Senators suggests PPUC overcharge customers on fuel adjustment rate charge

  01 Sep 2017

By: L.N. Reklai

August 28, 2017 (Koror, Palau) Senators Inabo, Whipps, Senior, Akitaya and Chin in a letter to CEO Kione Isechal and Chairman Sam Masang of Palau Public Utilities Corporation, questioned the high power revenue of PPUC in FY 2016 which shows excess of $5 million over actual fuel cost. [restrict]

“Did PPUC recover its fuel cost excessively by not adjusting the AFPAC fuel tariff rate down when its actual cost of fuel dropped by 30%?” asked the five senators.

“AFPAC, the Automatic Fuel Price Adjustment Clause of the tariff schedule was designed to recover only the actual cost of fuel, no more”, states the letter.

“AFPAC supports full-cost recovery which means PPUC’s average net income should be zero,” it added.

Senators argue that when the cost of fuel dropped into its all time low by 30% in 2016 and PPUC should have passed the savings to its customers by dropping the fuel charge accordingly.

Quoting FY 2016 audit report, the actual fuel cost was at $10.1 million and the average revenue was at $14.7 million but the actual power revenue was at $19.8 million.  Senators suggest that the $5.031 million was excessive recovery for fuel cost.

“Low utility rates are good for the people of Palau! Low utility bills leave more income in the pockets of the people and increase family spending power,” stated the letter.

The letter also raised a concern with the proposed 77% increase for water and waste water tariff on October 2017.

According to PPUC, Water and Waste Water Operations is expected to gain $5 million in revenue in 2018 but also acquire $9 million plus in operating expenses.  $7 million of that expense is operating expense and $2 million is first loan payment.  PPUC says it needs to raise tariff for water and sewer by 77% in order to cover its expenses.

Senators raised an issue that if PPUC did not adjust their fuel cost charge in 2016 to match the actual fuel cost, the operating expenses for Water and Waste Water Operation which fuel cost is a major component may be exaggerated and people will have to pay 77% increase in utility for excessive recovery.

“Since power bills have substantial impact on Water and Waste Water cost of operations, what is the possibility that the proposed water and waste water rates scheduled to be increased so steeply on October 1st are overestimated to cover WWO inflated power bills?” inquired the Senators.

Senators asked that PPUC provide detail information to explain the excessive power revenue  and if the AFPAC was charged wrong, that people’s money be returned. [/restrict]