The Commonwealth Utilities Corp. is projected to operate more than $22 million in the red for the next fiscal year, CUC consultants from economists.com said during a board meeting on CUC\u2019s proposed fiscal year 2017 budget Thursday.<\/p>\n
CUC projects net operation losses at $22,668,109 fiscal year 2017.<\/p>\n
Economist.com managing directors Dan Jackson and Robert Young spoke to the board on the net operating losses and possible strategies to address these.<\/p>\n
Jackson said the proposed fiscal year 2017 budget would reinforce the \u201cfact\u201d of financial challenges CUC has but also an opportunity for CUC to improve its finances.<\/p>\n
Under power projections, net revenue projections are at $27,130.905, with an operations budget is $26,049,442, amounting to an operating income of $1,081,463.<\/p>\n
Under water projections, net revenue is projected at $12,681,088. Its operations budget is at $20,267,489, and an operating income loss of $7,786,401.<\/p>\n
Under wastewater projections, net revenue is projected at $3,882,422. Its operations budget is at $6,160,593. Its operating income loss is $2,278,172.<\/p>\n
In total, net revenue projections are at $43,694,415, with an operations budget of $52,477,524, amounting to an operating income loss of $8,783,109.<\/p>\n
Total debt service and capital improvement outlays\u2014including wharfage fees to the ports authority, old debt, construction, typhoon restoration, and vehicles\u2014amounts to a total of $13,885,000.<\/p>\n
Some $9.3 million of this falls under power, $3.77 million under water, and $775,739 under wastewater, giving a deficiency in power amount to $8.24 million, in water at $11.3 million, and in wastewater, at $3.05 million.<\/p>\n
On the glaring water losses, Jackson estimated that for the 10 million CUC produces it is only \u201cselling\u201d about 3-4 million gallons a day.<\/p>\n
CUC has reported 65 to 67 percent unaccounted for water from leaks, poor meters, or theft.<\/p>\n
\u201cThat is an ugly figure,\u201d said board director Ignacio Perez.<\/p>\n
\u201cWater is the real issue,\u201d said board chair Adelina Roberto, when sought for comment after the meeting.<\/p>\n
Jackson said the non-revenue water is similar problem for many Pacific utilities, noting terrain and storms that puts stress on distribution.<\/p>\n
The consultants also proposed \u201cLong-Term Financial Plan Principal Elements,\u201d touting plans for new revenue growth, expense reduction, including limiting non-revenue water; additional grant funding, and revenue enhancement inclusive of \u201cdeveloper fees,\u201d rate adjustments or increases, as options for the utility.<\/p>\n
According to Young, the projections include the reopening of the Palms Resort, a megawatt of load or 5,000 kwh per year. He said they are also assuming to add three new customers a month, noting the opening of businesses like Bubba Gump, or IHOP, adjacent to new development.<\/p>\n
\u201cThere\u2019s gonna be a lot of new commercial activity,\u201d he said. \u201cYou will see a gradual increase in customers\u201d and toward the end of the projected budget, he said the board would start to \u201csee the effect of the [Best Sunshine International, Ltd.] casino.<\/p>\n
\u201cThat is a tremendous increase in electric sales. Maybe 40 or 50 percent of total commercial load right now. You are going to see a big bump in that,\u201d he said, noting that this would not show until the following fiscal year when the Garapan casino is in full operations.<\/p>\n
\u201c2018 will be even better because you will see the full effect of Best Sunshine. Depending on construction schedules, there may be one or two hotels in that too,\u201d he said.\u201d<\/p>\n
\u201c\u2026There are many steps, that CUC management has begun to take to address these issue,\u201d said Jackson. \u201cRight now the 2017 budget shows a lot of challenges\u201d<\/p>\n
One of these steps is revenue growth, he said, noting BSI\u2019s additional load would result in millions of dollars of additional revenue. Second would be reducing expenses. Their biggest expensive is non-revenue water, he said. A third element would be to aggressively pursue grant writing.<\/p>\n
And another avenue is development fees\u2014where they could negotiate these fees with a interested investor or hotel\u2014or standardize or schedule fees for how much the new development would cost CUC to expand its grid to take them on.<\/p>\n
The consultants touted the development fees as one way to build a new power plant, which CUC anticipates the need for.<\/p>\n
Young said the fees could have a set \u201cfloor. If a business does under 500 to 300 kws there would be no capacity fee, but if there went over this CUC could charge $1,500 a kw to build new power plant, for example.<\/p>\n
\u201cBased on [Coastal Resources Management] filing, CUC will need a new power plant fairly soon,\u201d in three to four to five years, Young said.<\/p>\n
Young proposed a policy of \u201cgrowth pays for growth,\u201d citing other firms examples of not raising rates but scheduling fees for new developers.<\/p>\n
\u201cIf they want to come here, let them pay a developer fee for the infrastructure needed for them to serve them,\u201d added Jackson.<\/p>\n
On raising rates, Jackson said the raising rates is \u201cnot the only solution\u201d but should be something considered to \u201cleave all options\u201d on the table.<\/p>\n
The CUC board has repeatedly stated its desire not to raise rates on residential customers.<\/p>\n
\u201cWe need all the money we can get. We\u2019ve got a hole to close,\u201d said Young.<\/p>\n
Before the conversation progressed further, board director Eric San Nicolas\u2014referring to the \u201cmedia\u201d several times\u2014urged they reconvene their meeting tomorrow (Friday) so he could more \u201csidebar\u201d conversations with the acting chief financial officer on the budget or operations information \u201cso we are not interpreted in any shape or form.\u201d<\/p>\n
He said he didn\u2019t want to put out the information \u201cin open session right now because I don\u2019t want to be misinterpreted again.\u201d<\/p>\n
CFO signatories removed<\/p>\n
Citing \u201caccountability,\u201d the CUC board also unanimously voted to remove the chief financial officer from one of the required signatories on approving its checks.<\/p>\n
Now only the CUC executive director or the CUC board treasurer may sign or approve checks.<\/p>\n
Board chair Adelina Roberto said the CFO, \u201cas custodian of the funds, should not be signatory on the checks.\u201d<\/p>\n
\u201cFor accountability more,\u201d she said. \u201cIt\u2019s just better for accountability.<\/p>\n
San Nicolas made the motion to amend banking signatures reflect that the CFO signature be removed from the banking resolution and that signature would have to come from executive director or his designee and from the board starting from the treasurer or his designee. <\/p>\n","protected":false},"excerpt":{"rendered":"
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