GARAPAN Saipan — The Commonwealth Utilities Corp. does not have the financial strength to hedge oil according to Robert Young managing director at Economists.com a policy think tank commissioned by the local government to find solutions to CUC’s woes.
"If you want to buy forward and lock in on oil prices you generally have to fill out a complete … international security dealers authorization. It has also financial requirements…you have to be rated. I don’t think right now that the CUC could comply with that and I’m not sure if the CNMI government can. Right now I don’t think CUC has the financial strength to lock in oil prices " Young said.
The utilities agency has been considering constructing a fuel farm and turn to hedging to save on costs.
With high fuel prices and breaking engines in the backdrop CUC has embarked on a long-term privatization plan with an option to eventually enter into hedge contracts.
Young proposed that the government enter into a partnership with a private company instead.
The government which provides CUC about $2.5 million a month to help finance its operations sought recommendations from Economists.com which suggested power rates be increased by an average of 117% for all residential customers and about 80% for commercial customers. The increase took effect in August. MBJ