CUC’s Muna favors rate credit over rate reduction

The Commonwealth Utilities Corporation is proposing to help customers by offering them a “rate credit,” instead of reducing the rates.

Right now, it is not clear how the customer subsidy provided by law should be applied.

CUC executive director Antonio Muna in a letter to Rep. Tina Sablan said a rate credit is a more practical way to offer the customer subsidy than a rate reduction.

Under Muna’s proposal, the rate will remain at the computed level reflecting full recovery of fuel costs. He said this will assure investors, potential franchisees, and financial institutions that the CNMI government supports a sufficient rate structure. However, as subsidy payments are received from the central government, CUC will apply a fuel rate credit to the customers’ accounts to reduce their billings.

“Obviously, it would be good to receive the subsidy payment before billing is issued such that the rate credit can already be posted,” Muna said.

He said that the subsidy was not factored in the rates that went into effect on May 3, 2008. That is because CUC had not received any fuel subsidy from the central government. Payments in excess of the central government’s current utility charges are booked as advance payments for the government’s future utility charges.

Muna also proposed that the fuel rate credit be applied to low-end customers—those residential customers who use 1,000 kWh or less a month.

He offered this scenario to illustrate how the credit could be applied: Under the new rate, customers who use 1,000 kWh or less are projected to be billed a total of $1.5 million. If CUC receives a subsidy payment of $750,000, that will translate to a 50 percent rate credit for the affected customers.

But what happens if CUC receives a $1.5 million subsidy, he asked the Legislature. “Should CUC effect a 100-percent rate credit or allow a maximum 50-percent rate credit and balance of subsidy payment not credited carried forward to next period?”

For her part, Sablan expressed belief that relief should be provided to residential and commercial customers. “I think there should be short-term relief for all customers. We can still have different rates for commercial and residential customers, of course, but they all deserve relief,” she said.

Muna also said that CUC recognizes the additional funds identified in Public Law 16-2. These funds include about $5.63 million in savings from the reduction of pension contribution rate, and about $2.15 million in suspended earmarks for CUC’s fuel expenses.

He said these funds were not factored into the new rates either, as CUC had yet to receive them from the central government. “[These funds] must be received by CUC prior to adjusting the fuel rate charge or establishing a reliable recurring payment amount from the central government for which a rate adjustment can be factored,” he said.

A 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.