Fireworks erupted at Monday night’s Public Services Commission meeting, as V.I. Water and Power Authority officials found themselves faced with the possible elimination of the entire rate financing mechanism (RFM) used to cover the cost of maintenance and spare parts.
Three years ago, the PSC ordered WAPA to implement measures that would enable them to bring on an independent agency (IAC) to monitor the day to day operations of the utility, the cost of which was eventually built into the RFM – a small charge that is built into the Levelized Energy Adjustment Clause – and was expected to be covered by WAPA’s monthly sales.
WAPA officials testified Monday night that sales have not yet met what was projected to come in through RFM in its first 18 months of implementation and, because of that, they were asking that the PSC reconsider its decision to bring on the additional advisor, or at the very least, find someone the authority could afford.
WAPA attorney Lorelei Farrington testified during the meeting that the authority had worked with PSC advisors Georgetown Consulting Group on a request for proposals for the IAC but only received two responses from bidders that she said varied “greatly” in price. One bid came in at $750,000 for the entire three-year period mandated by the PSC, while the other company would cost approximately $1.58 million per year.
Both companies were invited down for meetings that would give WAPA a better idea of what each would do and why the price varied so much, but only the more expensive company took the meeting, Farrington said.
“The committee that we put together to review these proposals recommended that we not got forward with this because they could not see why the services would cost as much as they did,” she said. “We feel that $1 million a year for someone to maybe just tell us what we already know, or just provide services that were advisory in scope, was just excessive.”
An alternate recommendation, which would involve putting together a master contract for a contractor or company that could provide advisory services for plant operations, was suggested and sent on to the PSC, Farrington said. According to the PSC’s mandate, the IAC was supposed to have been brought on by a certain time and, if that didn’t happen, WAPA would be faced with the elimination of that portion of the RFM that sets aside funding for it.
The RFM was based around sales of $50,000 per month for the first 15 months of implementation and, if all had gone as planned, WAPA would have brought in $24.8 million in revenues. Officials testified Monday, however, that after the 15-month period, WAPA came up $1.34 million short.
During that same period, the authority’s expenses were $27.1 million, which exceeded the $20.9 million in collections that came in. With maintenance, spare parts and other critical plant expenses, there wasn’t enough left over to put aside the $2.2 million for the IAC, they said.
Contributing to the loss in sales was the closing of the Hovensa refinery on St. Croix, which WAPA Executive Director Hugo Hodge Jr. said dealt a blow to the authority’s customer base. Employees lost their jobs, cut back on expenses or moved off island, and Hodge said it has taken some time for the effects to balance out.
WAPA’s testimony sparked a fire in board member Johann A. Clendinen, who said that while he understands WAPA had a “problem predicting sales and cash flow,” its officials still used the money earmarked for the IAC “for something else.”
“The problem is that WAPA got money for a particular thing and they spent it on something else entirely,” Clendinen said. “It doesn’t matter what that particular thing was; it matters that you didn’t perform the particular function that was approved.”
Clendinen said he was ready to move that the RFM be eliminated altogether, a suggestion that not only surprised WAPA, but also the PSC’s own attorney, Tanisha Bailey-Roka.
“I do think that is a serious stand that you’re taking, which could have a serious impact on their revenue generation,” Bailey-Roka said. While she added that WAPA should take note that the PSC is ready to bring down the “sledgehammer” and take some serious action, she did “caution the commission that the language of the day’s agenda may not support that action, just from a due process legal perspective.”
Farrington also said the RFM has helped to cover critical needs that has helped improve the authority’s efficiency.
“The RFM has purposes that are served and served well,” she said. “I don’t think the IAC issue should be the death sentence for a program that has not only been good for the authority but also for the ratepayers of the authority.”
In the end, board members did vote to suspend the portion of the RFM that deals with the IAC, which would bring ratepayers’ bills down by .3-tenths of a cent, or .00286 dollars, per kilowatt hour.
WAPA officials also made a presentation to the PSC about the ongoing propane conversion process.
Present during Monday’s meeting were board members Clendinen, M. Thomas Jackson, Andrew Rutnik and Joseph San Martin.
