WAPA Board Authorizes Drawdown of Last $2 Million in Credit

Aug. 13, 2008 — As Virgin Islanders stockpile supplies for the stormy season, the V.I. Water and Power Authority is worrying about how it will pay for its day-to-day fuel needs — much less set-asides for a rainy day.
Six days after Hovensa began requiring WAPA to pay for fuel deliveries two days in advance, the authority convened an emergency meeting of its governing board to authorize drawdown of the remaining $2 million from the $20 million Electric System Lines of Credit. (See "Hovensa Demands WAPA Pay in Advance for Fuel.")
The board approved the action unanimously.
The line of credit was originally authorized for $12 million, but on June 26 the board increased that amount to $20 million.
"Every time that WAPA draws [its line of credit] down, [the authority] has to get approval of the board," said Juanita Young, WAPA board chairwoman.
The lines of credit are distributed equally between FirstBank and Banco Popular. At a WAPA governing board meeting at the end of June, authority officials were authorized to draw down the entire $10 million from Banco Popular and $8 million from the line of credit at FirstBank to pay off some old debts, leaving the $2 million, which the board freed up for use today.
"We will need a little over $9 million for next week," said Hugo Hodge Jr., WAPA's executive director, noting that next week's expenses will include payroll for the authority's 600 employees.
After using up the $2 million in credit, the remaining $7 million will come from the authority's usual sources of funds, including customer payments. If there is a shortfall, the authority might access some cash resources earmarked for other expenditures, including maintenance or repair, according to Cassandra Dunn, WAPA's director of customer service and communications.
A $3.1 million Hovensa fuel delivery to St. Thomas, scheduled for Monday, will have to be paid for this Friday. A second delivery of fuel to St. Croix, scheduled for Aug. 20, will have to be paid for by Monday. That delivery will cost $3.2 million, according to Hodge. A third delivery, scheduled for Aug. 22 at a cost of $2.8 million, must be paid to Hovensa Aug. 20.
Hovensa's cash terms are not remarkable, considering that WAPA owes the fuel company $39.8 million, of which $17 million is more than 30 days late. As of Aug. 15, Hovensa will start charging 5.1 percent interest (or prime) on the overdue amount, according to Dunn.
While escalations in oil prices has helped to bring the authority to this point, the Public Services Commission has not allowed WAPA to bring its customer fees in line with the current per-barrel price. Other factors include a number of very large debts owed to the authority, most notably more than $18 million owed by the V.I. government. (See "WAPA Appeals to PSC, Senate for Help Cutting Costs.")
Essentially customers are paying for their energy at PSC rates approved when oil cost $121 per barrel, but now WAPA has to pay $139 per barrel. This means that for the 200,000 barrels that WAPA needs to power the territory, there is an $18 per-barrel shortfall.
That shortfall amounts to $3.9 million a month.
"We are looking at every potential avenue [for revenue] in both the immediate term and the long term," Young said. In the meantime, she urges everyone to pay their WAPA bills as soon as possible.
Hovensa declined to make a statement until the authority had released the information officially.
"We're doing everything we can to prevent rotating outages, and will only have to implement that if we have exhausted every other possibility," Dunn said. "And at this time we are not pursuing that as an option."
The emergency meeting scrambled seven members of the governing board, constituting a quorum. The timing was good; seven board members were already on site, attending other committee meetings.
Board members attending were Brenda Benjamin, Cheryl Boynes-Jackson, Donald Francois, Alphonso Franklin, Noel Loftus, Robert Mathes and Juanita Young. Only two board members were absent: Kenneth J. Hermon Jr. and St. Clair N. Williams.
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