THE Commonwealth Utilities Corporation board of directors has approved the recommendation of its consultant, Economists.com, for a utility rate increase that will be implemented over a five-year period and will gradually phase out the government rate.
At a special meeting on June 23, the CUC board also agreed to petition the Commonwealth Public Utilities Commission regarding its decision to adopt the rate increase recommended by the consultant following a cost of service study.
Last week, Dan Jackson of Economists.com recommended that the board adopt “Scenario III – 5-Year Implementation; Phase-Out of Government Rates.”
Jackson said the advantages of this option include “phasing in gradual adjustments over five years” and “lessening the immediate impact on ratepayers.”
He said the third option also “reduces CUC’s dependence on government payments, reduces government water and wastewater charges, and replaces them with commercial rates.”
As for the disadvantages, Jackson noted that “CUC will recover less revenue than the cost of service over the next four years, and rate adjustments will be annual.”
He added that the third option “will require significant increases in residential and commercial monthly water and wastewater charges.”
According to Jackson, under this option, the average residential water customer would end up paying about $30 more per month.
Economists.com also proposed two other scenarios for the rate increase: one involving a five-year implementation and another involving a one-year implementation of the cost of service study.
CUC Board Chairman Allen Perez noted that the last financial analysis to determine what it costs the public utility to provide services to different groups of customers was conducted more than 10 years ago and that no rate increase had been implemented during that time.
Perez said the study showed that “CUC is operating below cost recovery for its expenses.”
By law, the Commonwealth Public Utilities Commission sets utility rates in the Commonwealth.
Once CPUC receives CUC’s petition for a rate increase, it must present the proposal for public comment within 45 days.
CUC Executive Director Kevin Watson said the consultants “proposed a 6% base increase for power, water, and wastewater services, to be spread across five years to minimize the impact on ratepayers.”
