Govt looks at alternative energy sources

Haidee V. Eugenio
A 29-year-old mother of two says her household power bill has always been $200 a month, which could have been much higher if she is not conserving energy like turning on the air conditioner only from 9 pm to 2 am daily and using only electric fans at day time.

On top of the high utility bills, she also has a 10 percent cut in her salary because the company she works for is having financial troubles as a result of an anaemic economy.

To make matters worse, her household may need to pay more than double for their May power bills (which they will be receiving in June) unless they further reduce their power consumption.

“It will be harder for us,” she told ISLANDS BUSINESS. Her household is among the thousands of residential customers of the Commonwealth Utilities Corp. (CUC) bracing for doubled power bills effective May 3—only months after a rollback in electric rates and charges.

CUC is an electric, water and wastewater utility agency owned by the government of the Commonwealth of the Northern Mariana Islands (CNMI).

CUC’s power bill has three components: the fixed monthly customer charge, the fixed electric non-fuel rate per kilowatt hour, and the fluctuating electric fuel rate per kWh.

Effective May 3, all residential customers are charged the fixed electric non-fuel as follows: 1.6 cents for the first 500 kWh consumption; 6.6 cents for 501 to 1,000 kWh; 8.6 cents for 1,001 to 2,000 kWh; and 12.7 cents for over 2,000 kWh.

The fixed electric non-fuel rates for commercial, government and non-conforming load consumers remain the same at 8.6 cents per kWh, 9.1 cents per kWh, and 22.2 cents per kWh, respectively.

The fluctuating electric fuel rates for all CUC customers went up. From only 17.6 cents per kWh for residential customers in April, the electric fuel rate increased to 35.7 cents— up almost 103 percent.

Between March and May 2 this year, residential customers were paying the lowest electric fuel rates pursuant to Public Law 15-94 which capped the rate at 17.6 cents per kWh.

Other CUC customers who were paying only 32.7 cents per kWh in electric fuel now pay 35.7 cents as well—an increase of 9 percent.

CUC’s fixed monthly customer charges are as follows: $5.60 for residential customers; $7.67 for both commercial and government customers; and $56 for non-conforming load customers.

Up, down and up again

CUC power charges rose by up to a hundred percent in July 2006. In October 2007, the rates were rolled back amid bitter fights between the executive branch and members of the Legislature.

CNMI Governor Benigno R. Fitial said the power rates rollback has been the reason CUC operates at a deficiency of $1.2 million per month in fuel costs alone. The monthly shortfall was also blamed for frequent power outages due to lack of money to repair and maintain power plants and engines.

Thus, on May 3, the governor signed an omnibus bill immediately suspending up to Dec. 31, 2008 the power rates rollback and providing funding for CUC’s fuel costs. This means CUC customers may see doubled rates in their monthly power bills.

The new measure, Public Law 16-2, is expected to help CUC reduce its expected shortfall of $11.3 million by Sept. 30, 2008. But newly appointed CUC executive director Tony Muna said even with the new rates implemented immediately, CUC will still have operational costs to take care of. It also takes some time to see the benefits of the power rollback because of a lag time of 45 to 60 days between CUC’s billing date and the final deadline for customer payment.

The new law amongst other things grants the governor unlimited reprogramming power over lapsed funding, re-appropriates some $2.15 million earmarked to CUC’s fuel expenses, and allows CUC to use half of its customers’ security deposits for fuel.

P.L. 16-2 also incorporates fiscal measures including doubling the fees and charges for services such as driver’s license, vehicle registration, firearms license, police report, and marriage license. Motorists, for example, are now charged $30 instead of $15 for a driver’s license. Gross business tax now also applies to banks.

It also reduces the government’s pension contribution rate from 18 percent to 11 percent of the total payroll. Half of the savings from the reduction in pension contribution rate—about $5.63 million—will go to CUC’s fuel expenses and about $5.55 million will be used at the governor’s discretion.

CUC executive director Tony Muna, in a press briefing, said CUC should be able to pay for itself. “We need to make sure that whenever we buy oil, we can pay for it accordingly,” he said.

Problematic law

Opponents of the new law say more businesses will shut down as a result of higher power rates. They say when CUC hiked by over a hundred percent its rates in 2006, power outages were still rampant. These days, two-hour power outages are still common in the CNMI’s main island of Saipan.

Moreover, with an 11 percent pension contribution instead of 18 percent, the new law is expected to have an adverse impact on the CNMI Retirement Fund. The pension program’s actuarial consultant had said that the government should pay 37.4 percent of its payroll to keep the program afloat.

Some CNMI lawmakers also have reservations about the new law’s provision easing the quorum requirements for the Public Utilities Commission. This allows the regulatory commission to set emergency and interim power rates even if there is only one commissioner.

PUC, which was created in October 2006, asked CUC to explain the implementation of its new power rates—particularly the 35.7 cents in electric fuel rate for the first 500 kWh for residential customers—as a result of the signing of P.L. 16-2.

Rep. Victor B. Hocog told CUC in a letter that increasing the residential electric fuel rate from 17.6 cents to 35.7 cents per kWh “does not seem just and reasonable”.

“How can CUC justify doubling the utility rates when the fuel rate in February 2008 was only $0.258?” he asked.
Rep. Heinz Hofschneider also said that CUC’s new power rates are too high “even with (fuel) price increases,” and wants to know how the utilities agency calculated them.

Green energy

Besides energy conservation that has become more apparent in the Northern Marianas in recent years, another good thing that has come out of the higher power rates and the exorbitant costs of fuel is a shift towards the use of renewable or alternative energy.

Some households and private businesses are starting to harness wind and sun energy.

On Aug. 10, 2006, CNMI governor signed into law a measure establishing incentives for producing electricity using alternative or renewable energy.

This was repealed by Public Law 15-87 signed by Fitial on Sept. 26, 2007, to allow private power producers to produce and sell electricity produced by renewable energy to CUC on a large scale basis.

The Fitial administration also issued a request for proposals (RFP), inviting entities to provide renewable energy to CUC. The governor, in his State of the Commonwealth Address on May 2, said that more than a dozen companies have expressed their interest in submitting proposals across a wide range of green technologies—wind, solar, biodiesel, ocean waves and geothermal.

“We believe this RFP can withstand any protest and look forward to having the various proposals evaluated carefully and professionally,” he said.

CUC said the RFP is the first in what it envisions to be an ongoing process of growth and development of a comprehensive portfolio of increased energy efficiency in the CNMI, and reduce the islands’ dependence on fossil fuels.