CUC for sale. Who’s buying?

Given the beleaguered state of the CNMI’s utility service, the pain and suffering our current electric power crisis has brought to the people of Saipan, and the damage high electricity rates have done to our economy, one would imagine that our lawmakers might be eager to see the private sector resolve the situation.

Think again.

Last week, the Legislature voted to override Gov. Benigno R. Fitial’s veto of a bill designed to privatize the Commonwealth Utilities Corp., a move that clears the way for a private business to purchase and manage the utility service. As the local chamber of commerce has said, privatizing CUC is the right move for dealing with Saipan’s power woes, one which local businesses have long supported.

Yet the legislation that now authorizes this change comes with a hitch, a mandatory $250 million price tag for controlling CUC, a cost high enough that it will no doubt be passed along to consumers through higher rates.

A reasonable investor might understand this price tag if our leaders could show evidence that it is based on some sensible appraisal of CUC’s assets. But as one political insider pointed out last week, the number is arbitrary. When the privatization bill was introduced, the price for owning CUC was a randomly assigned $500 million. After some protests, lawmakers chose to split that in half. Yes, the value of the utility systems that light our homes, power our air conditioners and supply our drinking water was apparently decided through a numbers game. This is a classic case of micromanagement by the Legislature that, unfortunately, ignores the rules of the market. They didn’t even bother to include a provision for the exploration of alternative forms of energy that could possibly lessen the economic burden of consumers.

What if CUC is even worth more than $250 million? The truth is, we don’t know.

And the outcome of this numbers game—as the chamber, the governor and CUC’s leadership have all said—will almost certainly be higher utility rates at a time when scores of local businesses are already struggling to cope with the rates they are facing now.

Proponents of the privatization bill have said that if the price tag poses a real challenge to securing a buyer for CUC, they can amend the law. But imagine that you’re a corporation interested in buying CUC. Imagine that you’re working with a government that cannot agree on the price at which the bidding should begin and has not even done the research needed to assess CUC’s current value. Moreover, it will take a second act of legislative wrangling for the CNMI to decide the issue. Under those conditions, would you invest here?

That doesn’t even take into consideration the costs associated with the requirement to reinstate the eight-member board of directors. That means more people to pay for, travel costs, per diems, allowances, and all other operating expenses related to running a board.

The future of the CNMI’s economy and that of CUC are inextricably linked. Already, we have seen businesses shut their doors because of high utility rates, foreign investors turn away from us because utility costs here are too high and private citizens take sometimes drastic measures to conserve electricity just to make ends meet. However, amid all of these problems, our lawmakers have taken it upon themselves to pass a bill that threatens to exacerbate the situation with even higher utility prices.

The governor’s office has said that talks are on the horizon to address the issue in the Legislature. For the sake of the CNMI’s economy and its future, ours elected officials this time need to listen to the business community and take a reasoned and careful approach to privatization so that everyone benefits. The CNMI can’t afford anything else.[B][I] (Saipan Tribune)[/I][/B]