May 29, 2008 — Money woes dominated the Virgin Islands Water and Power Authority Governing Board’s regular monthly meeting Thursday as members grappled with the millions of dollars a month difference between what WAPA pays for the oil it burns and what it can charge customers.
”It’s stifling us," said Hugo V. Hodge, Jr., WAPA’s executive director.
WAPA generates power and produces drinking water by burning fuel oil purchased from Hovensa. Customers pay for the fuel through a surcharge called the Levelized Energy Adjustment Clause (LEAC) which is set by the V.I. Public Services Commission. The PSC approved an increase last November.
The LEAC is assessed to customers and passed directly through to the Hovensa refinery at the rate of $93 per barrel, but is currently paying $109 per barrel and that amount will likely increase next month, Hodge said. The shortfall between what WAPA collects and what it pays out will exceed $3 million dollars for this month alone, he said.
In order to pay for the oil, WAPA is spending operating revenues set aside for equipment maintenance, payroll, debt service and vendor purchases, and is spinning deeper into debt.
On top of that, spending maintenance funds on oil means WAPA's generators are less efficient than they could be, wasting oil that must then paid for by WAPA's customers through the same unpopular LEAC.
”The only short-term gains we can make are by having more efficient equipment," said Gerald Groner, WAPA’s newest board member. "Yet, we can only have that (gain) by getting payments in on a timely basis to maintain our equipment.”
Board member Noel Loftus agreed.
“Because we cannot afford to do maintenance on our equipment we are burning more fuel," Loftus said. Board Secretary Juanita Young added “delayed maintenance is always more expensive, more critical, and leaves less options for addressing the problems.”
To address the shortfall, on May 16 WAPA submitted a request for rate increases starting July 1. WAPA requested an increase in the electric system LEAC of $0.136059 per kilowatt hour (kWh) from the present level of $0.254733 to $0.390792 per kWh. This would result in residential electric rates in excess of $0.46 per kWh.
WAPA is also seeking an increase in the water system LEAC of $7.32 per 1000 gallons, from the current $7.58 per 1000 gallons to $14.90. The requested increase would raise the cost to a resident for 1000 gallons of water to $29.80 per 1000 gal. The PSC issued a press release Wednesday saying they would hold hearings on the request by July 1.
"I think it is important for the public and the PSC to understand there is no pocket of money out there," Groner said. "When we don’t get what we need to meet our expenses, we don't meet our expenses."
Right now, WAPA is behind $21.7 million for fuel to generate electricity and $2.6 million more on the water production side of the business. Maurice Sebastien, WAPA’s assistant chief financial officer said that amount is three times WAPA's entire annual maintenance budget, almost a third of the total cost of running the utility, 68 percent of all employee wages, or enough to cover more than a year of debt service on all of WAPA’s bonds.
“Think about it,” Sebastien said. “If you were a business owner, it would be like if you didn’t have 33 percent of your revenues to run your business. It would be very hard to survive.”
Board members present at the meeting were Groner, Noel Loftus, Cheryl Boynes-Jackson, Juanita Young and Donald Francois.
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