Several senators have raised concerns that PPUC may have recovered its fuel cost excessively when the Automatic Fuel Price Adjustment Clause (AFPAC) of the tariff schedule was not adjusted to reflect the huge drop in the cost of fuel worldwide. What should have been savings realized by families and businesses instead remained in PPUC's coffers.
In a letter to PPUC Chairman Sam Masang and Chief Exectuive Officer Kione Isechal, the senators also questioned if the excessive cost recovery may have had an impact on the proposed 77% tariff increase for water and wastewater to be effective on October 1.
The letter of August 28, 2017 was signed by Senators Rukebai Inabo, Mason Whipps, Regis Akitaya, Uduch Senior and Camsek Chin. "Though PPUC's fuel cost dropped 30% (from $14.5M in FY2015 to $10.1M in FY2016), power revenue changed only slightly. The FY2016 power revenue only dropped 6%, from $21.0M in FY2015 to $19.8M in FY2016.
This leaves one to believe that maybe PPUC did not adjust AFPAC fuel tariff rate downward sufficiently when fuel price dropped substantially," said the lawmakers. The senators claim that without the downward adjustment of AFPAC, PPUC continued to charge higher fuel rate. "Which probably means, the revenue generated through AFPAC fuel rate exceeded fuel cost by an estimated $4M to $5M," the senators said.
The senators stressed that AFPAC supports full-cost recovery' which means PPUC's average net income should be zero. From fiscal years 2013 —2015, actual fuel cost is always around 65% - 70% of the power generation revenue. But in fiscal year 2016, the cost of fuel was only 51% of the total power revenue, far below average. They asked if the 17% to 18% excess revenue really just excessive cash for PPUC.
Further the senators said that PPUC's cash flow appears to confirm assumption of over recover of fuel cost recovery through AFPAC because it shows PPUC's cash balance increased substantially by $8.4M in FY2016 from $7M to $15.4M. "When PPUC's cash reserves more than double in one
year, we must ask how and why this happened because cash flowing into the coffers of the PPUC is at the great sacrifice of the people, especially those who can least afford it.," they said. With PPUC's fuel cost at the lowest in the last 10 years, new power generators at Malakal and Aimeliik, and energy loss lowered, "why is it that the AFPAC fuel rate is not the lowest rate ever?" "Did PPUC recover excessive power revenue by not adjusting its AFPAC fuel rate in keeping with the fuel cost fluctuation? Or is something wrong with the AFPAC mechanism such that, its implementation yield unintended results?", asked the senators. They have requested PPUC to provide all the information necessary to form a firm and conclusive answer to the question.