Saipan Tribune

Saturday, May 25, 2013

Thursday, September 06, 2012

CUC increases LEAC rate anew

Due to the increased prices of fuel in the world market, the Commonwealth Utilities Corp. once again increased its levelized energy adjustment clause-or LEAC charge-effective today, Sept. 6.

The last time the corporation increased the LEAC rate was on Aug. 3, also due to unstable fuel prices.

LEAC is part of the customer's bill that reflects the cost of fuel. It goes up or down to reflect the cost of buying fuel to run the power plants. The other component of the bill is the electric base rate, which remains unchanged.

CUC chief financial officer Charles Warren said yesterday that the rate increase is about 10.8 percent, which translates to an increase of about $11.38 per month for the average customer. Average residential customers use up to 500 kWh every month.

Because electricity is also used to pump water and wastewater systems, the water electric and wastewater electric charges will also be adjusted soon, Warren said. This has not been calculated yet, he added.

Based on average loads, the 10.8 percent increase equates to about $580,000 monthly collection for CUC. According to Warren, this will be used to cover the increased cost of fuel purchases.

Based on the CUC statement released yesterday, the new LEAC rate is $0.31212 per kWh, some 10.81 percent higher than the August rate of $0.28168 per kWh.

“CUC observes that oil prices have gone through a wild ride this year, rising more than 10 percent a barrel by March 1, then dropping nearly 30 percent by late June, and now surging over 24 percent on Monday alone. While it comes as no surprise that these commodity prices are highly volatile, the upward swings last month means higher costs for fuel, just as we have seen at the gas pump,” the CUC statement said.

“CUC receives no financial benefit from the LEAC charges; simply it is a pass-through charge to pay for fuel, which comprises 70 percent of the electric rates. Also, the direct LEAC pass-through to customers is important for the utility's financial health, since CUC has no working capital or monies in reserve-it relies fully on its bill paying customers for operations. That is why immediate adjustments to the LEAC, when they occur, are as important as CUC must pay this higher price for fuel today, while collections of the higher tariff lag,” the statement added.

CUC said it is continuously working to stretch fuel dollars by seeking increased efficiencies in its operations. “Like many businesses and agencies in the CNMI, CUC has been weakened by the economy. Despite these challenges, CUC's day-to-day operational mission is unchanged, in that we remain committed to supplying our customers with quality power, water, and wastewater services,” added the statement.

'Power customers continue to dip'

Meantime, power customers of CUC continue to show a decline.

From the June 30 record of 14,818 power customers, Warren said yesterday that CUC's power client base at present is about 14,290. CUC defines active customer as one who receives a bill for services during the month.

The significant decline in active customers is being blamed on the general economic slowdown being experienced on the island and the impact of the federal immigration system.

Since the federal government took over the labor and immigration systems of the Commonwealth, many nonresident workers have left the island while many local residents have relocated to the U.S. mainland due to lack of job opportunities and economic hardships on island.