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Energy Bureau approves electricity rate increase

Yesterday, the Puerto Rico Energy Bureau (PREB) approved an increase of 3.32 cents per kilowatt-hour (kWh) or 13% in the electricity bill, which will be in effect from today, April 1, until June 30.

This is the sixth consecutive quarterly increase endorsed by the independent regulatory body, which reflected its determination in a resolution and order, of which this newspaper obtained a copy.

The increase was unanimously endorsed by the president of PREB, Edison Avilés, and the four associate commissioners. However, it is lower than that originally requested by LUMA Energy –on behalf of the Electric Power Authority (PREPA)–, which amounted to 16.8%.

For an average non-subsidized residential customer, with a consumption of 800 kWh, the bill will go up from $204.02 to $232.57, that is, an additional $26.57 per month between April and June.

According to the resolution and order, the cost per kWh will rise from 25.50 to 28.82 cents. In the 24-page document, the independent regulator did not detail the impact for commercial or industrial subscribers, who tend to have a higher energy cost.

They attribute it to the cost of crude

According to PREB, the element “that had the most impact” on the new quarterly adjustment factors was the increase in the price of oil and its derivatives in international markets, over which Puerto Rico has no control.

For the past two years, the cost of a barrel of crude oil has consistently risen after plummeting after the declaration of the COVID-19 pandemic. The war between Ukraine and Russia has raised prices even higher.

On the other hand, the main reason of the independent regulatory entity for not authorizing the originally requested increase was the deferral of $40.54 million, divided into two items.

The first of these items is the $30.2 million that PREPA requested, through LUMA, to be charged to customers and that corresponds to the purchase of petroleum derivatives – bunker C and diesel – to replace the natural gas that should have been supplied by the companies New Fortress and Naturgy. By not having this supply, the cost of operating units #5 and #6 of the San Juan power plant, as well as units #5 and #6 of Costa Sur, in Guayanilla, has been higher.

PREB required PREPA, in accordance with the contracts with both companies, to claim and collect from them the differential of the cost that the public corporation paid to substitute natural gas. Although the claims are still ongoing, the independent regulatory body considered it reasonable to defer the collection of the $40.54 million to the subscribers, at least until it is known whether the money will be recovered.

“(The deferral) does not represent, at this time, a risk with respect to the balance of the operational account of the Authority, its cash flow or the balance in the service accounts for the operation of the transmission and distribution system,” it was stated. indicated in the resolution and order.

The second item is the $10.34 million that Governor Pedro Pierluisi assigned to PREPA last Wednesday, from surplus federal funds from the CARES Act, to “mitigate the impact on the price of electricity,” according to a press release. press that La Fortaleza broadcast that day.

PREB warned that, without both deferrals, the approved increase would have been 4,265 cents per kWh.

A fatal combination

“The role of the Negotiated is to make a balance in favor of the public interest. This implies ensuring that excessive expenses are not passed on to the consumer, but it also means avoiding managerial irresponsibility that led the Authority to bankruptcy. Unfortunately, fuel costs increased and that requires an adjustment that guarantees the continuous operation of the electrical system,” the president of PREB said in a statement.

Avilés, who is an engineer and lawyer, added that the electrical system “continues to depend on fossil fuels and plants that have exceeded their original useful life”, which results in a “fatal” combination when fuel prices rise “dizzyingly”, as has happened in the past few months.

“This quarterly exercise should be a reminder of the urgency of modernizing the electrical system and developing renewable energy sources in Puerto Rico,” he asserted.

During the citizen participation process for the new quarterly adjustment factors, PREB received 12 comments from customers, an interest group, and an independent power producer. In general terms, they presented opposition to the proposal submitted by LUMA, on behalf of PREPA.

By law, PREB has the last word on any tariff aspect. Every three months, the independent regulatory body reviews the factors for fuel purchase and energy purchase and, depending on the expenses and income reported, subscribers are charged or reimbursed.

The next quarterly review will be at the end of June 2022.

Pending approval

As another measure to mitigate the rise in oil and its effect on electricity, Pierluisi filed, on Monday, an administration project to pause the collection of the fuel tax for 45 days.

As a source of repayment, the measure – pending approval – authorizes the Joint Underwriting Association to issue a dividend of $50 million and the Department of the Treasury to impose a 50% contribution, which would generate $25 million, which is the estimated cost of the temporary suspension of the “crudita”.

According to the governor, his piece complies with the principle of fiscal neutrality established by the PROMESA law.

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