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WAPA Chief Wants Line-Item Utility Appropriations

May 30, 2003 – If the Water and Power Authority executive director, Alberto Bruno-Vega, has his way, utility payments will be a line item in government agencies' fiscal year 2005 budgets. And, he told the WAPA board, he also wants the Legislature to pass and the governor to sign an appropriation for the payment of utility bills outstanding from prior fiscal years.
Going the line-item route instead of each department and agency having a lump-sum budget, he said, will ensure that the authority receives timely payments because line-time appropriations may only be expended for the purposes specified.
Bruno-Vega presented his ideas at Thursday night's WAPA board meeting on St. Croix, where concern about the utility's current cash crisis dominated discussion.
Nellon Bowry, the authority's new chief financial officer, told the board that the utility's cash flow is being severely impacted by the government's huge debt owed WAPA as well as by fuel costs that have not been covered by the Levelized Energy Adjustment Clause surcharge.
Bowry — director of the Office of Management and Budget in the Schneider administration and more recently chief financial officer of Juan F. Luis Hospital – told the WAPA board the central government currently owes the authority about $7.9 million and that the "deferred fuel balance" — fuel costs not compensated by the surcharge — was $14.9 million as of last month.
He said Luis Hospital recently committed to bring its 2004 account current and that a payment plan will be established for money due from prior fiscal years. The hospital owes WAPA $2.9 million, he said.
Nearly three years ago, thanks to an aggressive WAPA campaign by Joseph E. Thomas Jr., who had taken over in June 2001 as executive director, the central government came close to getting caught up on its past-due utility bills.
In July of that year, Thomas met with Gov. Charles W. Turnbull and other administration officials to formulate a plan for the government to pay off nearly $26 million it owed the authority by mid-November 2001. (See "WAPA, Government OK Debt Payment Plan".)
The biggest debts were $6.6 million owed by the Housing Authority and $6.3 million owed by the Public Works Department. Thomas said that if the agencies and independent instrumentalities didn't pay up, WAPA would cut their service. The plan also involved reducing the government's debt by about $3.5 million through canceling out the utility's debt to the government for construction of a water plant.
By December 2001, Thomas said, the government owed only "a couple million dollars" in pre-May debt – but in the interim, it had fallen behind in its payments again. He said that a lot of the money collected had gone to replenish the utility's debt-service reserve fund. Five months later, for reasons unrelated to the government's debt, the WAPA board asked for and got Thomas's resignation.
Debt Service, Fuel-Cost Surcharge Concerns
On Thursday, Bowry also told the board that the utility's water system debt-service coverage ratio was 1.53 x as of April and that end-of-year adjustments could adversely impact WAPA's bottom line. The authority is required to maintain a minimum 1.25 x debt-service coverage under its 1998 water bond covenant in order to avoid a technical default.
Bruno-Vega also said WAPA will ask the Public Services Commission to approve automatic monthly LEAC fuel adjustments based on the market costs of fuel. Currently the surcharge is reviewed and generally adjusted every six months.
The PSC ordered WAPA to spread a recently approved surcharge increase over a 35-month period to minimize the financial impact on customers. Recent spikes in the oil market have made it difficult for WAPA to predict future fuel prices. As a result, according to a WAPA release, the authority has been "under-recovering" fuel costs from customers for a longer-than-usual period of time.
Bruno-Vega also told the board that WAPA is working toward establishing a master plan to address the utility's high degree of line losses of both water and electricity.
In other business, according to the release, the board:
– Approved replacing the water line at the Enighed Pond Marina road at a cost of $142,153. The existing ductile iron pipe is corroded due to saltwater exposure. WAPA is facilitating the installation of new pipes now while the Port Authority is repaving the road, in order to avoid extra expense and inconvenience to the public to replace the pipe later.
– Approved a $3,170 change order for renovation of the new customer service office at the Lumberyard Complex on St. John. The office is to be dedicated on June 14.
– Authorized Bruno-Vega to enter into an agreement with FirstBank of Puerto Rico to borrow $1.13 million short term to finance property insurance premiums currently due.
– Approved a swap arrangement with the Office of Management and Budget for amounts due to and from the Federal Emergency Management Agency for Hurricane Marilyn recovery efforts. The board authorized a third exchange of checks between WAPA and OMB in the amount of $558,898.

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