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Monday, April 21, 2014

CPUC hearing examiner OK’s rate hike, CUC refunds

A new power rate hike and at the same time a refund for customers may likely take place if the Commonwealth Public Utilities Commission will follow the recommendations of both its consultant and hearing examiner, which separately issued proposals pertaining to the petitions filed by the utilities corporation.

CPUC’s consultant is Georgetown Consulting Services while its hearing examiner is Harry M. Boertzel. Georgetown earlier agreed to a joint stipulation with the Commonwealth Utilities Corp. that supported the proposed increases in base rates and other items. The hearing examiner, for his part, not only found the rate hike proposal necessary and just but recommended as well the creation of a 36-month refund mechanism for residential customers who were charged extra for a supposed external CUC loan that never materialized.

“The preponderance of evidence supports a finding that the rate and tariff adjustments proposed are necessary, just, and reasonable. These adjustments should be made effective the day after the commission’s decision,” stated Boertzel in his proposal to the CPUC on Dec. 24.

Boertzel specifically supported the recommendation to increase the electric base rate in order for CUC to generate $2.8 million to finance its capital improvement needs and cover its operating and debt expenses. This increase would be achieved by a base rate reduction of $1.3 million and the establishment of a separate $0.021 per kWh infrastructure surcharge on all customers classes, which over the next 12 months would fund the $4.1 million necessary to meet obligations to Pacific Marine and Industrial Corp., whose independent power purchase contract was bought out in 2011.

PMIC is the independent power producer that previously operated Power Plant 4. In June 2012, CUC entered into an agreement with the company to terminate an existing power purchase agreement that cost CUC $3.972 million annually. This was originally scheduled to end Aug. 31, 2016. This contract buyout was initially assessed to save CUC ratepayers over $5 million. From July 2012 to December 2014, the payments under the buyout agreement are $341,000 every month.

Boertzel also supports providing residential CUC power ratepayers with a $3.4 million refund. Under Public Law 16-7, these customers must be given a refund of what had been collected from them for the unrealized loan with Independence Bank. Boertzel recommended that the refund must be accomplished through the creation of a 36-month $0.023 per kWh residential credit that would be funded by a reciprocal increase in commercial base rates.

“CUC should be ordered to certify to the commission on or before Feb. 1, 2018, that the residential credit and reciprocal charge on commercial customers were terminated at the expiration of the 36-month refund period,” according to Boertzel.

CPUC, on its June 2011 decision, awarded CUC $1.02 million in annual rate revenue in anticipation of debt service expenses under a proposed loan for stipulated order capital requirements. The loan, however, was never closed and about $2.5 million had already been collected from customers. CUC, despite a legislative order to issue a refund, failed to do so.

Documents obtained by Saipan Tribune show that CUC has accounted for expenditures of about $1.5 million since the June 2011 decision for SO-related capital requirements while $1 million was used for business expenses.

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