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«LYDIA CAMACHO-ROMISHER* The Regulatory Life Cycle and Regulatory Concerns for the Utilities of the Northern Mariana Islands ABSTRACT In its endeavor ...»

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The Regulatory Life Cycle and

Regulatory Concerns for the Utilities

of the Northern Mariana Islands


In its endeavor to exercise its newly recognizedright of local selfgovernance, the Commonwealth of the NorthernMarianaIslands,

consistingof government officials, business leaders, and members

of the general public, has been considering how to develop the Commonwealth's infrastructureso that it can become more selfsufficient. The Commonwealth, untilrecently, wasgovernedby the United States and now must implement its own methods of regulationin order to sustain and develop its economy and protect its citizens and its environment As part of its growth toward economic and regulatoryself-sufficiency, the Commonwealth has, beginning in 1986, focused on whether it should privatize its government-owned utility structure. This article analyzes the Commonwealth's steps towardprivatizationand concludes thatthe government should continue to develop its regulatoryinfrastructure so that it can regulate the management and operationof each utility in order to ensurefair, equitable, and cost-effective utility servicesfor all residents.


This article discusses the development on the part of the Commonwealth of the Northern Mariana Islands (the Commonwealth) of a regulatory infrastructure in its endeavors to become economically and politically self-sufficient. Attention is also given to the Commonwealth's regulatory development by analyzing its deliberation over whether or not it should privatize its government-owned and operated utility system. The analysis and discussion provided in this article are useful not only to achieve a better understanding of the Northern Mariana Islands, but also to better understand how government regulation begins and why it is so * Graduate of the University ofNew Mexico School of Law, 1999, currently a practicing attorney in New Mexico; BBA from the University of Guam, 1972; employed with the Commonwealth of the Northern Marianas from 1987 to 1995, including work with the Department of Commerce and Labor, 1987-1993, and the Commonwealth Utilities Corporation, 1993-1995. The contents of this article portray the thoughts.and opinions of the author and are not intended to represent the opinions of the Commonwealth Government or any other entity.

[Vol. 40


crucial in enabling a newly independent government to protect its citizenry and provide for economic growth and stability.

This article first provides the reader with a background of the demographics, the political history and structure of the Northern Mariana Islands, and the applicable statutory law governing public utilities in the Northern Mariana Islands. Next, the article explains problems associated with the current utility structure and discusses the impetus for privatizing this structure. The potential benefits, drawbacks, and impediments to privatization are then analyzed. This discussion includes interrelated topics concerning government and regulatory principles, the operation and maintenance of the Commonwealth Utilities Corporation (CUC), and certain economic, political, and legal issues affecting the privatization of the CUC and the Commonwealth's development of its newly formed regulatory infrastructure. Finally, the article concludes with recommendations for how the Commonwealth Government should proceed in its steps toward privatizing the CUC.

Demographics of the Northern Mariana Islands

The Northern Mariana Islands are situated in Micronesia, which is a geographical region within Oceania.1 Oceania is a large area that is comprised of approximately ten thousand islands spread throughout the Pacific Ocean.2 Among the principal insular geographical divisions that have emerged from Oceania are three cultural island areas that include Micronesia, "small islands," Melanesia, "black islands," and Polynesia, "many islands."' Polynesia includes the Hawaiian Islands, Western and American Samoa, Tonga, Nuie, and French Polynesia (Tahiti).' Melanesia is southwest of Polynesia, and is north of Australia and New Zealand.5 It includes such islands as Papua New Guinea, the Solomons, Vanuatu, Fiji, and New Caledonia.' Micronesia is right above Melanesia and includes such islands as the Northern Mariana Islands, Guam, the Federated States of Micronesia, Belau, the Carolina Islands, and the Marshall Islands.7 The residents of these islands are culturally diverse, with differences in

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language, religious beliefs, social organization, and technological development.8 Micronesia comprises the northern-most duster of islands in Oceania and consists of approximately 2,100 islands." The Mariana Islands consist of Guam and the Northern Mariana Islands," which are separated into two distinct political entities, both of which are in political union with the United States." The Northern Mariana Islands are comprised of fourteen islands located above Guam. 2 The Northern Mariana Islands include Rota, Aguijuan, Tinian, Saipan, Farallon de MedinUlla, Anatahan, Sariguan, Guguan, Alamagan, Pagan, Agrigan/Agrihan, Asuncion, Maug, and Farallon de Pajaros (Uracas). 3 These islands have one of the most equitable climates in the world.1' The total land area of the Northern Mariana Islands is 176.5 square miles" and, as of 1997, is home to approximately 62,300 people.1 ' The three largest and most populated islands are Saipan, Tinian, and Rota. 7 Saipan is the largest island, with a land area of 47.5 square miles,'g and is home to approximately ninety percent of the Commonwealth's population, approximately one-third of which are indigenous to the Mariana Islands.1 Saipan lies about 3,200 miles west of Honolulu, about 5,800 miles southwest of San Francisco, about 1,200 miles south of Tokyo, and about 2,000 miles from Seoul.2' Tinian is the second largest island, with a land area of

8. See id. at 16-25,77; John M. Romisher, A Study about Community Education in the Trust Territory of the Pacific Islands 8 (1974) (unpublished PID. dissertation, University of Nebraska (Lincoln)) (on file with University of Nebraska Library).

9. See OLIVER, supra note 1, at 76.

10. See id.

11. See id. at 400-03, 420-22; Commonwealth of the Northern Mariana Islands, Government, History and Politics (visited Apr. 27, 2000) http://www.marianaislands.gov.mp/history.htm [hereinafter CNMI History & Politics].

12. See OLIVER, supra note 1, at 76; Commonwealth of the Northern Mariana Islands, Government, Geography (visited Apr. 27, 2000) http://www.marianaislands.gov.mp/geog.htm [hereinafter CNMI Geography].

13. See CNMI Geography, supra note 12.

14. See id.

15. See id.

16. See Bank of Hawaii, CNMI Economic Report, Commonwealth ofthe Northern Mariana Islands Economic Report: CNMI Summary & Map (1997) http//www.boh.com/econ/ pacific/cnmi/02.asp [hereinafter CNMI Summary & MAp].

17. See CNMI Geography,supra note 12.

18. See id.

19. See Bank of Hawaii, CNMI Economic Report, Commonwealth ofthe Northern Mariana Islands Economic Report: Economic Indicators (1997) http//www.boh.com/econ/ pacific/cnmi/06.asp [hereinafter CNMI Economic Indicators].

20. See CNMI Geography,supra note 12; CNMI Summary & Map, supra note 16.


39.3 square miles, 1 and is home to approximately 2,600 people, about half of which are indigenous to the Mariana Islands.' The third largest is Rota Island, which measures 32.9 square miles' and is home to approximately 4 3,500 people, about half of which are indigenous to the Mariana Islands.

The remaining eleven islands are much smaller and are significantly less populated, if populated at all. For example, Farallon De Pajaros (0.8 square miles), Maug (0.8 square miles), Asunsion(2.8 square miles), Sagriguan (1.9 square miles) and Aguijuan (2.8 square miles) are all uninhabited.' In addition, Pagan (18.7 square miles) is uninhabited due to volcanic activity, Guguan (1.6 square miles) is uninhabited and serves as a wildlife sanctuary, and Farallon De Medinilla (0.4 square miles) is uninhabited and is used by the United States for military exercises.' The remaining islands are sparsely populated. For example, Agrigan/Agrihan (18.3 square miles) houses approximately 20 people, Alamagan (4.4 square miles) houses approximately 70 people, and Anatahan (12.5 square miles) houses approximately 65 people.' The population of the Commonwealth continues to grow. The CNMI (Commonwealth of Northern Mariana Islands) Population Report showed that in 1973 the total population was 14,495; in 1980 it reported a population of 16,780; and by 1990 and 1995, it reported that the figure had grown significantly to a population of 43,345 and 58,846 respectively.' In 1997 the population increased to approximately 62,300 people.' About onethird of the population is comprised of citizens of the United States that are not citizens of the Commonwealth." Interestingly, the comparison of the population to the total number of visitors per year to the Commonwealth is staggering. For example, the Governor's Office reported that 596,033 persons visited the islands in 1994; 676,161 in 1995; 737,117 in 1996; 694,797 in 1997; 490,165 in 1998; and 501,788 in 1999.3'

21. See CNMI Geography, supra note 12.

22. See Letter from Frank S. Rosario, Press Secretary, Public Information & Protocol Office, Office of the Governor, to Lydia C. Romisher, author 4 (Mar. 16,2000) (on file with author) (citing 1995 CNMI Mid-Decade Census Report tbl.1.12: Birthplace by Island 1995).

23. See CNMI Geography, supra note 12.

24. See Letter from Frank S. Rosario to Lydia C. Romisher, supra note 22, at 4.

25. See CNMI Geography,supra note 12.

26. See id.

27. See id.

28. See Letter from Frank S. Rosario to Lydia C. Romisher, supranote 22, at 8 (tbl.A.2.0:

CNMI Population by Citizenship and Sex, 1973 to 1995).

29. See CNMI Summary & Map, supra note 16.

30. See id.; CNMI Economic Indicators,supra note 19.

31. See Letter from Frank S. Rosario to Lydia C. Romisher, supranote 22, at 2 (citing the Mariana Visitor Center, tbl.8.1: CNMI Visitors Arrival by Month: Calendar Years 1994Bank of Hawaii, CNMI Economic Report, Commonwealth of the Northern Mariana


Summer 2000] The Commonwealth's economy is primarily supported by taxes generated by tourism, garment manufacturing, service companies, and retail stores.' Even though the Commonwealth has recently experienced considerable economic growth, the economy is very fragile and is primarily controlled by outside markets and certain federal laws of the United States, like those pertaining to textile industries. At the present time, the Commonwealth's economy is experiencing numerous challenges, namely from substantial fiscal reductionbased on reduced tourism and the United States Government's present interference with the Commonwealth's textile industry and immigration and labor laws." On a positive note, however, the garment or textile industry has shown a 37 percent increase in revenue.' Such increases mitigate some revenue loss from the downturn in tourism and other non-apparel industries. 3

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Historical Background Over the years, the indigenous inhabitants of the Northern Mariana Islands have been governed by administrations from several different nations. 6 From 1521 to 1899, Spain governed the islands.' In 1899, Germany paid Spain $4.5 million for the acquisition of the Mariana Islands (excluding Guam since it was already a U.S. Territory) and the Carolina Islands.' Germany governed the islands until 1914, when Japan declared Islands Economic Report: Economy by Sector (1997) http//www.boh.com/econ/pacific/ cnmi/07.asp [hereinafter CNMI Economy by Sector].

32. See CNMI Economy by Sector, supra note 31; CNMI Summary & Map, supra note 16.



Bank of Hawaii, CNMI Economic Report, Commonwealth of the Northern Mariana Islands Economic Report: Introduction (1997) http//www.boh.com/econ/pacific/cnmi/04.asp;

Governor Pedro P. Tenorio, CNMI Testimony at U.S. Senate Committee on Energy and Natural Resources Hearing 1 (Sept. 14, 1999) (available at Commonwealth of the Northern Mariana Islands, Government, Speeches and Press Releases (Sept. 14, 1999) [hereinafter Tenorio Senate http://net.saipan.com/cftemplates/exec/senate.htm Testimonyl.

34. See Tenorio Senate Testimony, supra note 33, at § IIIC (Economic Outlook).

35. See Tenorio Senate Testimony, supra note 33, at §§ 1II.B (Strategic Economic Planning), III.C (Economic Outlook).



STRATEGIC TRUSTEESHIP (1947-77) 3-10, 26-30 (1978).

37. See id. at 4.

38. See id. at 6.

NATURAL RESOURCES JOURNAL [Vol. 40 war on Germany and the Japanese navy seized the islands. 9 Japan retained control of the islands until 1945. 40 During Japan's administration, the League of Nations formulated the objectives for the Japanese administration of the Islands." Then, in 1945 the United States Navy took control of the islands fromJapan. 2 In 1947, the United Nations designated Micronesia as a Strategic Trust Territory and placed the Northern Mariana Islands under the administration of the United States."

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