CUC board withdraws 2015 rate application

• Board warned CUC ‘running out of money’
• Board will reconvene today to discuss rate recommendations further

Despite its dire need for additional revenue and warnings of the Commonwealth Utilities Corp. running out of money by October, majority of its board of directors moved to withdraw their rate case application filed last April—bringing with it the possibility of not getting the money it needs to keep up operations later in the year.

Instead of making a decision on recommendations made by consultant, Economists.com, to “invest” some of the savings that they have from the low prices of fuel, the board ultimately moved to withdraw the application it submitted to the Commonwealth Public Utilities Commission last year, which sets a uniformed rate of $0.069 per kilowatt hour to residential customers after about four hours of discussion.

Vice chair Eric San Nicolas made a motion to withdraw the April 2015 application after concerns were discussed by some members on the difference of the current and the proposed rate, particularly for those in the lower-usage tier of the current inverted block.

“If you remember, last year, we filed in April. I think it was February or March, the board approved the uniform rate. At that time, the board understood that these individuals that are in the lower usage tier, their rates would increase from $0.02 to $0.069 so it would go up by five cents. That $0.069 will automatically, because of the expiration of the PL 16-7 credit, move to $0.092,” CUC legal counsel James Sirok said.

In their 15-02 docket last year, it stated that the board “considers the current inverted block rates to be prohibitive and discriminatory toward its high volume residential users” and noted that the “uniform rate would encourage a greater level of usage by reducing the cost for high volume residential customers.”

Run out of money

Prior to the motion, Sirok reminded the board of the need to make a decision on the rate case that was presented by Economists.com.

“We need to make a decision today and not tomorrow because we are trying to get this matter on the April agenda. It’s already causing time restraints because we’re not going to get it filed until the first week of March. That means that the consultants for the commission are not going to have the large amount of time to review it,” Sirok said.

“If we delay a decision on this, it’s certainly not going to make that April proceeding and may not be put on decision until October or November in the fall,” he added.

Sirok also noted the need for the revenue.

“That proceeding will go forward even without this but we would like to get this because we need the revenue from this rates. My understanding is, based on the information from the past board meetings, that our need for revenue is going to increase as we move forward to the point, that it’s going to be more important to deal with it as we get into the fall months,” Sirok said.

Director David Sablan, in one of his comments, boldly put that the utilities company will run out of money later in the year.

“If we don’t do something with our cash flows, we will run out of money by October. We won’t have anything or enough to pay the oil; we’re going to have problems with personnel, so this is very critical,” Sablan said.

“We have a responsibility as policymakers that we have enough,” he added.

However, the same board members, with the exception of newly-elected Commonwealth Development Authority board chair Ignacio Perez, who now represents CDA at the CUC board, who approved the 15-02 Docket last year now withdrew it.

The motion was carried, after getting six yes votes from CUC board chair Adelina Roberto and directors Chris Concepcion, Joe Torres, San Nicolas, Albert Taitano, and Perez, and a lone no vote from Sablan.

‘Investment of savings’

Economists.com earlier presented to the board and formally recommended that CUC submit a revised rate application to CPUC requesting a uniformed rate for residential customers of $0.129 per kilowatt hour.

The $0.129 per kwh comes from the earlier proposed uniform rate of $0.069, taking into consideration the expiry of the PL 16-7 credit which will add $0.023 to the rate, plus $0.037 should the board decide to recover from losses and fund future projects it needs.

For commercial and government accounts, the adjusted rate would be $0.15 from the current $0.11 and $0.12, respectively.

The $0.037 is broken down as follows: $0.008 per kWh for the $1.5 million needed for CUC to recover from the settlement agreement with the Commonwealth Healthcare Corp. and increase in bad debts; $0.007 per kWh for CUC’s $1.2 million debt payment to the CDA; $0.015 per kWh to pay for the $3 million share of CUC for typhoon restoration; and $0.027 per kWh to have $5,219,265 for non grant-funded capital project requirement.

CUC would need a total of $10.9 million in revenue for CUC to improve its quality of service, financial health, and pay costs CUC has incurred since last year.

Economists.com said CUC has reduced the average residential bill by 60 percent in the last two years and that despite the adjustment in rates, it would be more likely “an investment of savings” rather than rate increase as ratepayers will still pay a lesser amount than they paid two years ago.

The main reason for the reduction of utility bills is because of the fuel adjustment charge from $0.30 in April 2014 to $.093 today.

“We understand that nobody wants to be responsible for a rate increase. That is certainly human nature, however, at the same time, we see no longer alternative to being able to get $1.2 million other than to recover from the general ratepayers,” Economists.com managing director and chief executive Dan Jackson said.

“Keep in mind, it’s getting $0.037 of the $0.21 savings and investing it.”

Asked by Roberto why there is a need to put in the rate what CUC needs to pay CDA, Jackson replied, “Quite frankly, if you’re going to pay CDA $1.2 million a year, that money has got to come from somewhere. CUC has only one revenue source, that’s its ratepayers.”

Sirok reminded the board that they can just get portions of the items that they want to fund.

“What is being told to you is though is the rate can no longer be the $0.69 that we have in the current petition. Based on the credit expiration, it has to be at least $0.92 but then, there are these items,” Sirok said.

Since the board moved to withdraw their 2015 application and discussed infusing the items to the current inverted block rate, CUC chief financial officer Matt Yaquinto said they have to look into what the amounts would be like.

“The 0.069 will give you a different amount than the inverted block rate,” Yaquinto said.

Among the items it can fund, the board later on moved to add to the rate the $0.015 for typhoon recovery with a sunset provision of one year and with the option to extend.

All board members voted yes, including San Nicolas who earlier said that he will not allow for any “increase” in residential rates.

Business accounts

San Nicolas also raised during the discussion with the consultants how the scenario would look like if only commercial customers would shoulder the adjustment in rates.

To this, Jackson said the commercial rate will go up to $0.20 and government rates would be around $0.21 to $0.22 kWh.

“That rate may drive people off the grid. It may force some businesses out of business. Because what you would be doing is you would be forcing the commercial businesses to subsidize the residential customers,” Jackson said, adding that residential customers have to bear some of the costs as well.

San Nicolas asked for further presentation of this data, which Economists.com said they can provide today, as the board reconvenes for another public meeting.

Sablan, however, commented that the request would be an “exercise in futility” and that he does not agree to it.

“You don’t want to charge the commercial and government accounts more, then keep the residential rates where they are. You are to create a very strong protest from our commercial accounts,” Sablan said.

Sablan, who was also a former chair of the Guam Power Authority, wanted the board to move forward with the recommendation of Economists.com.

“The public will understand if we explain clearly that we are trying to protect and improve their system for the future, provide reliability of our system for more economic development,” Sablan said.
Further discussions will be made by the board starting 10am today.