"Mobil Oil's New Policy Requires Desperate Measures for the Cash Poor Utility"

May 02, 2007

The Kaselehlie Press

They are the providers of what have become essential services in Pohnpei. Pohnpei Public Utilities (PUC) provides electrical power, and in some places water, and sewage systems on Pohnpei. Like many businesses in Pohnpei the Utility has had a problem for a long time with bad customer debts. In 2005 they wrote off nearly $2 million dollars of uncollectible debts. At the end of Fiscal Year 2006 they still listed as an asset $2.6 million in Accounts Receivables from customers that have not paid their bills, some of them for years. The figure now stands at $4.013 million dollars.

PUC has an advantage that other businesses don't since the service they offer is practically indispensable to its customers and it can be curtailed if payment is not made. The utility has been loath to exercise that advantage at least in terms of electricity service but new developments with fuel supply have forced their hand.

PUC needs cash and they need it quickly. Mobil Oil, the island's only source of fuel has changed its policy and has the utility scrambling to meet the needs of its paying customers. By the end of May PUC must pay the over $650,000 that it currently owes for fuel and buy another $750,000 (one month's supply of fuel) in advance in order to keep the power on under Mobil's new "no credit" policy.

In an effort to generate the cash it needs, starting April 20 customers with outstanding balances who come to PUC to buy cash power will have 90% of their purchase applied to their outstanding balance (arrears) and will take home 10% of the power they intended to purchase. According to PUC the collection policy will be in place for 3 months.

Under the new policy, a customer who has a past due balance with PUC who comes to purchase the recently mandated $5 minimum cash power purchase (3.7 times the current minimum wage of $1.35 per hour) will receive 50 cents worth of cash power. The remaining $4.50 will be applied to their outstanding balance. 50 cents worth of cash power at the current rate of 36 cents per kwh will allow a customer to power three 40 watt incandescent light bulbs for 15 hours. If the customer turns on a fan or any other appliance in their home they will watch their 1.39 units of cash power dwindle away by morning.

Customers need power. If they have outstanding balances, whether those balances are just a few dollars, in the hundreds, or in the thousands of dollars they have little choice. They must pay, but they're not happy about it by any stretch of the imagination.

More customers have complained about what has come to be known as the 90-10 policy than complained about the 50-50 policy mandated months ago and the $5 minimum cash power purchase policy combined. PUC employees report that they have received threatening phone calls and many loud confrontations have taken place at the cashier's booth at the PUC office. At least some angry customers, landowners in Kitti and Madolenihmw have threatened to remove PUC power poles from the easements on their land. Kelly Keller, Comptroller for the utility said that the 90-10 policy is a better solution than turning off power or water which the utility is within its rights to do.

Keller said, "We're trying to keep power on for everyone. That is the priority." If the Utility can't come up with the $1.4 million in cash it needs by the end of May there will be interruptions in power service for everyone, even those customers who are fully paid up because PUC will not have the diesel fuel required to run its generators.

Of 5,992 customers with cash power meters 1,476 of them have arrears. He said, "We've been too lenient in the past."

Water bills are another source of the apparent cash problem. Commercial customers owe $125,000, the Government owes $24,000, but residential water customers owe $1.2 million. If customers who owe back water bills would stand in a queue at PUC and pay their arrears the Utility would have no trouble meeting the fuel obligation at the end of May but that will not likely happen.

Many water customers in Pohnpei have not been used to paying for their water and so they have open faucets in or outside of their homes that run constantly. Perhaps they don't realize that the meter is running all the while, clicking the expensive gallons away. Another problem is substandard water delivery systems between the meter and the home or business.

Above ground PVC conduit pipes can be stepped on or hacked through with a machete while clearing land causing an expensive leak that can quickly run into the hundreds of dollars if it does not get repaired or the valve at the meter shut down until repairs can be done. Leaks between the meter and the home or business are the responsibility of the customer. The disconnection of water services for non-paying customers was scheduled to begin on April 16 according to an announcement on Pohnpei State Radio Station V6AH. Many customers have received notices about eminent disconnection because of overdue bills causing further outrage and furious phone calls from customers.

At a public hearing at the Pohnpei State Legislature on the 26th of April concerned citizens wanted to know everything from why the Utility could come and cut down fruit bearing trees on their land that might interfere with power lines to whether or not PUC employees received free power.

Participants wanted to know about overhead costs for the utility. They seemed especially to want to know about salaries because of the many rampant rumors about them. PUC has 185 employees. In 2006 they paid a total of $2.021 million in salaries and benefits to its employees or an

Despite local rumors of mismanagement, huge salaries, exorbitant travel budgets, and waste, the audits don't show any of those things. To the contrary, it shows that in a financial environment where fuel oil has increased in price by nearly 3 and a half times, the operating expenses for the utility were actually $1 million lower at the end of 2006 than they were in 1999. The non-fuel operating expenses have decreased every year since 1999 and were at their lowest level at the end of 2006. Keller said, "We have really had to tighten our belts."

Apparently that is the case if the ramshackle PUC building with outside walls actually collapsing in downtown Kolonia is any indication.

Another interesting fact that the financial data showed is that every year since 1999 the utility has operated at a loss. The lowest loss figure was $1.15 million, the highest was $3.56 million. During that same period of time the lowest end of year amount that customers owed to the utility was $2.33 million. The highest figure was $4.84 million. Every single year since 1999, if all customers had paid their bills the Utility would have operated in the black.