HAGÅTÑA (The Guam Daily Post) — The fuel surcharge on Guam Power Authority customers’ bills will increase in three phases over the next four months, starting Aug. 1.
When the third phase is complete, the surcharge will have increased from 11 cents per kilowatt-hour currently to 17.14 cents per kWh, which will be a 55% increase.
The Public Utilities Commission broke down what could have been a one-time increase of roughly $57.56 in the average residential customer’s monthly power bill.
That one-step rate hike was proposed by GPA and approved by the Consolidated Commission on Utilities in late May. It represented an increase from the current rate of 11 cents per kWh to 16.75 cents per kWh.
At the third phase of the increase, the increase PUC approved is higher than GPA’s.
The three phases decided by the PUC are:
• Aug. 1, up to 13.04 cents per kWh.
• Oct. 1, up to 15.08 cents per kWh.
• Dec. 1, up to about 17.14 cents per kWh.
The CCU approval was only an interim step, and the PUC has the final say on rate matters.
The PUC’s decision Thursday was unanimous, although one commissioner was absent from the meeting.
The fuel recovery surcharge, formally known as the Levelized Energy Adjustment Clause, or LEAC, represents GPA’s cost of fuel to fire up its power plants. It is updated every six months, but changes may happen within that period as well.
PUC Chairman Jeff Johnson said the reason PUC’s approved hike is higher is that fuel prices went up about 6.4% between the time GPA submitted its proposal and the PUC meeting Thursday night.
GPA General Manager John Benavente has stated that the utility, CCU and PUC recognize that the phased-in approach should be done now, which is still manageable, “in order to avoid a more substantial increase in the future.”
Underrecovery
This is the second time that the PUC has raised rates amid record-high underrecovery, or losses as a result of rising fuel costs, that GPA is experiencing.
The first was in February, when the PUC raised the rate to 11 cents from about 8.6 cents per kWh. That represented a $21 increase for the average residential power bill.
But fuel prices have been rising also, raising the utility’s costs, and losses along with it.
GPA’s current underrecovery is $32 million, according to Johnson.
“We’ve never been that deep in underrecovery. Because GPA wasn’t collecting enough over the last year during the pandemic, when everybody was agreeing that we kind of take it easy for that period of time. But it’s caught up with us now, so now something has to be done,” Johnson said.
Between Feb. 1, 2020, and July 31, 2020, the PUC granted rate reductions three times due to declining fuel costs. The fuel surcharge went from about 15.4 cents per kWh to about 8.6 cents per kWh in that time.
Then, in August 2020, the PUC decided to maintain the surcharge at 8.6 cents up to the end of January. But by that time, GPA was projecting losses as fuel prices began to rebound.
In February, Johnson said the commission probably “overshot the mark” by keeping the rate low.
Even after the upcoming rate increases, the projected underrecovery is about $22 million.
There was a discussion Thursday about $15 million that might be obtained from American Rescue Plan funding. If that is received, that would take the projected underrecovery down to about $7 million, according to Johnson.
“We can handle that. We’ve been in single digits before,” he said.
But “more than likely,” the rate increases will have to stay the way they are, even with ARP funding, as the utility, the Consolidated Commission on Utilities and the PUC catch up to the losses, Johnson said.
“Unless there’s some great decrease in fuel prices over the next six months, … I don’t see how we can alter them very much over the next six months,” he said. “I think we’re kind of on that trajectory no matter what at this point in time. The fuel prices are staying stable. That’s the prediction by Morgan Stanley.”
John Benavente
