Lawmakers skeptical about surcharge fee

Lawmakers remain unconvinced about the Commonwealth Utilities Corp.’s need to impose a fuel surcharge fee, doubting that it would actually be used for fuel costs alone.

During a joint legislative hearing yesterday, Vice Speaker Timothy Villagomez, who is also chair of the House Committee Public Utilities, Transportation, and Communications, asked for assurance that the proceeds would actually go toward the payment of fuel.

He noted that the CUC has projected a $7-million increase in fuel cost in FY 2005 (compared to FY 2004) but that CUC’s surcharge projection amounts to $15 million.

Villagomez, a former Commonwealth Utilities Corp. executive director, took note that CUC’s rate analysis is based on its in-house accounting since its last audited financial statement was made in 1999.

House minority leader Arnold I. Palacios said CUC’s major problem lies with its old and inefficient power plants, which result in higher consumption of fuel.

Palacios also noted that CUC increased its FY 2005 budget by $2 million from last year’s budget.

“I wonder if CUC is implementing austerity measures…so this [surcharge fee] is not for fuel cost. Why should the public shoulder these costs?” asked Palacios.

Senate majority floor leader Paul Manglona said the surcharge issue would be irrelevant because people have no faith in CUC.

Manglona said consumers would only be willing to pay additional fees if they see efficiency and if they are convinced that the fee would actually address the issue.

“I think the customers would be willing to pay if they know that it’s not about CUC’s negligence. Show how much you are paying for fuel. Charge the customers the true cost of fuel. As it is, this is not a fuel surcharge. It is CUC a surcharge,” said the senator.

Meantime, CUC deputy comptroller Ed Williams said the utility firm intends to use the collected surcharge for fuel payment.

He projects that the CUC’s expenses for fuel in 2005 would reach $46 million, way above last fiscal year’s $35.5 million. In this case, he said, CUC needs to recover some $11 million.

Asked about CUC’s reserve funds, Williams said that CUC only has a little over $1 million as of Nov. 14.

Yesterday, he said, CUC was set to pay its fuel supplier, Mobil, $1.6 million as part of its final payment for November. By January 2005, he said, CUC would have “very little cash.”

By that time, he said, CUC will be obliged to pay Mobil for its fuel shipment for February. “Our monthly payment for Mobil will probably exceed $5 million,” he said.

The Legislature decided to hold a joint public hearing on the proposed fuel surcharge fee following CUC’s admission that the fee would reach a high of nearly 6 cents per kilowatt-hour by next year.

CUC had earlier said that all electric customers will be charged an additional 3.5 cents per kwh in December.

In calendar year 2005, customers that consume less than 2,001 kwh per month could be charged up to an additional 2 cents per kwh or a total of 5.5 cents per kwh.

For larger users, the additional charge that could be imposed is unlimited, depending on how much fuel prices increase.

CUC currently charges a fixed rate of 16 cents per kwh for commercial users and 11 cents for residential and government users.

At such rate, CUC said that it is left to absorb the fluctuations in fuel prices into its operating budget.

Yesterday’s meeting was co-chaired by Senate PUTC chair Diego Songao.