CNMI Utility To Go Ahead With Purchase Of Diesel Generating Plant

Questions raised about direct purchase could result in legal action

By Junhan B. Todiño 

SAIPAN, CNMI (Marianas Variety, March 30, 2017) – The Commonwealth Utilities Corp. on Wednesday decided to acquire an 8-to-10-megawatt diesel generating plant system through direct purchase instead of a financing scheme through a 30-year bond issuance.

The board will also continue to deal with General Pacific Services Marianas Inc. or GPSM despite questions about the company’s background.

It was CUC board vice chairman Eric San Nicolas who moved to proceed with the direct purchase to replace engine 8 at Power Plant 1.

“In a conference with the CFO [chief financial officer] and the legal counsel, we have decided that CUC will proceed with the direct purchase. There’s nothing to hide here — the whole purpose is to replace the engine.”

San Nicolas’s motion was seconded by CUC board chairwoman Adelina Roberto and board treasurer Joe Torres. CUC board secretary Albert Taitano recused himself while CUC board member Ignacio Demapan was on medical leave. CUC board member Dave Sablan Jr. was absent. He had asked the board to postpone the special meeting until Friday as he had a prior appointment, saying that the notice for the meeting on Wednesday came late. The board went ahead with the meeting anyway.

During the meeting, San Nicolas also moved to designate Roberto as head of the negotiating team in the procurement process.

At the start of the meeting, San Nicolas introduced an amendment to the agenda so that the purchase of the engine could be discussed in an open and not in an executive or closed-door session.

The meeting was attended by Rep. Ed Propst who presented his concerns regarding the proposed procurement during the public comment portion of the meeting.

Two individuals from the Office of the Public Auditor also attended to “observe” the meeting.

CUC board treasurer Joe Torres indicated that he encourages OPA personnel to attend the meetings. “We will always welcome you here,” he said

However, the board members still went into an “executive session,” and after they resumed the open meeting, they decided to adjourn.

Prior to the adjournment, Torres noted that engine 8 has been down for eight years and the plan to get a replacement was not made overnight.

“We are doing our best to get a replacement so we can accommodate [new developments],” he said.

In an interview, CUC legal counsel James Sirok said the board will deal with the contractor, GPSM, for the direct cash purchase of the diesel engine.

He said CUC considered three potential contractors.

“There was a choice. We looked at three different quotations and did a competitive review,” he added.

Sirok said that part of the reason for purchasing a new engine is that CUC has to maintain its ability to provide enough energy and reserve capacity in the event of a catastrophe.

“We have a larger demand for power and not just for [Best Sunshine International] but because of the growth of the CNMI economy,” he said.

Asked if the board had scrutinized the background of GPSM during the selection process, Sirok said: “The board approved the contractor after considering the totality of proposals submitted which included the background of all the entities involved.”

In a separate interview, San Nicolas said they made a declaration of emergency to allow the board to go through an emergency procurement process.

“We asked vendors to provide an option for a possible financing scheme. But we were able to verify from our CFO that we have funding to procure one right now.”

Asked about their funding source, San Nicolas said, “The central government.”

He said Roberto and her team will now start the negotiations for the procurement of the engine with GPSM.

Asked about the consultant the board agreed to hire to help CUC with its generator-acquisition plan over the next five to seven years, San Nicolas said CUC management or legal counsel should answer the question.

Questions

Rep. Ed Propst left when the CUC board decided to go into executive session without answering his questions regarding the proposed purchase.

But board chairwoman Adelina Roberto assured him that CUC management will provide him a copy of the request for proposals.

“There are lots of questions that need to be asked and the public has the right to know,” Propst told the board.

These questions are about GPSM’s credibility as a company, the relationship of the company’s incorporator to Robert Toelkes who previously made a business proposal to CUC regarding reverse osmosis, and the relationship between GPSM and Fairbanks Morse, a manufacturing company, among other things.

“We are moving at the speed of light,” he said, referring to the insistence of the CUC board to do business with GPSM.

Propst said he also wanted to know if Toelkes and his wife had relationships with some elected officials and whether discussions with them had taken place prior to the engine procurement.

CUC board treasurer Joe Torres told Propst that he should attend their monthly meetings so he would be informed about the issues.

“We always believe in transparency, but if you believe something’s ‘underground’ then speak up,” Torres said.

“That’s why I am here,” Propst replied.

Torres said some of Propst’s questions and concerns are still being discussed by the board.

Roberto, for her part, said “there was an RFP done last year so this is not the speed of light.”

CUC board vice chairman Eric San Nicolas said he wished to remind Propst that lawmakers have the authority to come up with appropriation bills to support the island’s needs.

“What have you done? I have seen nothing from your office,” he told Propst.

Propst said he attended the meeting not just as a lawmaker but as a ratepayer who has questions regarding the procurement of a new engine.

“When people have questions on certain things about transparency and accountability then we do come in,” he said, adding that his questions are legitimate and need to be answered. “But you are getting upset. Don’t be upset with me, I just have questions.”

In an interview, Propst said he was disappointed by the board’s reaction.

“They didn’t answer my questions. Instead they became a bit touchy and upset. I apparently upset a couple of them so they started lambasting me for not coming to their meetings frequently even though I am not a member of the [House public utilities committee].

“What the CUC board needs to understand is that if there are things that are suspect and questionable, especially regarding accountability and transparency and potential collusion and wrongdoing, it is my job as a representative to question these things.”

Propst said he was asked by his constituents to question the legitimacy of the contract.

He said he will pursue his own investigation and request an oversight hearing.

[PIR editor's note: On March 30, 2017 Saipan Tribune reported that 'Rep. Edwin K. Propst is thinking of suing the Commonwealth Utilities Corp. board to stop it from going through with a plan to buy a new diesel generator. ... Propst (Ind-Saipan) told Saipan Tribune yesterday that he would be filing an injunction against the CUC board’s plan and he hopes that Attorney General Edard Manibusan will agree to file it.']

His other options, he added, are to seek assistance from the Office of Public Auditor, the Office of the Attorney General and possibly the Federal Bureau of Investigation. He said he is also considering taking CUC to court.

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