This is the first electric base rate increase since 2006. CUC is a government utility, and so it does not make a profit. However, it is required by law to bill consumers fully for the services they use. For electric, those services include the cost of fuel, or the “LEAC,” and the cost to CUC to run the utility, or the “base rate”. The rate increase ordered by the commission is only for the base rate, which includes a monthly customer charge.
What does the new base rate mean for customers?
Average customers who use up to 500 kilowatt hours, or kWh, per month should expect to see a monthly increase of between $1.77 and $2.52 from the new electric base rate. For larger residential users up to 1,000 kWh, expect a 2.2 percent increase, or approximately $8.52 per month, and for residential users up to 2,000 kWh, expect a 3 percent increase or approximately $24.52 per months. Small commercial businesses should expect to pay another $5.39-$9.39 up to 500 kWh, and another $17.39 for up to 1,000 kWh per month. Larger businesses will be paying approximately $33.39 more per month for up to 2,000 kWh and $49.39 for up to 3,000 kWh.
What is the LEAC and the new base rate paying for?
For the first six months of the year, CUC spent 80 percent of revenues to buy fuel and lube oil — the LEAC charge — for the power plants and about 20 percent to pay for base rate expenses.
• LEAC
Each CUC customer pays for the fuel and lube oil it takes to provide electricity to his or her home or business. This is known on the customer’s bill as “LEAC.” “This year has been especially hard on us with rising world oil prices — there is no immediate way to get cheaper fuel. This is something we have all seen at the pump as well,” said CUC Executive Director Abe Malae. The rest of CUC’s revenue, approximately 20 percent, goes toward the base rate.
• Base Rate — Maintenance
CUC paid 5 percent of its total income for maintenance. CUC’s engines must be maintained, and the parts required are expensive. Malae said “there is no substitute for proper maintenance. We need to do everything we can so that our engines continue to produce the power we need and to minimize emergencies.”
• Base Rate — Independent Power Producers
CUC paid 6.41 percent to the independent power producers that run Power Plants 4 and Tinian.
• Base Rate – Personnel
CUC paid 6.42 percent of its revenue for salaries and benefits for its employees. CUC can no longer depend on less expensive nonresident labor, and must offer competitive pay and benefits to its professional staff. Public Law 17-36 requires CUC, before it can hire nonresident workers, to show that “despite offering competitive pay and benefits similar and even better than U.S. utility operators, CUC is unable to attract qualified workers.” This increases the amount CUC must pay for its staff. In addition, CUC is required by the stipulated orders entered by the U.S. District Court to hire personnel with certain technical qualifications and to accomplish many projects. Even with all these requirements, CUC has hired skilled personnel to maintain power to the CNMI without paying more than other utilities typically pay.
• Base Rate – Miscellaneous
All other expenses combined totaled 2.84 percent, including security guard services and administrative supplies.
How does CUC’s rate compare with other Pacific islands?
The costs for CUC’s electric service are in the middle of the range for Pacific island utilities. In early 2011, according to the Pacific Power Association, the lowest electric tariff was Fiji at $0.17/kWh and the highest was Wallis & Futuna at $1.07/kWh. Fiji is a middle income country; Wallis & Futuna is a French territory. While Guam’s rate is lower than the CNMI, Guam does not have to maintain a fully functioning power system on more than one island, unlike CUC which provides power on Saipan, Rota, and Tinian. Guam also burns heavy fuel which is cheaper albeit more polluting than diesel.
Help for low income customers
CUC has proposed a “lifeline program” which would offer qualified low income households a discount on the base rate, or the non-fuel portion of their monthly electric utility bill. CUC has asked the Commonwealth Public Utilities Commission to offer the program to anyone who currently receives certain low income determined government benefits. The program will apply to customers with a usage of 500 kWh per month and under. Usage above this amount will result in a higher cost. Lifeline discounts will not be applied to an outstanding balance owed to CUC.
The lifeline rate will be applied back to the enactment of the new base rate as long as the customer applies within 30 days of the beginning of the lifeline program. CUC will publicize the program again when it is officially approved by the commission.