CUC eyes change in rates, charges

Customers may see some changes in their utility bill in the coming months, as the Commonwealth Utilities Corp. looks to change, continue, or replace some of their charges or rates to capitalize on dropping fuel costs in the last 12 months.

CUC will go before the Commonwealth Public Utilities Commission for these four requests: to change the levelized energy adjustment clause, or LEAC, rate reconciliation process; to continue their infrastructure surcharge that is set to expire in May; to replace their residential inverted block rate with a flat rate; and to eliminate their water electric charge.

The CUC board of directors unanimously approved these four requests in their board meeting last Friday. While the changes may increase the bills of customers, it was said that with dropping fuel rates, customers would still be better off than they were a year ago.

LEAC represents the fuel component of a power bill and accounts for 70 percent of electric rates on power bills. Right now, CUC only has authorization to change the LEAC if fuel prices go up or down by 4.5 percent.

A monthly LEAC would allow CUC to flow through changes in fuel costs each month, and avoid the time and expense of an extended reconciliation process.

This would also allow CUC to lower the LEAC by three quarters of a penny. Currently, the LEAC has a volatility factor that is added to the rate because of CUC’s lack of cash reserves.

This factor is added so that if oil prices go up between the approval of one LEAC and the next, there is factored in an extra monetary cushion. This factor would be eliminated with a monthly rate.

CUC’s second request is to extend and rename their infrastructure surcharge to allow them to continue the 2.1-cent per kilowatt hour surcharge for another 12 months to recover revenue.

At the board meeting, it was described that electric utility is “operating in the red.” Allowing the electric utility to continue this 2.1-cent surcharge would enable CUC to basically break even, it was said.

It was also posed that the surcharge be renamed “system repairs,” as the funds recovered from the surcharge will be primarily used to fund capital outlays and debt service.

The 12-month extension, if approved, would also request the right to re-appropriate or re-evaluate the appropriateness of the charge in 2016.

The third request is a proposal to replace the current residential inverted block electric rate with a uniform rate.

Right now, high volume users of CUC pay a disproportionate rate for their service, it was said. They pay a 16.8-kilowatt hour if they use more than 1,200 kw. The lowest volume rate users pay a 2.1 kWh rate.

The new rate would charge 6.9 cent per kilowatt-hour.

Instead of paying the current rate “where the more you use the more you pay,” all residential will pay a flat rate of 6.9 cents, it was posed.

The rate of 6.9 cents would recover $1 million more revenue than the inverted block rate, it was calculated. This would enable the electric utility to recover its cost in servicing next year.

The fourth proposal is to eliminate the water electric charge to replace it with a 2.6-cent kilowatt increase across the board in electric rates.

But this may prove controversial, as the commission earlier found that water rates had to recover their costs, wastewater rates had to recover their costs, and so on.

If the commission opposes this proposal, CUC will argue that the commission itself has been “very inconsistent in implementing cost of service principles,” it was said.

CUC will say the commission authorized a wastewater electric charge but then did not allow CUC to charge it to customers, because it would be too adverse to the ratepayers.

CUC will point out that the commission itself acknowledged that the water electric charge and the wastewater electric charge is a burden to ratepayers and that it should be eliminated and replaced by a nominal increase in the electric rate.

The proposal would increase electric rates across the board for all customers by approximately 2.9 cents.

In terms of revenue, CUC is not expecting additional revenue from changes to the LEAC reconciliation.

The systems repair surcharge would provide CUC an additional $4.7 million of revenue. That charge is supposed to expire in May.

The replacement of the inverted block residential rate with a uniform residential rate will provide CUC about another million dollars in revenue.

In total, this would provide CUC with approximately $5.8 million of additional revenue and allow them to break even in the next 12 months.