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CUC: Monthly LEAC adjustment will benefit customers
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Posted on Aug 10 2011
Allowing the Commonwealth Utilities Corp. to amend its levelized energy adjustment clause rate, or LEAC, every month will result in substantial savings, not only for the corporation but for its customers as well.
CUC chief financial officer Charles Warren said this approach will reduce rates much sooner as fuel prices fall.
The LEAC rate is a component of the power bill that reflects the cost of fuel. It is supposed to go up or down to reflect the cost of buying fuel to run the power plants.
Warren said that consumers should expect smaller rate increases as fuel prices rise since six months of LEAC increases will not be billed at one time.
This will also bring substantial savings of more than $100,000 a year on consultants’ fees for both CUC and the Commonwealth Public Utilities Commission, the regulating agency that authorizes LEAC adjustments, Warren said.
“[We expect] lower fees for outside consultants since the calculation will be less complex than the current method. Savings in consultant’s fees for both CPUC and CUC are expected to exceed $100,000 per year,” he said.
If the monthly LEAC adjustment is approved, he said this will lessen “uncertainties” or “unknown variables” since forecasting will only be for next month’s activity rather than the next six months.
CUC executive director Abe Utu Malae earlier complained that the lack of a functioning regulatory commission is hamepring the agency’s plans and moves to submit any petitions. He said the LEAC adjustment was among the items the agency wants to raise with the CPUC, which had ordered CUC to return with another petition to adjust the LEAC rate if fuel prices go down.
The LEAC rate was last adjusted early this year, increasing from $0.24446 per kilowatt-hour to $0.28125 per kWh. At that time, crude oil was trading at over $100 a barrel.
Based on Monday’s fuel prices, the LEAC charge would go down to about $0.04 per kWh, according to Warren.
