Accord reached on incentive rate for large CUC customers

After extensive discussions, consultants for both the Commonwealth Utilities Corp. and the Commonwealth Public Utilities Commission have agreed yesterday to come up with a modified incentive rate proposal for CUC’s large commercial customers.

CUC’s rate consultant, economist.com and CPUC’s consultant, Georgetown Consulting Group, inked the joint agreement that recommends the implementation of a tariff rider incentive rate, which would apply to three classes of commercial customers.

First are commercial customers with generation capacity of 400 kW or greater and generate 90 percent or more of their annual electric needs. Second are commercial customers that expand their existing facility that results in an increased load of 200 kW or greater or expand their hotel by 75 rooms or greater. Third are new commercial customers with electric generation capacity of 400 kW or greater.

Under the proposed incentive rate tariff, these customers will pay 33.416 cents per kWh, which includes the LEAC currently in effect.

During CPUC’s evidentiary hearing yesterday, economists.com managing director Robert Young said the IR tariff represents an 8.3 cents per kWh discount from the current commercial rate, which is roughly a 3-cent per kWh base rate on top of the current LEAC.

“This represents a reduction or discount in the cost per kWh for incentive rate purchases of about 31 percent from CUC’s commercial rate. In addition, with the expiration of the ‘infrastructure surcharge’ in January 2015, the incentive rate discount will fall to 25 percent,” states the newly-signed agreement.

Both Georgetown and economists.com also agreed that CPUC should approve an experimental tariff rider IR to CUC’s existing commercial rate, with a signup period of four months from the date the master incentive rate contract is approved.

“This means the large customers have four months to decide if they want to pursue and lock in the current rate for four years. If not, they will have to wait for another 12 months to do it,” explained Young.

The purchases under the IR will be effective for four years.

Young said the agreement also places a cap on the volume of purchases under the incentive rate rider, which is 20 MW of billing demand. CUC, he said, reserves the right to petition the CPUC before the end of the incentive rate window to increase the 20-MW limit.

Georgetown will file with CPUC at its next regulatory meeting a large commercial rate tariff that will apply to all customers with a kW demand of 400 kWh or greater for review.

CUC will also submit its proposed master incentive rate contract for review and approval by the commission by July 31, 2014.

Before coming to an agreement on the incentive rate, Georgetown had disagreed with CUC’s original recommendation for an incentive rate for its large commercial customers—mostly hotels on Saipan.

Georgetown claimed that the approach CUC used in ratemaking results in larger, high-load factor customers subsidizing low usage within the commercial class. This was described as currently a flaw in CUC’s existing commercial rate structure.