What happened to fuel subsidy, CUC asked

The Commonwealth Utilities Corp. has been asked to explain how extra funds made available by law were factored into the new power rates.

Rep. Tina Sablan, chairwoman of the Saipan legislative delegation’s Committee on Public Utilities, Transportation and Communications, questioned yesterday how CUC says it came up with the new rate schedule.

She noted that Public Law 16-2 provided additional funds to subsidize CUC’s fuels.

P.L. 16-2, which suspended the October 2007 rollback of power rates, allows for the government to pay only 11 percent, instead of the actuary-recommended 37.4 percent, of the total payroll to the NMI Retirement. Half of the savings—about $5.63 million—from the reduction is supposed to go to CUC’s fuel expenses.

Further, the law grants the governor unlimited reprogramming power over lapsed funding, re-appropriate some $2.15 million of suspended earmarks to CUC’s fuel expenses, and allow CUC to use half of its customers’ security deposits for fuel.

In a letter to CUC executive director Antonio Muna, Sablan asked whether these funds were factored into the new rates. “If so, how? If not, why not?” she added.

The lawmaker said it remains unclear not only how the rates for this month were calculated, but also whether CUC followed the same rate formula that was adopted in September last year, prior to the passage of rollback law.

She requested a breakdown of the new rates according to the generation, transmission, distribution, customer service, administration, as well as fuel costs that were factored into CUC’s calculations.

She also asked Muna to explain how the new rates, including CUC’s decision to apply higher charges of 42-plus cents per kWh to a broader group of residential customers, complies with the rate formula referenced in PL 16-2.

Further, she took issue with CUC’s decision to set the new rates without the approval of the Public Utilities Commission.

She raised concern that the new rates were assessed to try to recover fuel expenses dating back to February 2008. “Isn’t this fuel that has in fact already been paid for through government subsidy as a result of PL 15-94? Is it, in CUC’s view, both legal and fair to try to recover these costs? Moreover, does the rate formula adopted last year provide that rates should be adjusted according to projected fuel costs, as you say the new rates do, rather than actual fuel costs?” she asked.

Sablan’s queries are a follow up to the explanation Muna submitted to the Legislature last week. In that correspondence, Muna defended the doubling of power rates, saying that CUC is actually charging less than what it should for fuel.

Muna said the current projected price of fuel is $3.69 per gallon. This is four cents higher than the figure used for calculating the electric fuel rate of 35.7 cents per kWh.

Muna also said the rate doubled because fuel costs increased by 92.76 percent while sales declined by 12.6 percent. “Decreasing sales has the effect of spreading more costs over a smaller revenue base,” he said.

The new rate schedule went into effect on May 3, 2008. Under the new scale, customers must pay a total of 37.3 cents per kWh for the first 500 kWh of usage. The rate increases with consumption.

Prior to May 2008, customers paid 17.6 cents per kWh for the first 1,000 kWh.