‘Fuel charge’ to replace LEAC, revised method endorsed

The levelized energy adjustment clause, more popularly known as LEAC, may soon disappear from customer’s billing statement following a decision by the Commonwealth Utilities Corp. board to replace it with the term “fuel charge.”

The CUC board unanimously approved the LEAC’s abolition during last week’s meeting where it also adopted a revised method to calculate the “fuel charge.”

CUC management is expected to file a petition with the Commonwealth Public Utilities Commission this month to reflect the change.

CUC executive director Alan Fletcher and chief financial officer Charles Warren disclosed that LEAC is currently calculated through a six-month true-up method. The board wants this process revised to a monthly true-up to reflect actual fluctuations in the oil market. LEAC collections are used to buy fuel.

Saipan Tribune learned that CUC had its last LEAC true-up in 2011 because the CPUC didn’t function for two years.

According to Fletcher, because of the current true-up frequency on LEAC, which is every six months, this accounts for either under- or over-collection of fuel charges.

“According to our financial records, we under-collected a significant amount of fuel charge [in that two years]. Changing the frequency of our adjustment to monthly, we think, will make more sense for a utility our size and our finances,” said Fletcher.

Besides replacing LEAC and the revised true-up method from six months to each month, the CUC board also approved the transfer of the “water electric charge” from the water division to the electric division to avoid confusion among customers.

CUC board chair David J. Sablan said that revising the true-up method for “fuel charge” will have minimal impact on customers.

Back in 2011, CUC petitioned the CPUC to replace LEAC with MFAC, or the monthly fuel adjustment clause, after determining that the LEAC methodology was too complex and was of significant cost to ratepayers.

It was revealed that because of LEAC’s complexity, CUC and CPUC engaged in several disputes over the model’s findings. These disputes have involved the ultimate LEAC rate itself and the amounts of any alleged over-recovery by CUC of revenues relative to fuel expenses. These disputes have only added to the costs CUC and its ratepayers have been compelled to incur in order to maintain the LEAC.

A bill was also filed endorsing the MFAC but was not acted upon by the Legislature.