Line of credit established for Guam Power Authority; fuel surcharge hike proposed

By Pacific Island Times News Staff

The Public Utilities Commission has approved the Guam Power Authority’s request for the establishment of up to $70-million line of credit to help manage fuel cost increases triggered by global fuel market volatility amid the Iran conflict that disrupts the movement of fuel supply.

GPA said the line of credit is a short-term measure to facilitate continued purchases of fuel for power generation while fuel costs are recovered through the established levelized energy adjustment clause, or LEAC, also known as fuel recovery surcharge.

On Thursday, GPA also petitioned the Consolidated Commission on Utilities for a LEAC increase, from approximately 13.6 cents per kilowatt-hour to 19.4 cents per kilowatt-hour. 

For an average residential customer using 1,000 kilowatt-hours per month, the proposed adjustment would result in an estimated increase of approximately $58 per month.

The combined base and fuel surcharge rates would be approximately 32 cents

 per kilowatt-hour for average residential customers.

John M. Benavente, GPA general manager, said the proposed LEAC adjustment aims at balancing rising fuel costs with the need to mitigate the impact on customers.

John Benavente

“We understand that any increase to a power bill is difficult, especially for families and businesses already managing higher costs,” Benavente said. “This recommendation is intended to bring fuel recovery closer to actual fuel costs, allowing GPA to continue purchasing fuel for Guam while helping avoid a larger impact for customers later.”

GPA argued that even with the proposed adjustment, the resulting rate would be among the lowest rates in the region.

GPA noted that, despite global fuel volatility following the strikes on Iran, the utility agency maintained LEAC at a steady rate by carefully managing fuel purchases and evaluating alternative fuel supply options.

Officials said GPA also applied available Ukudu liquidated damages to fuel under-recovery balance, relying on the Ukudu Power Plant’s efficiency and using available solar energy to reduce fuel consumption.

“These efforts have helped limit the proposed LEAC adjustment to an increase of approximately 5.8 cents per kilowatt-hour from the current 13.6 cents per kilowatt-hour,” GPA said.

GPA expects approximately $27 million in fuel under-recovery by June 30.

“Fuel under-recovery occurs when the LEAC collected from customers is not enough to cover the actual fuel costs incurred to generate electricity,” GPA said.

“The proposed adjustment is intended to keep the projected fuel under-recovery from growing while helping ensure GPA can continue purchasing the fuel needed to keep the lights on and serve its customers," it added.

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As for the line of credit, GPA said the actual amount available would depend on what financial institutions are willing to lend.

“Approval does not mean GPA will immediately draw the full amount,” GPA said, assuring customers that the line of credit would be used only for fuel purchases and not for payroll, capital projects, debt service or general operations.

“Fuel shipments must be paid for before costs are fully recovered through

 customer bills,” said John Kim, GPA chief financial officer. “The line of credit provides short-term liquidity to manage that timing gap. It does not replace the LEAC or eliminate fuel costs. It is a financial tool to support fuel purchases as needed, not a long-term borrowing program.”

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 roughly $26 million, while the April shipment increased to about $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, which continues to put pressure on fuel recovery and cash flow.

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