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Sunday, April 20, 2014

‘Potential disapproval of Telesource contract change will have no impact on CUC finances’

In the event the Commonwealth Public Utilities Commission disapproves the proposed implementation of Telesource change order No. 5, this will not have any financial impact on the Commonwealth Utilities Corp., according to chief financial officer Charles Warren.

CUC earlier requested that a $1.412 million for fiscal year 2014 be recognized by the commission to fund the obligations it would incur under change order No. 5. It will be recalled that CPUC approved in November 2011 amending CUC’s contract with Telesource, the independent power producer that handles power production on Tinan. This change order provides extensions of up to 15 years on the Telesource contract, with incremental increases each year that will be paid out from electric base charges. This decision was put on hold in January 2012.

It was learned that in the event CPUC decides to fund the Telesource change order, the net revenue requirement of CUC for fiscal year 2014 would increase to $4.212 million.

Under the latest rate petition before CPUC, the utilities corporation is seeking to raise $2.8 million from its electric base rate. This amount does not factor in the Telesource change order.

CPUC’s consultant, Georgetown Consulting, and the hearing examiner have already cautioned the commission against acting on the Telesource matter pending further review.

Although he admits that the Telesource contract would not have any impact on CUC’s finances, Warren underscored the importance of the infrastructure surcharge.

“During the pre-public hearing conferences held with CPUC staff, the deteriorating condition of the power distribution system was discussed. CUC requested to continue the $0.021/kWh charge after the PMIC obligation is paid off to fund repairs/improvements to the power distribution system,” said Warren.

He said that CPUC staff recommended, and CUC agreed, that an independent study of the distribution system be conducted to determine the extent of repairs needed and the associated costs.

In the proposed increase in the electric base rate of power customers, factored in the equation is a surcharge to pay for the remaining balance owed an independent power producer whose contract was terminated over a year ago. The surcharge will specifically be used to pay Pacific Marine Industrial Corp., whose contract was bought out in 2012.

In June 2012, CUC entered into an agreement with the company to terminate their power purchase agreement, as it was costing CUC $3.972 million annually. Their original agreement was scheduled to end Aug. 31, 2016. This contract buyout was projected to save CUC over $5 million.

Documents obtained show that the payments under the buyout agreement was $341,000 every month from July 2012 to December 2014.

It was also agreed that the surcharge, once approved by CPUC, should be in effect for 12 months.

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