“Given the long lead time it will take to change power production technology it is critical that CUC take steps soon to employ new generating technologies,” said Georgetown, the regulatory consultant of the Commonwealth Public Utilities Commission.
Georgetown said CUC should explore new technologies including available renewable energy from customer generation, central wind, solar, geothermal, ocean current, biomass and waste-to-energy facilities, natural gas fuel conversion, new high efficient gas fired power production or solid fuel options.
Power rate hike
On Friday, CUC and Georgetown endorsed a power rate increase for the next six months starting on Oct. 1.
An increase of levelized energy adjustment clause, or LEAC, rate from $0.24446 per kilowatt-hour to $0.25338 per kwh was recommended.
This means an increase of approximately 1 percent over the existing LEAC charge.
In the new rate, a residential customer consuming 500 kwh per month will see an overall increase of 3.5 percent, or $4.46 per month.
The LEAC rate tariff is designed to be adjusted every six months.
CPUC said the LEAC rate mechanism is designed to create a transparent process by which just and reasonable fuel and purchased energy rates are established to allow CUC to recover its prudent fuel, purchased power and related expenses, and to remove the volatility experienced by consumers under the previous fuel clause.
The recommended LEAC rate is comprised of the following elements:
• $0.23033 per kwh for the fuel and lube oil element;
• $0.01152 per kwh for the fuel oil pricing volatility element;
• $0.00343 per kwh for the technical and regulatory support element;
• $0.00230 per kwh for the Office of the Public Auditor funding pursuant to statute; and
• $0.00580 per kwh for prior period fuel oil reconciliation.
Fuel oil dependence
Georgetown said there are factors that impact CUC’s fuel oil expenses, but several of them are within its control. Fuel oil is outside CUC’s direct control and it is the largest single expense in the production of electricity over the past few years.
Power production technologies, the type of fuel consumed, power production efficiency and delivery system efficiency also impacted CUC’s fuel oil expenses, Georgetown said.
CUC currently employs only one power production technology (reciprocating diesel engines) that burns a single fuel — high quality diesel oil which is one of the most expensive oil products available.
As a result, Georgetown added, no fuel or technology diversification exists and CUC remains totally dependent on diesel fuel oil whose price is set based on worldwide supply and demand consideration.
“[When] the current worldwide economic downturn eases we can expect that increases in demand will drive fuel oil prices to higher levels,” Georgetown said.
It urged CUC to aggressively explore private sector opportunities for fuel and technology diversification.
CPUC, the Georgetown added, should also create a separate docket for monitoring CUC’s power and fuel supply diversification activities that will reduce its dependence on fuel oil.
