“We all have an obligation,” Hodge said, “to present factually information to the public in order to avoid panic and unnecessary stress during difficult times.”
A major point of contention, Hodge said, was the “false reporting” that the fuel surcharge known as the LEAC (Levelized Energy Adjustment Clause) had risen 783 percent in nine years when the price of fuel has gone up only 281 percent.
The reality, Hodge said, is the fuel surcharge went up 335 percent while the cost of fuel rose 336 percent over the nine-year period that was used in the published report that spawned Wednesday morning’s reality check.
Hodge said the authority’s posture has been to ignore the rampant falsehoods that spread across the territory, but that the latest round of falsehoods and demoralizing innuendo called for some straight talk.
He recognized the Public Services Commission for striking a fair balance in setting LEAC and rates between what is best for consumers and what is viable for WAPA.
“There is nothing emotional they [the PSC] can do about this; this is real,” Hodge said.
But real is not necessarily “sexy,” Hodge added, admonishing “the media” for its embellishments and inaccuracies in the interest of sensationalism at the expense of facts.
LEAC is a four-letter word that has been bandied about by senators and others as though it were some kind of secret formula for stealing from the rate payers. But Hodge pointed out, there is no utility in the world that doesn’t “have a mechanism to recover the cost of fuel.”
In other Caribbean countries, he said, the adjustments for fuel costs are made monthly. In the Virgin Islands, they are adjusted quarterly in a guessing game that requires the utility and the PSC to speculate what fuel costs will be three-months in advance, he said.
That guessing game plays a part in the LEAC charge. WAPA has put out $45 million in unrecovered fuel purchases which is also factored into the LEAC. The deferred fuel costs account for 7 percent of the LEAC, and all other fuel costs account for 86 percent – or 93 percent of LEAC being direct fuel costs. Financing and regulatory costs account for the remaining 7 percent.
During the question and answer period, Hodge said the recent 25 percent LEAC increase is a reflected calculation that includes WAPA’s increased cost of about 5 percent when it no longer receives a discount from HOVENSA, the local refinery that has been selling oil to WAPA at reduced costs for years.
HOVENSA announced earlier this year it was pulling out of the oil refining business in the territory. The V.I. government struck a deal at the time that saw HOVENSA continuing the discounted fuel until the end of the year.
As for charges that WAPA is woefully inefficient, Hodge said the authority’s efficiency was well within the standard at 30 percent.
Responding to the media report that appeared to be the overarching impetus for the press conference, he said, “It was stated in a recent article that WAPA’s utility generation and other equipment is old and that 70 percent of the energy created in the combustion process is lost.”
While it may be a fact that some of WAPA’s equipment is aging, Hodge said the authority strives to be more efficient and its generating units are within the industry standards for efficiency.
A quick Google search verifies Hodge’s assertion. According to the Environmental Protection Agency’s web site, “the average efficiency of fossil fueled power plants in the United States is 33 percent and has remained virtually unchanged for four decades.”
The EPA says, “This means that two thirds of the energy in the fuel is lost (vented as heat) at most power plants in the United States.”
And speaking of the United States, Hodge said he was tired of the comparison to utilities on the mainland. “We need to stop making that comparison.”
Island utilities are unique, he said, and even more so in the case of the Virgin Islands, where a deep trench separates St. Thomas from St. Croix, eliminating the possibility of interconnection and necessitating two separate systems.
And the U.S. Virgin Islands are bound by EPA standards, unlike other Caribbean nations, Hodge said. And still WAPA falls in the middle of the efficiency and utility rates pack in the region, he added.
Hodge repeatedly bemoaned the damage to morale both for WAPA employees and the community at large done by erroneous reports and inflammatory radio talk show babble. He called for an end to emotionalism in exchange for realism and solutions-oriented discussion.
He cited the scores of initiatives the authority has taken to increase efficiency and to elicit bids for alternative energy production – which is well on its way.
Hodge also noted that a recent audit of the authority found no wrong-doing on WAPA’s part. “I wish people would read this,” he said holding it up. [Final Evaluation Report Energy Production in the Virgin Islands]
Hodge called for a new “educated dialogue,” saying, “it takes all of us to find a way to move forward.”