Parts of St. Thomas were hit by a brief power outage Thursday morning that V.I. Water and Power Authority officials attributed to generation problems at the Harley Power Plant — problems that could amount to another increase in levelized energy adjustment clause (LEAC) rates if they’re not fixed quickly.
For years, the authority’s financial problems have stymied any efforts to put aside money for routine maintenance to the generation units, some of which have been online for decades, officials have said. A vast majority WAPA’s revenues go toward fuel costs, and just about a year ago, whatever was left over for personnel and other administrative expenses were being slowly eaten away for the same reason, resulting in several large jumps in the LEAC.
As fuel prices began to tumble, the LEAC stabilized, with WAPA filing last year for back-to-back decreases. That practice has recently changed, as oil started to hover again near $80 a barrel, and the government’s outstanding power bill (now at a much lower $5 million) continues to be pushed forward.
Thanks to a recent increase in base rates, it appears that the authority has more revenues on the electric side, but officials said during Thursday’s board meeting on St. Thomas that those figures don’t factor in the government’s debt or the $7 million owed for street lighting — a casualty brought about by a lack of real property tax revenues.
WAPA filed last month for a slight increase in the LEAC, but made it clear to the Public Services Commission that their generation problems on St. Thomas and St. Croix, which spurred at least a week of outages in both districts, could mean another spike.
At a special PSC meeting this month, WAPA Executive Director Hugo Hodge Jr. said the problems might not be so severe if the authority had the money all along to make the repairs it needs.
During the WAPA board meeting Thursday, Hodge said he should be filing for another rate increase Friday, since the generation problems have not yet turned around. Most affected are Unit No. 16 on St. Croix and Unit No. 18 on St. Thomas, which feed into each district’s waste heat recovery boilers. On St. Croix, the boiler is virtually brand new, but can’t run properly until the unit is fixed — cutting the amount of savings expected to immediately come out of the project, officials said.
A surcharge to cover the cost of the St. Croix boiler was supposed to go into effect April 1, and board members said Thursday that WAPA is down another $2.2 million in projected revenue because of the continuous delays.
Meanwhile, some of the generation units are routinely fixed during the cooler months, when the public’s demand is lower. Now that the weather had remained relatively hot, those plans have been derailed, since the continued use of air conditioners and other cooling devices have caused demand to jump, sometimes as much as 83 megawatts during peak hours, Hodge explained.
Right now, all hands are pitching in to make sure everyone’s lights stay on, including hotels, which have disconnected from the grid, he added.
"We’ve really just been working on meeting demand for a little bit now," Hodge said.
Sales have tumbled on the water side, resulting in less revenue, but board members said Thursday that they were also anticipating a jump once another increase to the base rate went into effect. The catch is that the increase is triggered when the board approves a request for proposals (RFP) for a third-party supplier that would provide WAPA with water — an RFP that officials said needs to be reworked.
On the upside, however, WAPA will be closing next week on an $87.8 million bond issue — a combination of the refinancing of older 1998 series bonds at a lower interest rate and the floating of about $37.1 million in new Build America Bonds available under the American Recovery and Reinvestment Act — that will give the authority about $40 million for capital projects and some extra cash to pay down on a $40 million line of credit from the bank.
WAPA’s bonds were oversubscribed on the market — meaning that there were more orders (Hodge said three to four times more) than there were bonds to sell.
A portion of the new bond proceeds will go toward a new building complex being constructed by the V.I. Housing Finance Authority for WAPA. During Thursday’s meeting, Hodge was authorized to begin negotiating another memorandum of understanding with the agency to move ahead with the second phase of the plans, which will cover final drawings and permit costs, among other things.
Funding requests approved by the board Thursday include:
-about $108,000 in final change orders for St. Croix’s waste heat recovery boiler project;
-$397,620 for the design, purchase, construction and installation of four metal air-conditioned and insulated buildings to protect outdoor equipment at two St. Thomas substations;
-about $2.7 million, which will be funded by a bank loan, to cover the authority’s property insurance coverage premium (the resolution approved board members Thursday also authorized Hodge to purchase the policy from Theodore Tunick & Company); and
– up to $514,569 for a contract with Xenon Construction to put up three security guard booths and a perimeter fence around portions of the Richmond Power Plant, also known as the Devcon property, to ward off vandalism attempts.
The board also approved a change to its bylaws to allow members to attend meetings via video conference.
Present during Thursday’s meeting were board members Brenda Benjamin, Cheryl Boynes-Jackson, Kenneth Hermon, Noel Loftus and Juanita Young.
