Commonwealth Utilities Corp. board member Diego Songao told board members that legislation is needed to allow for a moratorium of their debt payments to the Commonwealth Development Authority.
Songao is the board chair of CDA.
CUC officially sent a letter last month to ask for a five-year suspension of all debt and interest payments to the Commonwealth Development Authority.
Former CUC executive director Alan Fletcher asked that CDA suspend “all payments, accrual of dividends, and any associated liability” for debt payments owed to CDA for a period of five years.
Right now, CUC is required to pay back $4.32 million in deferred debt by October 2016. This payment ties to debt that stretches all the way back to 1985.
Songao told the CUC board that the CDA board did not have the power to defer suspension. “We can’t do it,” he said.
CDA also currently lacks quorum.
Songao suggested they draft legislation that would allow the payment of dividends to be conferred to infrastructure funds for capital improvements.
He said that a moratorium needs legislation.
Fletcher told CDA last month that the CUC board seeks “to avoid burdening its customers with including the CDA debt obligation and any accrual of liabilities for unpaid dividends into its tariffs.”
Fletcher was referring to the board’s preference to not charge customers with rates set to pay debt owed to other agencies like CDA and the Commonwealth Ports Authority.
In his letter, Fletcher also emphasized that any accrual of liabilities for unpaid dividends be suspended.
This because a deferral of payments with continued dividend accrual would only result in increased rates, as this amount would still have to paid off in the future.
“Since the dividend payment due will be larger than today, the effect on the rates at that time will also be greater than it would be today,” Fletcher said.
CUC’s request to suspend their debt also comes in hand with the board’s vote earlier this month to withdraw a 2.1 cent “debt service surcharge” that had been pending with the Commonwealth Public Utilities Commission.