CNMI UTILITY ON VERGE OF BANKRUPTCY

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By Ferdie de la Torre

SAIPAN, CNMI (Marianas Variety, Oct. 7) – The Commonwealth Utilities Corp. is on the verge of bankruptcy, the Saipan utility’s legal counsel Kathryn Delafield disclosed yesterday.

This developed as CUC prequalified six bidders for its power plant privatization scheme.

Delafield, in court documents, said the Commonwealth of the Northern Marianas government’s failure to pay its debt, now amounting to $18.3 million, in combination with the impact of fuel price increases, has pushed utility toward bankruptcy.

"Within two to four months, without a rate adjustment, CUC will not have the money for either its fuel bill or to pay for costly engine repairs and overhauls," said Delafield in a motion to dismiss the Department of Finance’s lawsuit against the utility.

The attorney said CUC has no desire to disconnect service to the government.

But after four years of failing to pay its bills in full, increasing CUC’s debts to $18.3 million, the government has forced the utility to use its cash reserves keep it afloat, Delafield said.

Court records show that in April 2004, CUC notified Finance that it intended to disconnect utility services to various government agencies if did not receive payment on the utility bills.

Finance responded by seeking a temporary restraining order to enjoin disconnection. It also sued CUC.

Last April 23, the Superior Court granted the TRO that prohibited the utility from disconnecting services to government agencies.

CUC and the government reached an agreement to extend the TRO until Nov. 30.

The extensions call for the government to pay $650,000 per month for the months of June until Nov. 2004.

Yesterday, Delafield, on behalf of CUC, moved the court to dismiss Finance’s lawsuit and dissolve the TRO.

Delafield asserted that the utility has not contested the TRO to date because of its interest in working out a payment agreement with Finance.

But the attorney said, Finance has had nearly six months to address its failure to pay and to work out a plan or to demonstrate the validity of its arguments regarding the government’s utility bills. However, the matter has not moved toward resolution.

She said CUC sees the problem with Finance as simply a debt-collection matter that should proceed according to the utility’s regulations.

Finance, on the other hand, the attorney said, is treating this matter as a question of rate validity and whether CUC has achieved financial independence.

Finance, she pointed out, simply does not address the question of the debt.

"Thus, CUC asks the court to examine Finance’s claims, find that they do not state a claim on which relief can be granted and dismiss the action so that the parties can deal with the realities on this matter for the benefit of the public," she said.

Delafield said Finance lacks authority to bring the lawsuit on behalf of the various entities it serves.

She said there is a reason government rates are higher. She said the executive and legislative branches requested these higher rates at the time they were adopted.

October 7, 2004

Marianas Variety: www.mvariety.com

 

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