‘CUC has rare opportunity to achieve financial goals’

The Commonwealth Utilities Corp. board will be reconvening in a public meeting today to discuss, among other things, possible options for a potential rate application.

CUC’s rate consultant, Economists.com, discussed with the board last Thursday information for a “potential direction of a restructuring of CUC’s electric rates.”

“We are not providing any recommendations to the board with regards to any rates at this time. All we’re trying to do is present to you some numbers that we can show you to illustrate the impact of certain decisions that you as a board might make regarding what costs you want to recover, and what expenses you want to fund,” Economists.com managing director and chief executive Dan Jackson said at the beginning of the presentation.

According to Jackson, CUC has a “unique” and “very rare” opportunity to achieve certain goals financially.

This is because CUC has reduced the average residential bill by 52 percent, in the last two years according to Jackson.

“In other words, rate payers today are paying half of what they’re paying in 2014. For residential customers today, their monthly electric charges are now as low as they have been in 2005,” Jackson said.

“There’s a possibility that electric charges may be reduced even further if oil prices continue to fall,” he added.

Jackson further illustrated his point by saying that a residential customer consuming 400 kilowatt hour per month is currently paying about $67.50.

This is significantly lower from the April 2014 when the same customer paid $140.90 for the same service, and much lower than in 2008 when the same customer with the same consumption paid $208.

This is because of the high price of oil eight years ago, reaching about $150 per barrel.

“Since the peak of August 2008, ratepayers’ bill has come down by almost 70 percent,” Jackson added.

The main reason for the reduction of utility bills is because of the fuel adjustment charge from $0.30 in April 2014 to $0.12 cents today.

“The fact that residential electric bills has been reduced by 50 percent, presents you as a board and CUC as a utility with a very unique opportunity to potentially restructure your electric rates to achieve many objectives,” Jackson said.

Because of the low price of oil which is projected to continue to go down, Jackson said CUC has the opportunity to restore the corporation’s financial health, improve the quality of its service, and retire its outstanding obligations while “ensuring that its ratepayers will continue to pay far less than they did two years ago.”

Economists.com included five items that CUC may consider in their adjustment, namely the Commonwealth Healthcare Corp. agreement and bad debts increase, payment due to the Commonwealth Development Authority, Typhoon Soudelor restoration and mitigation, non-grant funded capital improvements projects, and power plant reserve fund contribution.

These items corresponds to different possible rate adjustments should the board decide to fund them and at what amount.

In the sample computation presented by the rate consultants, the potential rate adjustment was said to result to increased revenue for CUC’s projects while ratepayers would still pay bills that were lower than what they paid for in 2014.

Last April, CUC submitted to the Public Utilities Commission the board-approved applications Docket 1502 and 1503 which establishes a uniform base rate—then calculated to be at $0.069—for residential customers, and eliminates water electric charge and increase electric base rates to recover lost revenue, respectively.

The said proposed uniform base rate of $0.069 last year will go up to $0.092 as Public Law 16-7 which gives a $0.0230 credit to residential ratepayers is set to expire this year.

However, Jackson noted that since the April 2015 filing, there have been several material impacts on CUC and a base rate of $0.092 would not give CUC the revenue it needs.

No actions have been done by PUC following the filing of these applications especially after Typhoon Soudelor. The board could withdraw these applications and submit a revised rate plan to the commission.

Several board members asked for more data from Economist.com to include calculations of several factors such as the possible enactment of a bill that will require public land leases to be connected to CUC. They are expected to have discussions on these additional pieces of information today.