May 22, 2005 – Just about every Virgin Islander would agree that they are tired of seeing price increases from the Water and Power Authority. A positive flip side of this, though, is that consumers are starting to use less power, Alberto Bruno-Vega, chief executive officer for WAPA, told the WAPA Governing Board on Thursday.
Nellow Bowry, WAPA's chief fiscal officer, had a different picture, though. He said because of rising oil prices, WAPA is struggling with its budget. Maintenance of equipment and the purchasing of replacement parts was being put off, he said, and board members foresaw that this could come back to haunt WAPA in the form of power outages.
Daryl Lynch, board chairman, said he had been talking to residents at town meetings, and the board needed to do something to show, "We recognize their hardship. We feel their pain."
To help with the budgeting process, Claude Molloy, chair of the finance committee, asked the board to approve a motion to investigate hedge funding to even out fluctuations in the markets that determine the cost of electricity.
The finance committee recently heard a presentation from Philadelphia-based Seslia & Co. on developing a hedge program. The presenters said the pros of the program were price stability, budgeting guidance, fiscal responsibility and insurance against price spikes.
Board member Roy Anduze was quick to point out the downside. "What if we buy in at $50 a barrel, and the price drops to $15 a barrel?" Oil prices have dropped a few dollars a barrel in recent days. Although most predictors have said oil prices will remain high and could go higher, Anduze said some are predicting that it will fall.
Anduze noted that no one in WAPA had the expertise to manage such a fund. Bowry said a professional would manage it, but Anduze said, "They aren't going to do it for free."
Anduze said he thought the intention was good and agreed with other board members in allowing the finance committee to pursue the matter further. He emphasized, however, that the board should get the Public Services Commission onboard before WAPA gets involved with hedge funding. "If this goes wrong, I want us to be all in the same row boat," Anduze said.
The fund could offer stability but would not help cash flow, which Bowry told the board was WAPA's real problem. In his report, he stated of the electrical system, "Working cash has improved slightly but continues to be significantly deficient due to very high V.I. government receivables and very high deferred fuel balances. By all liquidity measures, the results are poor."
He continued, "The working cash deficiency is negatively impacting operations and will eventually impact customer service."
On the water system, the picture was a little brighter. He said the water branch's working cash is "relatively stable."
In a matter not related to finances, Lynch on Thursday informed the board of a letter he had written to Gov. Charles W. Turnbull asking him to relieve Andrew Rutnik, commissioner of the Department of Licensing and Consumer Affairs, from his position on the board. Lynch wrote that Rutnik has not attended a meeting in a year.
These absences, along with the fact that the governor has not appointed a replacement for former Attorney General Iver Stridiron, has made it difficult for the board to get a quorum, Lynch said. Along with replacing Rutnik, Lynch asked to the governor to fill the vacancy left by Stridiron.
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