Utility rate hike looms

Commonwealth Utilities Corp. executive director Lorraine Babauta has urged the CUC board of directors to commission a study that would propose adjustments in electric, water, and wastewater service rates.

Babauta said the cost of service and rate design analysis would include a review of CUC’s current financial situation and proposed equitable rates for each of the utility services for each island and class of customer.

She noted that with its current financial situation and the consecutive increases in fuel price, CUC is heading toward a point where it may be unable to pay basic expenses with its revenues.

The agency, she added, is starting to exhaust the financial reserves intended for emergency repair and other crises that would threaten the production of power and water on the island.

“To address the cost of fuel, we are proposing a pass-through of these costs to the customer through our fuel recovery charge. However, there is a problem facing us that is equally a factor in our financial crisis,” Babauta said. “CUC has not adjusted basic rates for…power, water and wastewater for approximately 15 years.”

CUC chair Francisco Q. Guerrero said the board will study Babauta’s proposal. But at Tuesday’s board meeting, at least one member—Velma Ann Palacios—has already expressed her reservation about commissioning a rate study.

CUC comptroller Sohale Samari said the accounting department should not have difficulty in coming up with an estimate of the utility rates that CUC should be implementing.

Further, the study would identify ways in which the corporation can reduce its cost of operation, Babauta said.

“CUC has a responsibility to the Commonwealth, to its customers, to the government, and, under the partnership agreement, to the federal government, to operate responsibly and self-sufficiently,” Babauta said. “CUC must be able to demonstrate that we are taking steps to reduce expenditures and that the revenue received from customers is put to the best possible use to ensure reliable utility services and the continued effort to improve and expand those services.”

The CUC staff, she added, is now preparing a scope of work for the study and she will be presenting it to the board at a later time for consideration.

A 1997 feasibility study on CUC’s privatization, conducted by CH2Mhill and Winzler & Kelly Consulting Engineers, showed that based on the full-cost recovery analysis, residential electric rates would have to be increased by 39 cents.

At present, CUC power rates are 11 cents per kilowatt-hour for residential customers and 16 cents per kwh for commercial customers.

For areas with 24-hour water service, CUC charges $1 per 1,000 gallons for the first 3,000 gallons; $2.40 per 1,000 gallons for usage of 3,001 to 15,000 gallons; and $3 per 1,000 gallons for usage of over 15,000 gallons.

For areas with less than 24-hour water service, CUC charges 50 cents per 1,000 gallons for the first 3,000 gallons; $1.20 per 1,000 gallons for usage of 3,001 to 15,000 gallons; and $1.50 per 1,000 gallons for usage of over 15,000 gallons.