWh. This includes capital recovery in 12 years, of around 5.5 cents per kWh. Remember, Aggreko fuel cost will be about 30 cents per kWh, and their rental charge is 5 cents per gallon for old, cheaper, smaller units.

Also medium-speed engines should operate on heavy fuel, which today on the spot market is about $680 per ton, versus diesel no. 2 fuel that CUC uses, which costs around $1,300 per ton. The heating value difference between the fuel is negligible, but the price difference is huge—about 40 percent. In other words, CUC is using the wrong oil for the engines. And guess who switched the Power Plant I fuel from heavy fuel to diesel no. 2?

Here comes the shocker: CUC has suffered over $270 million in losses from this single mistake perpetuated by the most incompetent utility manager that I have ever come across. The burden carried by the people of the CNMI over the years is the accumulation of the costly mistakes of the executive director who replaced me, when he took over the helm of the CUC. Now, he is the Lieutenant Governor. He had two and a half years to turn around CUC. What has he delivered to all of us? Higher bills, higher bills and more outages to his credential.

No doubt, CUC is trying hard to obtain necessary power generation facility to augment the shortfalls. CUC, it would seem, is trying to do something. The urgency of the Aggreko contract tells us that the rehabilitation at Power Plant I is not going right. If DCM is doing a great job, we certainly don’t need the temporary power from Aggreko. But obviously, CUC doesn’t believe that DCM can complete the work, or there is obviously some kind of reason for expanding the Aggreko contract that we are not privy to.

The DCM contract is a complete mess, but some background will help the readers understand what has transpired. It seems that in August 2007, the DCM group visited Power Plant I for a few days. Thereafter they submitted a proposal comprising of a list of parts to rehabilitate Power Plant I and a proposed schedule. DCM submitted a list of parts that they claim was needed for seven of the eight engines at Power Plant I. The total parts costs submitted for Engines 1, 2 and 3 were identical. The total parts costs for Engines No 5, 6, 7 and 8 are also identical. This is despite the fact that each engine was having different mechanical and electrical difficulties. It appears DCM simply listed some part numbers without actually determining if these parts are required or sufficient. It was simply a list for a proposal. Except for taking some used lube oil as samples, DCM did not conduct any tests, or inspect the vibrations of the engine and review the operations and maintenance logs. No used oil lube tests were submitted by DCM. Such tests and used lube oil samples and performance reviews are the basis for plant rehabilitation estimations. DCM just went in, looked around, went home, and prepared a proposal and claimed that they could complete the rehabilitation of Power Plant I within 90 days of contract execution.

What is disturbing is that, at the same time, CUC had already received correspondence from Mitsubishi Heavy Industries that the complete lining and critical parts are required to complete the rehabilitation of Power Plant I, making the 90-day schedule from DCM more than suspect. Mitsubishi informed CUC that some of the parts would take at least 200 days to manufacture. Mitsubishi provided detail listing of the parts needed for replacement. Despite having the information, the Fitial Administration decided that DCM is more qualified and knowledgeable.

Ramon S. Guerrero[/B] [I]As Perdido, Saipan[/I]