By John O’Connor
For Variety
HAGÅTÑA (The Guam Daily Post) — The Public Utilities Commission has authorized the Guam Power Authority to secure and establish a line of credit of up to $70 million for fuel purchases due to cost increases tied to the U.S.-Israel war with Iran and the closing of the Strait of Hormuz.
This credit line is a short-term financial tool that would be used only as needed to help GPA continue purchasing fuel while fuel costs are recovered through the Levelized Energy Adjustment Clause, or LEAC, according to a release from GPA.
The LEAC is a major portion of monthly power bills that largely pays for GPA’s fuel costs.
How much GPA can receive through the credit line will depend on how much financial institutions are willing to lend, the GPA release stated. PUC approval does not mean the utility will immediately draw the full amount, the release added.
Moreover, the credit line can only be used for fuel purchases and may not be used for payroll, capital projects, debt service or general operations, according to the release.
“The request comes as global fuel price volatility continues to place pressure on island utilities and GPA’s fuel purchases. GPA’s March fuel shipment was approximately $26 million, while the April shipment increased to approximately $54 million. GPA is also anticipating elevated pricing for its next fuel shipment at approximately $168 per barrel, or about $44 million for a 250,000-barrel shipment, continuing pressure on fuel recovery and cash flow,” the GPA release stated.
GPA General Manager John Benavente said the credit line is one of several initiatives the utility is using to manage the impact of rising fuel costs and avoid placing the full impact on customers at once.
GPA Chief Financial Officer John Kim said fuel shipments have to be paid before costs are fully recovered through customer billings, and the credit line is a tool to support fuel purchases but does not replace the LEAC or eliminate fuel costs, nor is it a long-term borrowing program.
The credit line approval comes as GPA is proposing to raise the LEAC by about 6 cents, from 13.58 cents per kilowatt-hour currently to around 19.4 cents per kWh beginning in July and lasting through January.
For the average residential customer using 1,000 kilowatt-hours per month, the rate hike would represent a $58.31 increase in total monthly bills.
