March 9, 2007 — Legislation that would allow the V.I. Water and Power Authority (WAPA) to cut costs by potentially reducing fees paid to the Public Services Commission was approved Thursday by the Committee on Government Operations and Consumer Protection.
In addition, the proposed bill would divert money from WAPA's PSC fee to help fund a feasibility study about connecting the St. Croix and St. Thomas power grids and shift application costs for small power providers from WAPA to the providers themselves.
Under current V.I. law, in order for a private company to sell energy to WAPA they must apply and meet qualifications as determined by the PSC. An assessment is performed as to the companys viability to supply power, and administrative hearings are held — all at a cost to WAPA.
There are two types of applicants, Qualified Cogeneration Facilities (QCF) and Small Power Production Facilities (SPPF), and both must go through the qualifying process with investigations and administrative hearings. A QCF is an entity that produces energy while providing another service, like the steam produced by a hospital and subsequently used to produce energy. An SPPF is any entity that produces under 30 megawatts of power.
Since 2004, WAPA has paid more than $118,000 to the PSC for these assessments and hearings relative to petitions filed by private, for-profit entities. These costs are passed on directly to the consumer. For at least the past two years, Bruno-Vega has argued that WAPA should not be incurring these costs, yet the PSC took no action.
The bill, which was co-sponsored by Committee Chair Sen. Shawn-Michael Malone and Sen. Liston Davis, would allow those costs to be directly passed on to the applicant, saving WAPA considerable expense.
This money could have gone to projects that would improve electric service, according to WAPA Executive Director Alberto Bruno-Vega. The authority enthusiastically supports this amendment.
However, PSC Chairwoman Alecia Wells argued that the cost will still ultimately be passed on to the consumer and that the bill was limited in scope in that it applied only to one type of assessment and that there were many other instances in which the PSC levies other fees.
In related news, Sen. Carlton Dowe offered two amendments to the bill, both of which were passed. The first allowed WAPA to pay its fee to the PSC Revolving Fund on a quarterly basis instead of in one annual lump-sum payment. All utilities regulated by the PSC must make annual payments based on a percentage of their total revenues.
Allowing WAPA to pay quarterly will allow the cash-strapped agency some flexibility in meeting its obligations.
The other amendment would remove the Levelized Energy Adjustment Clause (LEAC) total from WAPAs gross revenues. Essentially a fuel surcharge that WAPA charges customers to help the utility pay for rising fuel costs, LEAC has greatly inflated the authority's gross revenues. This is important to WAPA because the authority pays the PSC an annual fee based on total revenues.
In 2003, the fee WAPA paid to the PSC was just under $397,000, while in 2007 WAPA paid $727,000 — more than a 75 percent increase, primarily due to rising fuel costs and the LEAC.
According to Bruno-Vega, LEAC is a direct pass-through to Hovensa and should not be included in the gross revenues. The inclusion of the LEAC amount results in a drain upon WAPAs limited resources and represents a windfall profit for everybody except WAPA and its customers.
PSC attorney Boyd Sprehn contended that this decrease would mean that other utilities would have to make up the difference in order to maintain the PSCs $1 million Revolving Fund, which provide operating funds.
The second amendment also diverts $200,000 from WAPA's annual PSC fee to do a feasibility study of interconnecting the electrical systems of St. Thomas and St. Croix. This would allow electricity to flow between the two islands via submerged lines as it currently can between St. John and St. Thomas. This would provide greater reliability and would allow WAPA to shut down several poorly functioning generating units.
The proposed amended legislation now passes on to the Rules Committee for further review.
In attendance Thursday were Sens. Malone, Dowe, Terrence "Positive" Nelson, Usie R. Richards, Juan Figueroa-Serville, Liston A. Davis and Alvin L. Williams.
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