CPUC: Abolishing LEAC eliminates transparency at CUC

The Commonwealth Public Utilities Commission strongly opposes a plan to abolish the levelized energy accrued clause-or LEAC tariff-and replace it with a fuel charge that will fluctuate from month to month, saying that doing so will eliminate transparency in the utility firm’s operations.

In a seven-page letter to Gov. Benigno R. Fitial and the Legislature, PUC commissioners Viola Alepuyo and Jack Manglona argued that Senate Bill 17-84 will have a significant negative impact on Commonwealth residences, business community, and government consumers.

The LEAC charge typically applies for six months. The Senate bill proposes to change that into a monthly fuel adjustment clause that would be calculated on the first day of every month.

The bill, authored by Sen. Pete Reyes (R-Saipan), had already passed the Senate and is awaiting the House’s approval.

The commission urged lawmakers to conduct a public hearing that will examine the bill’s merits before they act on the measure, saying that electric consumers “deserve a thorough and transparent public review which can be best accomplished by these public hearings.”

The commissioners specifically pointed out that the measure currently has no formula by which consumers and the commission would know what is included in the monthly fuel adjustment clause, or MFAC. They said when rate tariffs cannot be expressed in numeric terms, they are presented in a formula or process similar to the commission’s mandatory filing requirements.

There is also no provision in the bill that the proposed MFAC has been approved by anyone. They said there should be a resolution authorizing and approving the MFAC and that a rate change resolution must be adopted and certified by the CUC board of directors.

Another omission, they said, is a summary that would tell residential, business, and government consumers the effective date of the proposed change, the magnitude of the proposed change, and the impact of the proposed change both in dollars and percentage.

Importantly, the commissioners noted that there is no provision in Reyes’ bill for reimbursing consumers for the over-recovery of fuel related expenses that are known by CUC to have already occurred.

“Senate Bill 17-84 lacks transparency. CUC would be free to control 80 percent of the cost of electricity to residences, businesses, and government consumers without providing notice of the change and amount, conducting public hearings to receive comments and evidence from consumers, and providing to consumers and the commission work papers supporting any change to the MFAC,” their letter states.

The pointed out that the entire process lacks transparency and would be cloaked in secrecy. No information is also provided on the reconciliation process other than one line with no entry labeled “variance from prior fuel adjustment clause.” CPUC said that this vagueness is an open invitation to abuse because no related work papers and documents would be made available to consumers.

‘What LEAC does for customers’

Under the current setup, the commission reviews CUC’s fuel expenses every six months and then sets a prospective LEAC rate for the next six months, subject to adjustment to assure that consumers are neither over- nor under-billed for CUC’s actual fuel expenses.

According to the commission, it has done six semi-annual reviews in the last three years and the process has resulted in the many findings, including the fact that CUC has been unable to account for 20 percent of its energy production. The industry standard is 6 percent to 8 percent, according to the commission’s consultant, Georgetown Consulting.

The commission had determined that this excessive level of unaccounted for energy constitutes a hidden and unreasonable expense to electric customers. It later ordered CUC to stop providing free power to the water and wastewater divisions to generate savings projected to amount to $4.4 million.

The commission also uncovered several unauthorized use of LEAC revenues.

The commission created the LEAC tariff in December 2008 to enable CUC to recover its fuel costs.