SAIPAN – The Commonwealth Public Utilities Commission voted 3-1 Friday to lift the cap on the Commonwealth Utilities Corporation fuel adjustment charge from $0.245 to $0.44489 per kilowatt-hour, effective today, May 15, after the utility warned it could run out of operating funds within roughly one month if rates were not adjusted to match rising global fuel costs.
CUC Executive Director Kevin Watson told the commission the utility’s actual fuel cost has continued to climb. He said the current FAC value under the commission’s existing formula should be $0.60481 per kilowatt-hour for the month of May, but CUC will need to file a separate petition before the commission can act on the higher figure.
CPUC energy consultant Marc Hellman confirmed that the $0.44489 figure is justified under the existing FAC formula, with all backup numbers and Mobil pricing worksheets verified. Hellman said the $0.60481 May figure does not yet have supporting documentation before the commission.
The vote followed a lengthy discussion in which CUC outlined the cash crunch facing the utility. Watson said CUC’s monthly fuel costs jumped from roughly $4.5 million to $8 million in April as global diesel prices spiked, driven by ongoing conflict in the Middle East. Watson said the utility cannot absorb the shortfall under the prior cap.
“CUC does not have the funds to last four or five months if this isn’t adjusted. We will run out of money before that time,” Watson said. “And if we run out of money, we can’t buy the fuel and the power goes off. What you’ve experienced in this typhoon, you experienced because of lack of fuel. So yes, it’s a hard decision, but it’s your decision.”
CUC Board of Directors discussions on Thursday indicated the utility has approximately one month of operating funds remaining at current rates. Several CPUC commissioners said they wished CUC Chief Financial Officer Betty Terlaje had been available to present a complete financial picture before the vote. Terlaje was in concurrent meetings with FEMA, the Governor’s Authorized Representative for Disaster Recovery and the U.S. Army Corps of Engineers during the CPUC session.
CUC counsel told the commission that the company’s request for the April rate increase was originally filed on March 30 for an effective date of April 1, but the commission had no quorum to act on it through April due to the expiration of one commissioner’s term and the delayed confirmation of two new commissioners. CPUC legal counsel James Sirok said retroactive billing of the higher FAC is not lawful under CNMI ratemaking provisions, with the new rate taking effect prospectively as of today.
The commission’s existing FAC formula has been in place for more than a decade and includes a 4.5 percent volatility element plus an allowance for uncollectible accounts. Hellman said removing those two components from the calculation would have produced a rate of approximately $0.41186 per kilowatt-hour. However, Sirok told the commission it cannot modify the formula on the fly. A new FAC formula would require formal rulemaking under the commission’s enabling statute, including required public notice and hearings.
The commission’s action lifts the prior $0.245 cap and sets a new ceiling at $0.44489 per kilowatt-hour. CUC will need to file a separate petition if it seeks approval to recover closer to the May actual cost of $0.60481.
Commissioner James Mendiola, who represents Tinian on the commission, cautioned ratepayers that the elevated FAC may not be temporary. He cited a comparable 2022 episode when fuel prices remained elevated for an extended period.
“This isn’t going to be a temporary measure. If we go 44 now, we’re going to go 60 next time, if those numbers check out, and they’re going to stick around in that range just as it did in 2022,” Mendiola said. “We buy from Mobil at the prices current, and those current prices don’t go down. They don’t fall like rocks. They’re going to go down slowly. So if we’re getting ready, we need to be communicating this to the people of the CNMI that it’s not going to be a giant decrease in the future.”
Mendiola called the vote a difficult one.
“This 44-cent decision is absolutely an abysmal decision to make,” Mendiola said. “But we need solid numbers, we need to get an understanding of what the projections look like, and then come to a sober assessment whether 44 cents is right, and how long can we sustain 60 cents.”
As a condition of the approval, the commission asked CUC to launch a public information effort to communicate the underlying fuel cost data to ratepayers, including charts showing global oil price trends and the actual Mobil pricing CUC pays under its monthly bulk diesel contract. The acting chairman said ratepayers are entitled to see the raw numbers behind the rate change rather than only being told that prices are rising.
A request for information seeking how long CUC could sustain operations under various fuel cost scenarios was sent to the utility’s economic consultants but was not answered before the meeting. The CPUC said it will continue to seek that information.
The CPUC also discussed an ongoing CUC rate case and the FAC reconciliation process. CUC’s economic consultants are working on a proposal that would reset the reconciliation period from six months to three months, which could allow more frequent adjustments to the formula. Approval of a new FAC formula would still require formal rulemaking, the commission said.
