CUC to withdraw its debt relief rate petition

The Commonwealth Utilities Corp will withdraw its petition for a debt service surcharge and plans to file with its regulators an “infrastructure improvement” rate instead.

Last month, utility regulators rejected CUC’s renewal of .021 per kilowatt-hour surcharge under a “debt service” rate to pay back debt owed to other government agencies.

Commissioners of the Commonwealth Public Utilities Commission said then that the debt service surcharge on electric customers was not reasonable, and there was no immediate need for this relief as requested.

With the 2.1-cent surcharge, CUC was essentially continuing a rate already on electric customer’s bills, this time to pay back outstanding debt owed the Commonwealth Development Authority. The previous rate expired on May 1.

During a board meeting last Friday, CUC board director Joe Torres motioned to retrieve this debt relief docket from the utility commission to substitute it with an “infrastructure improvement” rate.

He explained that the line losses that CUC incurs now are around 18 to 20 percent of power transferred on CUC’s grid.

“I believe doing this as a priority in the near future will reduce our rate after a full recovery of our line losses,” he said.

CUC executive director Alan Fletcher asked if this rate would be at the 2.1-cent amount.

CUC counsel James Sirok advised that they vote to just withdraw the docket. The rate’s name, amount, and filing would be voted on later.

“…That would be done after we hear from our consultants,” he said.

The board voted to withdraw the debt service petition, or docket 15-01.

Last month, CUC’s petition sough to pay back debt stretching decades back to 1985, when CDA loaned CUC $200 million from a federal grant pledge agreement they received so CUC could build its infrastructure. CUC hasn’t paid much of this back. A legal battle in 2001 over the money was resolved in a memorandum of agreement the next year, which was revised in 2004 to turn that debt into equity for CDA.

In 2009, the agreement was executed effectively turning that total debt of about $200 million and the total interest debt of $138,672 into equity, or $45 million in preferred stock held by CDA. CUC’s dividend payment was set at 2 percent, or $900,000 a year of that amount. The deferred payment of three years is amortized over 15 years, for $180,000 a year.

In total, CUC has to pay $1.08 million to CDA per year, after paying off the deferred $4.32 million by October next year. If not, CDA can enforce a takeover of CUC management, but CDA officials say they do not intend do that.