HAGÅTÑA (The Guam Daily Post) — Guam Power Authority General Manager John Benavente is expected to return Tuesday before the Consolidated Commission on Utilities with a recommendation on whether to keep the fuel surcharge on power bills as is, for now, or raise it as soon as next month as oil prices hit new record highs in recent weeks, spurred by Russia’s invasion of Ukraine.
“An adjustment of the (fuel surcharge) seems inevitable; we need to ensure we could purchase fuel which now may be between $25 million to $30 million per month,” GPA stated in a summary discussed Thursday at a work session with the CCU.
That’s a steep increase in spending for fuel for the GPA power plants compared to the $15.5 million a month it spent, on average, toward the latter part of last year.
Still, Benavente said he would like to avoid an abrupt increase in the fuel surcharge.
“I think we need to give our customers a little bit of time, at least so they can prepare for the additional $25,” Benavente said, referring to the possible monthly change. “I’m thinking perhaps, if anything, something may occur May 1, if costs don’t change or trend backward, or anything like that, … I can make that recommendation on Tuesday.”
GPA’s cost of fuel is directly passed on to customers as a surcharge, officially known as the Levelized Energy Adjustment Clause.
Benavente on Thursday presented three scenarios to the CCU: No change to the surcharge, an increase in April or an increase in May.
GPA had projected in the middle of 2021 its expenses on fuel — compared to the amount it passes on to consumers, or what it calls “recovery,” would fall $17.5 million short by January.
Now, the gap between its spending on fuel and what it charges customers is on the negative — at $27.8 million.
To reduce that gap to about $20 million, the surcharge would need to increase to 20.6 cents per kWh in April, or 21.4 cents per kWh in May, according to data provided by GPA.
A surcharge increase would result in the average customer total bill going up 10% to 13%, the utility stated.
GPA has been cutting costs and utilizing its cash reserves — as much as $30 million — to minimize the impact to customers.
The Public Utilities Commission will have the final say on whether to adjust the surcharge before July.
Fred Horecky, administrative law judge for the PUC, said it is likely the commission will examine the surcharge at its meeting this month.
The PUC voted in late January to raise the surcharge to 18 cents per kilowatt-hour, effective in February, as fuel prices rose and GPA’s losses on fuel costs grew.
CCU member Simon Sanchez noted that the PUC may not want to see GPA’s underrecovery rise even if the recommendation is to maintain the surcharge.
Fuel oil prices peaked March 7 at $119 per barrel, but on March 16 went down to $95 per barrel, according to GPA.
Commissioner Francis Santos on Thursday asked Benavente what internal measures would GPA take to slow spending if the utility proposes to hold the fuel surcharge.
“That’s the only other way to do this. You don’t do a rate increase, then you’re going to increase your expenses,” Santos said.
Benavente said the increase would not be on the base rate, the other major component of a power bill, that pays for personnel and other costs not related to fuel.
“We are, of course, holding back on what we could…. It helps the LEAC because, by not spending, it develops more cash. Cash flows better. So that cash flow goes to be able to pay the fuel oil. So we’re continuously working on that really,” Benavente said, adding that GPA is not holding back spending at the expense of power grid reliability.
The governor provided $15 million from American Rescue Plan funding late last year to mitigate fuel surcharge hikes at that time. The Guam Daily Post asked if ARP money can be allocated again.
The governor’s office stated that it is reviewing other alternatives to address the rising cost of fuel.
The Cabras Power plant in Piti is seen on Feb. 4, 2022. The Guam Power Authority’s cost of fuel has increased with the rising prices of oil.
