CUC agrees: LEAC rate needs change

The Commonwealth Utilities Corp. admitted yesterday that its existing formula for calculating the levelized energy adjustment clause rate needs to be modified but disagrees with the Commonwealth Public Utilities Commission’s consultant on how it should be done.

In its report to the CPUC yesterday, the utilities company also opposed rushing the process for the commission to come up with a new LEAC rate.

Georgetown Consulting Inc., the commission’s independent consultant, stated in its report filed Monday that the existing LEAC rate is higher than required and needs to be reduced at the earliest possible time. It asked the commission to consider adopting a new LEAC rate for November 2011 through March 2012. Georgetown said it will come up with an expedited report by Oct. 12, with a response from CUC, and the commission can then make a determination on the matter.

CUC opposes the short period recommended by Georgetown, saying it needs more time to thoroughly review the data.

“First, CUC believes that the LEAC calculation should be modified. Second, even if the commission would like the LEAC calculated immediately before a determination of its possible modification is made, CUC is entitled to put together the LEAC calculation itself, and asks that it be able to do so. CUC believes that under basic principles of regulation, the operating utility is entitled to prepare its own cost and LEAC calculation,” states CUC general counsel Deborah E. Fisher in her report to the commission.

According to Fisher, even if Georgetown is tasked with putting together the LEAC calculation, CUC’s rate consultant—economist.com—has indicated that it would take three weeks to adequately review a LEAC recalculation.

Citing past LEAC calculations, she said it is clear that both parties need more than one week to adequately review the complicated model and there is no suggestion that the LEAC calculation would be any different from past LEAC calculations.

CUC, she said, does not believe that the proper calculation of CUC’s fuel charges should continue to be the LEAC.

Georgetown had recommended the creation of a process for changing the LEAC rate to reflect current world fuel oil market conditions. It believes that CUC is in an over-recovery situation now and between May 2010 and November 2010. Georgetown cautions CPUC that while fuel oil prices have the most impact on the LEAC rate, there are other factors that influence the under- or over-recovery such as generation efficiency and line losses. These factors will need to be analyzed before the exact impact any over- or under-recovery can be quantified.

The commission was supposed to discuss Georgetown’s status report in yesterday’s meeting but commissioner Viola Alepuyo and newly installed commissioner Joaquin Manglona voted for a recess until Oct. 12 to give Manglona enough time to review the documents before the commission.

CUC acting executive director Alan Fletcher and Fisher, who were present in yesterday’s meeting, were elated with the commission’s decision. In an interview after the meeting, Fletcher said that CUC has yet to formulate a response to the Georgetown status report as the utility agency was only told about the report on Monday.

CUC also needs to wait for their financial expert, CUC chief financial officer Charles Warren, and rate consultant in order to come up with a response. Warren and an economist.com expert are expected to be on island this week.