CUC faces $9M operating loss this fiscal year

Commonwealth Utilities Corp. chief financial officer Charles Warren disclosed yesterday that the agency expects to incur an operating loss totaling $8.9 million by the end of the fiscal year.

This is based on CUC records in the first five months of the year, or from October 2011 through February 2012.

Warren revealed that for power alone, they project the operating loss to reach $5.9 million. For water, it is expected to reach $1.8 million and for wastewater, $1.2 million.

Power has the largest shortfall, mainly due to maintenance costs and lower than anticipated kilowatt-hour sales, according to Warren.

On the rate case CUC filed last January, the revenue estimates CUC developed assumed that total usage consumed by ratepayers would be around 254,880,857 kWh during the test year. Unfortunately, due to a general decline in economic activity and conservation or a reduction in usae by CUC customers, CUC’s current projection is that annualized kWh sales will be 204,984,199, a decline of almost 20 percent.

For maintenance cost, Warren said that CUC is currently looking for ways to fund this primarily through additional grant funding from the Department of the Interior.

“Also, a portion of the rate increase approved in January was intended to help mitigate the shortage in revenues attributable to the lower-than-expected kilowatt-hour sales,” Warren said.

When asked about the immediate impact of this projected operating losses, he said it is too early to see any meaningful impact.

The projected shortfall for water and wastewater, meantime, is due to increasing operating costs as a result of inflation and other factors beyond CUC’s control.

According to Warren, CUC has the following projected revenues this fiscal year: power, 86.7 million; water, $10.2 million; and wastewater, $5.2 million.

Meantime, the budgeted revenues of the agency include: power, $108.8 million; water, $15.2 million; and wastewater, $7.4 million.

LEAC increase in the works

Warren told Saipan Tribune yesterday that CUC expects an increase in the current levelized energy adjustment clause, or LEAC, in April.

“We anticipate a LEAC increase for April, but I will not know the exact amounts until I receive the Mean of Platts Singapore pricing from Mobil early next week,” he said.

In the January public hearing, the Commonwealth Public Utilities Commission adopted a revised LEAC tariff, in anticipation of the CPUC not having a quorum.

The revised tariff states: “In the event that the CPUC is not functional for any period of time in which the LEAC rate is effective and the MOPS monthly pricing as supplied by Mobil Oil Guam, Inc. to CUC equals or exceeds a 4.5 percent differential in the average per gallon or equal or is below a 4.5 percent differential in the average per gallon cost of fuel used in the calculation of the then current LEAC rate, CUC shall change the LEAC rate to reflect the higher/lower MOPS price.”

This change shall be calculated on the basis of the ratio of the then current monthly MOPS pricing to the average per gallon cost of fuel used in the calculation of the current LEAC rate.

The present rate is $0.30550 per kWh-and about 4 percent of the rate is equivalent to 12 to 15 cents of the current rate.

LEAC is part of the customer’s bill that reflects the cost of fuel. The other element of the bill is the electric base rate.