An array of interwoven debts between utility companies and the territorial government, an aging power generation grid, and a broad budget squeeze across departments have brought the Northern Mariana Islands to the precipice of a territory-wide power failure.
For the past six months, the Northern Mariana Islands have reckoned with an unprecedented budget crisis that saw year-over-year declines in available resources, inter-department competition over scarce funding, and harsh cuts to essential government functions like the courts. At the same time, liabilities between various government departments and state-run corporations have put further pressure on critical services.
The Commonwealth Utilities Corporation (CUC) is a state-owned corporation that exclusively manages power, water, and waste disposal for the entire territory of the Northern Mariana Islands. They, however, owe the Northern Marianas government in excess of $10.9 million in missed procedural and administrative fees. At the same time, the commonwealth owes the CUC for missed utility payments. The two have tentatively resolved their liabilities in a mutual debt cancellation agreement wherein the government’s past utility obligations will be canceled, as well as their future payments until the CUC’s balance is cleared.
The Commonwealth Health Corporation (CHCC), another state-owned service, also finds itself in debt to the CUC. The CHCC needs to catch up on a number of its payments, including $67 million to the CUC, over $30 million of which are simply penalties for missed payments. With no prospects of the CHCC paying their debts on the horizon, CUC Chief Financial Officer Betty Terlaje warned of dire consequences for the community. “it’s going to impact the community because our cost of service will increase because those charges need to be spread out somewhere else because we can’t collect these payments, she said. “Unfortunately, that’s the situation. Someone else needs to pay for it if [CHCC] doesn’t pay for it.”
The Northern Mariana Islands’ successful passage of a budget for FY 2025 has temporarily allayed the exigency of the CUC’s power and budget crisis. But the CUC isn’t out of the woods just yet. Financial pressures have already forced the corporation to cancel employee bonuses for 2025. Worse still, deteriorating power generation equipment threatens to black out Saipan and Rota, two of the commonwealth’s three principal islands.
In late September, CUC Executive Director Kevin Watson requested that Governor Arnold Palacios (I) declare the commonwealth’s power situation a state of emergency. Natural disasters in 2023 and the inevitable march of obsolescence have left power plants in Saipan and Rota critically unstable. The CUC’s effort to replace damaged and aging equipment has been stalled by a lack of funding and legal challenges that may take as many as five years to resolve. Director Watson warned that should power generation fail, “most CNMI economic activity would come to a halt, much refrigeration and air conditioning would end, and the airports and seaports would be forced to rely on emergency generation and on the limited, expensive oil supply for it,” among a laundry list of other catastrophic failures for the islands. Watson’s appeal, however, was denied, and without a state of emergency to bypass the legal appeals currently preventing the commonwealth from replacing equipment, the aging power plants will likely remain unchanged for years.
This power crisis, a result of budget battles, unpaid debt, legal challenges, and natural disasters, is currently a powder keg waiting to explode. Should power generation for the Northern Mariana Islands fail, whether by aging technology or by the CUC being unable to sustain its functions, the islands will be thrown into chaos. The commonwealth’s hopes rest on the financial and legal troubles being resolved before the lights go out.
