‘Surcharge’ eyed to fund terminated PMIC contract

In its proposal to increase the electric base rate of power customers, the Commonwealth Utilities Corp. disclosed that also factored in the equation is a surcharge to pay for the balance that is owed an independent power producer whose contract with CUC was terminated over a year ago.

CUC and the commission’s consultant, Georgetown Consulting Services, endorsed for the Commonwealth Public Utilities Commission’s approval the implementation of what they call “infrastructure investment surcharge,” which will be solely used to pay Pacific Marine Industrial Corp., whose contract the utilities firm bought out in 2012.

PMIC is the independent power producer that previously handled and operated the Power Plant 4.

In June 2012, CUC entered into an agreement with the company to terminate their power purchase agreement that costs CUC $3.972 million annually. The contract was originally scheduled to end on Aug. 31, 2016. This contract buyout was initially assessed to save CUC ratepayers over $5 million.

Documents obtained show that from July 2012 to December 2014, the payments under the buyout agreement totaled $341,000 every month.

In papers filed with the CPUC on Dec. 6, it states: “CUC and GCG agree that in order to fund the termination payments for fiscal year 2014, a surcharge should be implemented in this case, which has been determined to be $4.1 million divided by the projected kWh of 198,607,454 resulting in a surcharge of $0.021 per kWh.”

It was also agreed that the surcharge, once approved by CPUC, should be in effect for 12 months.

“This surcharge is included in the overall recommended rate relief of $2.8 million,” CUC and Georgetown state in their Dec. 6 joint stipulation.

CUC defines a regulatory surcharge as a fee on a customer’s bill for specific purposes such as surcharges to recover extraordinary costs related to a storm; self-insurance surcharges to provide for specific reserves; or fuel recovery surcharges to recover large expenses.

CUC also plans to commission a study, called “Electric Distribution Infrastructure Study,” to assess the additional investments CUC needs.

“It is anticipated that the proposed electric distribution infrastructure study and recommendations will be completed by September 2014,” stated CUC.

Georgetown and CUC agree that additional infrastructure funding could be implemented through an infrastructure investment surcharge. Under the schedule and process to be set by the hearing examiner, proposals for such a surcharge will be developed and presented to the CPUC for review and approval before fall of 2014.

CPUC is expected to conduct its rate hearing within the month or early January to decide on several proposals endorsed by the CPUC, in agreement with the commission consultant. Among these proposals is the recommended increase in base rate, the standby charge for large power customers, revision of the residential bloc rate, net metering, and others.