Fuel surcharge fee junked

The fuel surcharge fee will not be implemented after all, as the Commonwealth Utilities Corp. reversed its Friday decision and junked the proposal with a 3-3 vote yesterday.

The CUC board of directors met Tuesday afternoon to review the fuel surcharge regulation after the Attorney General’s Office issued an opinion that the regulation was illegal.

In a Nov. 29 letter to the acting attorney general, assistant AG Alan Barak said the regulation that CUC approved last Friday was unlawful because it is too different from the proposed regulation earlier presented to the public and because it discriminates against one class of customers, among other reasons.

CUC initially wanted to implement a 3.5-cent, across-the-board fuel surcharge.

After considering government offers of subsidy and the public’s demand for a lower rate or gradual hike, CUC on Friday decided to impose a fuel surcharge of 3.5 cents per kwh for government customers and a surcharge of 1.5 cents per kwh for all other classes of customers.

However, Barak said there should be only one fuel surcharge fee, as CUC’s general powers do not allow for differential fees.

He also argued that CUC may not set rates that arbitrarily discriminate among customers classes. “Here, there is no expressed basis for the discrimination between the government and all other classes. Further, given the purpose and logic of the surcharge—for the average cost of fuel burned to make the electricity for all customers—it is difficult to imagine there ever being a basis for fuel charge discrimination,” Barak said.

The final regulation, he added, appears to be arbitrary and capricious because it eliminated the computational basis for the fuel surcharge. He also raised the issue of statutory prohibition against rate subsidies.

At yesterday’s meeting, CUC board members voted on the question whether to adopt the regulation as it was originally proposed, with a minor amendment giving the board final decision on any adjustments to the fee.

Board member Allen Perez made the motion and Rufina Miles seconded.

Only board member Martin Mendiola had a change of mind about the fuel surcharge. Mendiola, who voted in favor of the fee implementation last Friday, decided against the across-the-board increase. He said he did not approve slapping all customers, particularly households and businesses, with a sudden 3.5-cent rate increase.

A tie ensued, with CUC chair Frank Guerrero, Miles, and Perez voting “yes,” and board members Joe Torres, Velma Ann Palacios, and Mendiola voting “no”.

CUC vice chair Herman Sablan, who has been supportive of the fuel surcharge, was not present to break the tie. He is on a business trip.

With the tie, the motion failed to pass.

In an interview, Guerrero said the AGO “practically killed” the fuel surcharge. He added that the result of the vote was unfortunate because it would place CUC in an inevitable financial crisis.

He said the public may expect more power outages as the utility firm continues to run out of money to buy fuel for power generation.

Still, he maintained that CUC may consider discussing the fuel surcharge at a later date.

For his part, Torres said that while he understands the CUC board’s responsibility to keep the firm afloat, he could not support the fuel surcharge when he still had questions unanswered.

Torres insisted that the CUC management should look at alternatives and be more careful in its spending.