The Guam Public Utilities Commission (GPUC) sets Guam Power Authority's electric power rates or tariffs. GPA must petition the GPUC in order to change its rates.
Two components comprise GPA electric power rates: a fixed base rate and variable fuel rate components. Part of GPA's budget is made up of items such as debt service, maintenance, labor, insurance and other costs that are reasonably predictable and estimable. This predictable portion of GPA's budget is funded by fixed base rates. Another part of GPA's budget is expended on fuel costs which are highly susceptible to wide market fluctuations. This difficult-to-predict portion of GPA's budget is funded by a variable fuel rate.
Prior to 1999, GPA reset its fuel rate on a monthly basis to reflect current market conditions. In 1999, GPA adopted a Levelized Energy Adjustment Clause (LEAC) to enable fuel costs to be set on a bi-annual basis. The LEAC allows sharp market price fluctuations to be spread over a six month period. It also provides increased consistency to customer bills.
Every six months a schedule of fuel costs is provided to the Public Utilities Commission to enable the LEAC rate to be reset. Any under recovery or over recovery is trued up during the review process. In the event that GPA's fuel forecasts indicate an under recovery exceeding $2 million, it is allowed to petition for an adjustment before the expiration of the LEAC period.