Electric ratepayers in the U.S. Virgin Islands will pay less on their power bills following two actions taken Friday by the Public Services Commission.
While approving an increase in the base rate for power and water, the commission reduced the Levelized Energy Adjustment Clause by about three cents per kilowatt hour, reflecting a drop in the cost of fuel and other factors.
The cut in the LEAC will save about $14.29 for the average consumer’s monthly bill. But the temporary base rate increase, effective Aug. 1, will add about $5.85 to that bill, offsetting part of the LEAC cut and created a net decrease to the average consumer of about $8.44.
The action came on the recommendation of PSC consultant Jamshed Madan.
LEAC, in effect, is the cost of fuel and related costs for WAPA to produce the power.and water, costs which are ultimately paid by the consumer.
WAPA Executive Director Hugo Hodge said people in the territory are beginning to understand the connection between the cost of power and the cost of fuel to produce that power.
“When I came on board, there was no true understanding that oil and LEAC were one and the same. I think that awareness is there now and it’s a good thing,” Hodge said. Now “there’s a better understanding for what the price of energy will do.”
The reduced cost of fuel has been accompanied by repairs to generating equipment on St. Thomas, which allows the plant to run more efficiently.
The increase in the base rate will allow WAPA to continue making timely payments on its bonds. If WAPA were to default, it would make it harder and more expensive for the utility to get the funding it needs.
“Basically we need to let WAPA go out to get financing,” said PSC chairman Donald “Ducks” Cole. “I’m seeing some hope with cleaning up the bond market and reduction of debt.”
The rate increase will provide WAPA with an annual revenue of $8.6 million in electric and $1.5 million in water.
Customers who consistently use WAPA water will see a net reduction of about $4.66 on the water portion of their monthly bills, according to Hodge.
PSC attorney Boyd Sprehn said the PSC and WAPA should reevaluate the rate increase by Feb. 1.
Both WAPA and ratepayers will benefit from these decisions, Hodge said. WAPA will have the opportunity to fulfill debt obligations and prevent the bond rate from decreasing while ratepayers will see a drop in their utility bill.
In another action, the PSC:
• Approved six power purchase agreements for WAPA’s solar energy project, giving WAPA the green light to begin installing equipment on St. Thomas and St. Croix.
A two-decade partnership with Toshiba International Corp., Lanco Virgin Islands I and Sun Edison LLC will produce a combined 18 megawatts of solar energy for both islands. The project will cost a total $65 million, not including future maintenance, with all responsibilities resting on the three companies.
WAPA will buy the resulting energy from the companies. Rates fluctuate, as they are site specific, but Hodge noted they will cost a “weighted average of 16 to 17 cents per kilowatt hour.”
Madan said residential customers will save between $1 and $2 a month while commercial customers will save between $15 and $16 per month.
Construction is scheduled to start during the first quarter of 2013 and end on both islands in December 2013, at which time the solar sites will be incorporated into the grid. Within the next year WAPA expects to begin generating about 15 percent of its peak load demand with solar energy.
• Gave the Virgin Islands Waste Management Authority “qualified facility” status, allowing it to begin discussions with WAPA about selling energy made from gases under the Bovoni landfill. The action allows WMA to negotiate with WAPA for energy.
“They’re proposing to use some of the energy themselves and sell off the rest,” PSC attorney Sprehn said.
The Bovoni facility will only use about 150 kilowatts of the total 714 kilowatts produced, and will create energy for about 20 years. The project will save the VIWMA almost $1 million each year for 10 years and is funded by a federal stimulus grant.
VIWMA will be ready to sell power to WAPA in six months, according to VIWMA chief engineer James Brown. It is uncertain exactly how much money the project will save ratepayers since WAPA has not yet agreed to buy the energy.
“What they’ll do is collect landfill gas, put gas in a cleaning system, deliver fuel to the engine which will drive a generator. There are no other parties,” Sprehn said.
“We have funding, the facility, equipment in place, everything but WAPA,” said VIWMA’s legal counsel Iver Stridiron. “We’re excited to keep the project moving.”
