Senate OKs $5M debt cap for CUC

The Senate yesterday approved an executive order raising the debt ceiling for the Commonwealth Utilities Corp. from $500,000 to $5 million.

In a resolution adopted unanimously, the senators said the Constitution and the Public Utilities Commission already provide enough controls on CUC borrowing. They added that requiring legislative approval for borrowing sums less than $5 million “seems like an unnecessary additional burden that would hinder the CUC from promptly responding to a power crisis.”

Sen. Paul A. Manglona, one of the cosponsors of the resolution, said the Senate agreed to increasing the debt cap because Gov. Benigno R. Fitial gave his word that the planned $5-million loan will include the recently earmarked funds to CUC.

Some lawmakers have questioned CUC’s need to borrow money. They have argued that the Legislature already earmarked $3.4 million of future earnings of the Marianas Public Land Trust to fund CUC’s urgent needs. The earmark was designed to provide CUC money to make an initial payment of $1.5 million for rental generators, and to settle outstanding obligations with contractors Telesource CNMI and Pacific Marine Industrial Corp.

In a letter to the Senate yesterday, Fitial explained that the obligations funded by the earmark require immediate cash outlay. Since CUC currently does not have liquidity, some temporary borrowing will need to be done.

He also said that CUC needs the additional borrowing authority of $1.6 million—$5 million less $3.4 million—to augment currently available funding to fix two engines at Saipan’s main power plant.

Fitial further noted that the new debt ceiling sets the maximum aggregate amount of new and outstanding debt that CUC may carry on its books at any given time. “Any new or additional debt to be incurred by CUC over the new ceiling will have to be approved by the Legislature,” he said.

The governor issued the executive order raising CUC’s debt ceiling on Wednesday, July 30, 2008. Under the Constitution, the Senate and the House of Representatives have 60 days to amend or modify an executive order. If no action is taken within 60 days, the executive order becomes a law.

The House of Representatives has discussed the executive order on the floor, but it has not reached an agreement on whether to approve or reject it. The executive order has been referred to the House Committee on Judiciary and Governmental Operations for further study.

The Fitial administration is currently considering a loan from Independence Bank, a Rhode Island-based bank that offers federal government-backed loan programs.