CUC to seek even higher base rate hike

Despite the recent decision to lower the LEAC rate, power users in the CNMI should brace themselves for a possible increase in their power bills starting next year following the approval of changes to the contract of an independent power producer on Tinian, which is projected to result in an added cost of $32.7 million for ratepayers.

This follows the Commonwealth Utilities Corp.’s decision to seek an emergency base rate hike as a result of the increased employer contribution rate being enforced by the NMI Retirement Fund starting this fiscal year.

CUC chief financial officer Charles Warren told Saipan Tribune that the Fund’s new 60 percent employer contribution rate is expected to bring about $1 million in additional cost to the power division.

With the Commonwealth Public Utilities Commission’s decision yesterday to approve amending the contract of Telesource CNMI Inc., Warren said the rate increase proposal will go even higher as the projected additional cost of $32.7 million for ratepayers will have to be factored in.

CUC initially wanted to file the base rate petition on Dec. 8 but this new complication means that CUC may have to file it in January.

Telesource’s new contract is effective upon CPUC’s approval of the emergency petition for electric base rate next year.

CPUC chair Viola Alepuyo approved the amendment to Telesource’s contract after almost four hours of deliberation with the commission’s consultant, Georgetown, CUC and its consultant, economists.com, and the commission’s hearing examiner.

Her decision came despite findings of both Georgetown and economists.com that the proposed change order for the Telesource contract is “unnecessary and not beneficial” to customers. Both experts believe that CUC can explore other ways of bringing renewable or sustainable energy to customers other than amending the IPP contract.

Alepuyo, who pointed out that her obligation as CPUC commissioner is to protect consumers and make sure that her decision is for the best interest of people, said that the renewable or sustainable energy component was the main factor in her decision.

Under Public Law 15-87, CUC is mandated to implement renewable energy on all three major islands of Saipan, Tinian, and Rota by 2014. Alepuyo said, however, that until now, there has been “zero” progress in terms of renewable energy options from CUC.

The existing Telesource contract is in effect until March 2020. CUC pays the company $2 million a year to provide power services to Tinian, which has about 4,000 residents. With the approved change order No. 5, the contract may be extended up to 15 years, with a $3.5 million yearly fee or $32 million during the 15-year period.

Alepuyo sees the potential to end this long-term contract with Telesource because a provision in the amended contract states that CUC can terminate the agreement in five years provided it identifies and establishes renewable or sustainable energy on Tinian.

“The way I see it, CUC wants to get out from the relationship with Telesource and this change order No. 5 could possibly be the vehicle for this. With this approval, I hope CUC will start [exploring renewable energy] on Tinian so it can get rid of Telesource and then provide the same to the rest of the CNMI,” said Alepuyo.

Alepuyo finds that the additional cost stipulated in change order No. 5 will be less than what CUC would pay Telesource in the full eight years of its contract. She said so long as fuel cost keeps going up, CUC customers will continue to pay higher electric rates. Renewable energy will alleviate the dependence of power production on fuel.

CUC, along with Sen. Jude Hofschneider (R-Tinian), backed amending the contract with Telesource.

Both Georgetown and economist.com had recommended the rejection of the proposal, citing the significant increase it will bring to ratepayers.

Based on the economic analysis of economist.com, the change order will mean an increase of $4.43 per month—or $53.20 for the first year—for an average residential ratepayer using 500 kWh monthly. Over the 15-year period, the additional amount by a user of 500 kWh is forecast to reach $975.82.

For a residential ratepayer using 1,000 kWh monthly, this will result in an increase of $8.87 per month or $106.40 for the first year. In a 15-year period, the added cost is $1,951.64.