The mess at CUC

CUC has come to a juncture where, unless critical and correct measures are undertaken, the CUC is only awaiting collapse, and the Aggreko contract, if incorrectly contracted in capacity and in length of service, will simply hasten such collapse. I ask my fellow citizens, and especially the Legislature, to be forewarned about the Aggreko contract. CUC should first address the DCM contract to understand the schedule for completion of rehabilitation of Power Plant I. The need for temporary power does exist, but only after the DCM schedule for completion is known. Also, as detailed in the foregoing, the efficiency clauses of the Aggreko contract must be addressed before mobilizing the equipment from Singapore. CUC should seriously consider the claims of Telesource that it can provide power at half the costs. To proceed with Aggreko and fail is not a viable option for CUC and the rate payers.

In addition, the readers should know that as early as 2002, CUC was cautioned by many consultants of the potential line losses estimated from 15 percent to 25 percent of the power generation output. The distribution system at CUC is not like when I built it. Essential system components have been removed for reasons that no one has been able to explain to me, the load at the underground power line to Waterloo Substation has been exceeded by dangerous levels, wrong transformer sizes and conductor sizes are being used to service loads, and the list of abnormals just goes on too long to recite. If CUC does not fix the distribution system, the power generated by Aggreko will also face such losses. To put it simply: It is just like trying to fill an empty tank with expensive gas. If the tank keeps leaking, do you put in more gas? You need to fix the tank first, right?

CUC management is of the opinion that if they provide more power, CUC sales revenue will grow and CUC will be able to turn around its fiscal condition. But CUC is doing all the wrong things for a successful turnaround. CUC tariffs are already too high. Businesses have closed, and the numbers of consumers on the islands have shrunk significantly. Everyone is getting used to the fact that a bill from CUC is like a bill from a loan shark. It never gets lower. It only kills you. So, everyone has gotten into the routine of pulling off plugs, using fans instead of air-conditioning, making their business places smaller, or closing down. As a report undertaken for CUC puts it, “CUC has reached an extremely elastic point in the power demand curve.”

Personally, I think it will take at least a 20 percent tariff reduction to get consumers to abandon their power reduction (not conservation) regime. In the meantime, CUC still have the same system losses, and CUC is still using the wrong oil and doing all the wrong things, and taking the wrong paths to recovery. If CUC is eying the use of the Aggreko units to boost sales, I am sorry to say, it will break CUC financially as the sales increase desired will not materialize.

There is another disaster waiting to happen involving CUC. CUC oil storage facilities at Lower Base are on the brink of a catastrophic failure. Tank 104, which has over 300,000 gallons of used and contaminated fuel, is near ready to fall apart. In addition, there are thousands of waste oil in leaking drums. CUC has yet to resolve this problem, despite a U.S. EPA Order in 2006 of potential fines of $32,000 per day. If CUC deals with this in its laizzes faire way, soon all we will have is our beautiful lagoon completely polluted by contaminated oil. We will then simply become a basket case; no business, no work, only food stamps as the future for our people. And for all the hotel owners, especially some sympathizers, please be aware, your hotel beach front could be the worst nightmare yet in our beautiful island. Already, the coastline at Tanapag and Charlie Dock is showing signs of oil spill.

Our community needs a utility that is well managed, and one that is not clouded by suspect procurement procedures and poor execution of contracts and inaction. The CUC has been financially damaged by bad procurement, bad contractors who have not performed, and action should be taken to terminate these contracts. CUC needs capable project managers and engineers to assist the executive director to get the power plant back in shape. However, no degree of help can be of use to CUC if it continues awarding contracts that have no fiscal or professional merit.

CUC’s must resolve the contract involving DCM, so that in the end, our utility can be one that we are proud of again. The task on hand for the utility requires technical knowhow, teamwork and earnest effort. The penalties that DCM has incurred is clear and indisputable. Their inability to perform and complete the contract is now unquestionable.

CUC needs a project management team to manage all the five different contractors doing various work at Power Plant I. CUC needs to obtain a real attorney with knowledge of utilities or contracts to review and administer all of CUC procurement. But the most critical issue for CUC remains the completion of rehabilitation of Power Plant I without further delay, the reversion back to heavy fuel, and the rehabilitation and improvement for the power distribution system. Time is already out for CUC, and if these three critical issues are not successfully executed, well, the people of the CNMI may be better off selling CUC for $1.00