SAIPAN - Commonwealth of the Northern Mariana Islands Gov. Arnold I. Palacios and Commonwealth Healthcare Corp. Chief Executive Officer Esther L. Muna asked the Commonwealth Utilities Corp. on Tuesday to charge CHCC based on the commercial rate for utilities, but CUC issued a disconnection notice on Wednesday for CHCC’s outstanding balance based on the higher government rate.

Acting CUC Executive Director Dallas M. Peavey Jr. gave CHCC 14 days to pay a total of $53.6 million, the outstanding balance as of March 31.

In an interview on Wednesday, Muna said CHCC is appreciative of the governor's initiative to "bring all the parties to the table" on April 18. In that meeting, Muna said CHCC offered to continue the monthly payment of $219,000, an amount based on the commercial rate.

Muna said it was agreed in 2020 that $219,000 "is about what CHCC would be paying if we're being charged the commercial rate just like other health care providers."

She said CHCC issued a payment of $219,000 on Wednesday morning, "but CUC still issued the disconnection notice."

In his disconnection letter, Peavey said "that agreement expired in September 2021. CUC acknowledges and appreciates the efforts made within the one-year period by the CNMI government and CHCC; however, the combined amount was insufficient to cover CHCC's monthly current charges, let alone any arrears."

He said the arrears continued to accumulate month after month. After the agreement expired, CHCC requested a six-month extension, but the CNMI government "did not agree,” thus CUC denied CHCC's request for an extension.

In a separate interview, CNMI Sen. Jude U. Hofschneider, who introduced Senate Bill 23-37 to charge CHCC the commercial rate, said it was agreed in July 2020 that if CHCC were designated as a commercial entity, the base rate for its power consumption would be 8.8% lower per kilowatt-hour; 98% lower for water; and 95.6% lower for wastewater.

He said CHCC should be billed as any other health care provider in the CNMI at a fair and reasonable utility rate.

CHCC and CUC are both autonomous public corporations whose board members are appointed by the governor.

Notice of disconnection

In the notice of disconnection, Peavey told Muna that power and water services to CHCC will be terminated May 4.

He said CUC has continuously communicated with CHCC regarding the outstanding arrears that continue to grow and the importance of making timely payments for services rendered to CHCC.

The continued delinquent status of CHCC has adversely impacted CUC's ability to provide reliable and uninterrupted services to the community, he said.

"You must agree that it is not in either organization's best interest that CHCC continues to disregard its outstanding arrears which will end up significantly jeopardizing the health and safety of the community when utility services interruptions begin to impact the entire islands for even a short period of time as a result of CHCC's continued delinquent status," Peavey said.

He noted that in June 2015, CHCC proposed a plan to pay an initial $250,000 followed by monthly payments of $150,000. CUC received the initial payment, he said, but the monthly payments did not follow as promised.

CUC and CHCC then entered into a net metering intergovernmental cooperative agreement in December 2015 that would eventually reduce the cost of power and utility services and the financial impact on CUC of CHCC’s “liquidity challenges.”

But Peavey said CHCC failed to make its payments as agreed, breaching the agreement, which was rendered null and void.

Since then, he added, much correspondence has been sent and numerous meetings have transpired in attempts to collect from CHCC.

In August 2020, CUC issued a disconnection notice to CHCC. Consequently, on Sept. 8, 2020, CUC proceeded to shut off power service to the hospital grounds after CHCC failed to meet CUC's demand. The disconnection in September 2020 pressured the CNMI government and CHCC to enter into a payment agreement to pay CUC for CHCC's utility billings.

"This demands your immediate attention,” Peavey said. “This notice is valid until the outstanding balance stated in this notice is settled. Any new utility billing or notice received after the date of this notice does not give CHCC more time to pay the past-due amount stated in this notice. Please make payment or settlement immediately to avoid disruption of your services," Peavey added in the disconnection notice.