Last night we told you about the PUC’s decision to keep the same
effective electricity rate and not grant BEL its 13.4% increase. That means
the average rate of 44.1 cents per kilowatt hour will remain in effect. It is
a bold decision, but PUC Chairman John Avery today held a press conference to
make it clear that it is not a misguided one. First, he explained how they magically
reached 44.1 cents even after making adjustments.
John Avery, Chairman – PUC
“The cost of power components and the rates, we set it at 31.2 cents;
we have the 8 cents for the recovery so with those we are at 39.2 cents, all
strictly related to do with the cost of power. And then we allow a 13.5 cents
for the value added of delivery, which is actually an increase of 0.5 cents
from what we had allowed for in the initial decision.
We did some revision of some of the work we had done previously with respect
to the regulated asset value on which return and depreciation and so does resulted
in a higher VAD rate. But the total corrections that we did, to also recover
those over a year, would result in a deduction of 8.6 cents from the mean electricity
rates we approved and so we are right back at 44.1 cents. Quite coincidently,
everything seems to work back to this 44.1 cents.”
And while the 44 cents gave him reason to smile, it’s been no
laughing matter for the PUC in the past few weeks. Avery says the commission
had to completely reconfigure the way it determines rates, known as the rate
setting methodology. First, as of September your monthly electricity rate will
be variable. That means that depending on the cost of power, which is largely
determined by international oil prices, you could end up paying more or less
for power. It’s called the variable rate and it comes into effect in September.
John Avery,
“We will be introducing a new rate setting methodology to be implemented
for September first. And what that rate setting methodology will do is that
we will have a fixed fee to cover for BEL’s expenses. A fixed fee to cover
for the, the corrections and the CPR RSA recovery seem to be balance each other,
and we will have a variable fee for power that month to month will reflect the
true cost of power. We feel that keeping the rate at 44.1 cents right now, we
can employ this automatic adjustment mechanism and perhaps keep the rate at
a constant 44.1 cents, at least up until the end of December.
If our projections hold, certainly by January customers will have to understand
that the cost of power keeps going up and at some point in time we will have
to bear those costs.
We believe customers need to understand the true value of the service they
are paying for. We cannot expect the PUC to just hold down rates because it
is not convenient for the customers. We cannot put BEL in jeopardy. We need
to be more prudent and more responsible for the cost that we incur.”
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