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5/23/2025—Gov. Arnold I. Palacios has called on the Commonwealth Utilities Corp. to explore options other than increasing power rates, stressing the urgent need to modernize the aging power plants on Saipan and Rota and alleviate the financial burden on residents.
Speaking at a CUC special board meeting last May 22, Palacios urged the utility’s leadership to avoid the “default” reaction of resorting to rate hikes and instead pursue long-term infrastructure solutions.
Palacios expressed concern over the economic impact of a proposed rate increase based on CUC’s final cost of service study, which showed that inefficiencies in the power generation system—mainly due to outdated generators—are driving up operational costs.
“In the first year, we’re talking about an increase from $140 or $180 to over $300 for the average residential bill,” the governor said. “That’s almost double. There will be a lot of push back from the public.”
He called on CUC to be proactive in seeking federal infrastructure funding, lamenting past missed opportunities from programs like American Rescue Plan Act and Federal Emergency Management Agency grants.
“We had billions of dollars in funding opportunities two years ago,” Palacios said. “We could’ve made a lot of difference had we acted faster or brought in external expertise. Now we need to move forward.”
Palacios added that power reliability and affordability are key to attracting investors to the CNMI, as many are deterred by high utility costs and frequent outages.
“I've had so many foreign or even U.S. investors making inquiries of what type of investments they can bring to the island. But one of the biggest elements that they consider is what is the cost of power and water, and, you know, how reliable it is. So those are the factors that we're almost in a chaos because we need to take care of one, but we can't take care of it without increasing the rate.”
The governor also mentioned that the Office of Local Defense Community Cooperation is funding a master plan study for CUC, which he hopes will accelerate planning and improvements.
“We’re going to push our grantor agency and the contractor to move this fast so CUC can begin implementing this year—not next year,” he said.
CUC board chair Allen M. Perez echoed the governor’s concern and said the board will not rush to approve the cost of service study's recommendations.
“We are not ready to vote on this today,” Perez said. “Management needs time to assess the study and present to us the best or amended option. We’ll likely vote by next month.”
Perez emphasized that stakeholders including the Legislature, the administration, and the Commonwealth Public Utilities Commission must be looped in before any final decision is made.
“We don’t necessarily have to select one solution as presented,” he said. “We can modify or amend it.”
CUC executive director Kevin Watson said the utility is seeking to reduce fuel costs through renewable energy, especially solar and battery storage. If bids for renewable power come in below 15 to 16 cents per kilowatt hour, residents could see relief in their monthly bills.
“The average cost of generation is currently around 17 to 18 cents per kilowatt hour,” Watson said. “Lower bids would mean a lower fuel adjustment charge.”
CUC’s consultant from economist.com, Robert Young, and legal counsel Tina Ngo from the Attorney General’s Office were also present, along with board members Rebecca C. White, Miranda V. Manglona, and Francisco M. Rabauliman. Simon A. Sanchez attended the meeting online.
Sanchez recommended exploring models used in Guam, where businesses and government subsidize residential utility rates.
“We have to move to the next level of rate design,” he said. “We may need to take the medicine now.”
The meeting also featured discussions on privatization options and integrating renewable energy. Palacios encouraged clear communication with energy providers about affordability limits and urged urgency in taking action.
“We can’t wait another five years to see results,” he said. “Sooner rather than later, we have to decide.”
At the end of the day, Perez said, the CUC board needs to make a recommendation to CPUC for a rate structure that is going to cover the cost of CUC’s operations.
“So, moving forward, here's my recommendation. Management, take the report, assess it, come back to the board with what you recommend would be the best situation to deal with cash flow and cost of recovery that will serve our utility. And I'd like to see if we could do that within one month...Whether we call it a board meeting or a special meeting, [let’s] actually sit down and entertain this, to the point where the board could actually vote on our recommended strategy. And then from there, we'll take it to the next step and present it.”
By Mark Rabago
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