‘Legislative rate, fee changes threaten utilities cost recovery’

A number of bills and recently passed laws are threatening the full recovery of the Commonwealth Utilities Corp. and might cause potential rate hikes in the future if not given due consideration by the Legislature, according to executive director Alan Fletcher.

He told Saipan Tribune that when rates and fees are changed legislatively, there is typically no analysis of the resulting economic impact to all consumers or to the utility’s cost of providing service.

As an example, a reduced rate or fee change to one customer class would normally increase the rates of the remaining customer classes to provide the same revenue requirement.

“When the Legislature [lowered] the reconnection fee, the lower fee means CUC will not recover the costs of processing and physically reconnecting customers following a non-pay disconnect. New reconnection fees were just ordered by the [Commonwealth Public Utilities Commission] in February following analysis of the cost service. The legislative change lowered that fee below that newly approved amount,” according to Fletcher.

Senate Bill 18-30 was enacted into law (Public Law 18-39) last month, drastically cutting the reconnection fee for CUC customers. Under the new law, the reconnection fee for CUC residential customers is now $25, from the previous $60. The law also includes CUC commercial customers when it comes to offsetting the amount past due for utility services with the security deposit, prior to disconnecting utility services. For commercial consumers, the reconnection fee is now $75.

“Consequently, CUC will not recover its cost of service and those unrecovered costs will be picked by all customers, resulting in a subsidy to reconnected customers,” Fletcher said.

In September last year, Public Law 18-19 reduced PSS water rates by 98.4 percent, from $44.30 to 72 cents per 1,000 to 3,000 gallons. The wastewater rate was also reduced by 95.6 percent from $68 per 1,000 gallons to only $3 for 1,000 to 6,000 gallons. Under this same law, any late fees or penalties that have been assessed PSS shall be waived for fiscal year 2013.

Besides these new laws, there remains a pending legislation that would negatively impact CUC, according to Fletcher.

He cited Senate Bill 18-39 that seeks to require CUC to refund the security deposit of commercial and residential customers after a one-year period if they timely pay their utility bills in full. The same legislation also reduces to one month the security deposit for commercial clients of the utility agency.

If it becomes law, this will take away a source that CUC depends on to collect, and this will in turn increase CUC’s bad debt levels, which could potentially lead to higher base rates for all customers, Fletcher said.

In 2013, CUC petitioned CPUC for a total of $5.9 million for cost recovery, of which only $2.8 million has been approved to date.