Virgin Islanders will pay approximately 19 percent more for electricity starting next month due to a heavy increase in the Levelized Energy Adjustment Clause passed by the Public Services Commission on Monday.
Effective Oct. 1, the LEAC fee will rise $.07671 per kilowatt hour, from $.306524/kWh to $.383234/kWh, resulting in an average increase of $38.35 per month for residential consumers.
The water LEAC was also increased from $8.29 to $14.72 per 1,000 gallons. Residential consumers will see an average increase in that monthly bill of $15.43.
The size of the increase to the electric LEAC was due to several factors, according to Larry Gawlick of the Georgetown Consulting Group, which reviews the V.I. Water and Power Authority’s LEAC proposals for the commission.
The chief cause, Gawlick said, was the rising cost of fuel oil. WAPA is seeing its cost per barrel rapidly increase due to the phasing out of discounts previously offered by Hovensa.
As part of its agreement to supply the territory with fuel oil through December, Hovensa stipulated that it would sell each barrel 20 percent below market value in July and 15 percent below in August and September.
That discount will decrease to 10 percent in October and 5 percent in November.
In December no discount will be offered.
At the same time that WAPA is losing these discounts, the global market for oil remains volatile and generally high, adding to the cost.
Gawlick said WAPA should expect to pay an average of $132.19 per barrel through the end of the year, a steep increase from the $100.81 they were paying in July.
The second major component to the rate increase is a drop in WAPA’s forecasted efficiency. Gawlick explained that this factor is WAPA’s best guess for how many kilowatt hours its plants will be able to produce per barrel of oil, similar to a car’s mile per gallon rating.
Gawlick said that in the past WAPA has consistently been overly optimistic with its efficiency forecasts, with actual production falling short of goals. This has caused the authority to seek payment for the additional oil needed through “deferred fuel recovery” fees, which factor into the total LEAC.
Their current, lower forecast should be closer to the authority’s actual efficiency, Gawlick said.
Members of the commission voiced some concern over the size of the increase and how it would affect individual ratepayers.
Sen. Alicia “Chucky” Hansen questioned the validity of WAPA’s numbers, but Gawlick and other members of the consulting group reiterated that they were satisfied that they were accurate.
Commission member Joseph San Martin said he was concerned about how the rate increase would affect small business owners. San Martin, who runs the Re/Max agency in Christiansted, said he’s watched King Street slowly turn into a “ghost town” and the remaining merchants could ill-afford the higher electricity rates.
Vice Chairman M. Thomas Jackson said he understood the objections but reminded everyone that if the PSC did not approve the rate hike, WAPA would not have sufficient funds to provide 24-hour electrical services to the territory.
“We only have one other alternative. We either give them what they ask for … or we walk around with candles,” he said. “I don’t like it anymore than anybody else.”
As the commission voted to pass the increase, it added one stipulation. WAPA has been delinquent in supplying quarterly reports on its use of funds raised by the rate financing mechanism. The commission voted that if WAPA does not supply these reports within a month, the LEAC will return to its previous level.
The rate financing mechanism is a small charge added to the LEAC to raise funds to operate an emergency generator on St. Thomas and conduct maintenance work.
After the vote, Marie Thomas Griffith, an attorney for WAPA, expressed concern about the stipulation, pointing out that in their vote, the commission did not define a mechanism by which to determine if WAPA’s filings were sufficient.
She said that it is possible that the authority could file the reports, but the commission’s consultants could still ask for more information. If they did, would that extra information need to be provided within those 30 days, she asked.
Tanisha Bailey-Roka, attorney for the commission, responded that she also had concerns about the vagueness of the PSC’s action and that ultimately it would be best if both party’s worked to avoid that situation.
“We will have to work collaboratively,” she said. “You will have to get us information timely so we can review it and make sure there is nothing missing and, if something is missing, that we can get that information.”
Immediately after passing the increase, the commission lost quorum so no additional actions could be taken to clarify this issue.
After the meeting was adjourned, Gregory Rhymer, chief operating officer of WAPA, answered questions concerning the authority’s search for a new fuel supplier. He said that the authority was still reviewing bids and had not made a decision.
Rhymer confirmed that none of the increase to the LEAC came from this search. Any increase in fuel costs resulting from the new contract would be addressed in the next LEAC reassessment in January.
Editor's note: An earlier version of this story indicated Sen. Hansen is a voting member of the Public Services Commission. She is not. The Source regrets the error.