WAPA Board Approves LEAC Raise Next Quarter

The governing board of the V.I. Water and Power Authority held its regular monthly meeting Thursday at the West Indian Co. conference room on St Thomas. Board Chairman Gerald Groner led the two-hour meeting, which included extensive discussion and the subsequent unanimous approval of four motions ranging in subjects from the payment of advisory attorney fees to the purchase and lease of both private and government-owned land on St Croix.

In his financial report, WAPA Chief Financial Officer Julio Rhymer highlighted the fact that there is currently $50 million in the quarterly deferred fuel balance, a sum that will require a raise in the LEAC for the upcoming quarter.

This was the highest under-recovered balance in recent history, if not the largest, Rhymer confirmed. “We are having serious cash flow problems which affect our ability to maintain our equipment and provide necessary services to our customers,” Rhymer said.

In discussion that followed this report, Executive Director Hugo Hodge added, “Clearly our current system as it stands is broken.”

Attorney fees totaling $1,060,851 were approved for payment to the firm of Skadden, Arps, Slate Meagher & Flom for legal assistance to WAPA in the preparation of numerous proposals, including a power purchase agreement and letter of intent between the Puerto Rico Electric Power Authority and WAPA for the development of a subsea electric transmission facility from St Thomas to Puerto Rico, and power purchase agreements with Alpine Energy Group LLC and Wintdots Development LLC for a geothermal facility.

Also approved was the purchase of parcels in Estate Penitentiary, St Croix, for $67,367 which the authority has deemed necessary in order to construct and operate the reverse osmosis plant. The new plant, when operational, is projected to significantly reduce WAPA’s cost to produce water. Those savings would then be passed on to the consumer, the board said.

A 20-year lease was approved on approximately 5.19 acres of government-owned property zoned I-1 in Spanishtown for the construction and installation of a substation which would connect with the existing Richmond substation, t he proposed benefits being to reduce the electrical line loss on St Croix.

Board member Noel Loftus introduced discussion raising the question of a lower cost per acre for purchasing privately held land as opposed to the lease of government owned property, the difference being $2.13 per square foot versus $2.37 per square foot.

Hodge answered that question by saying: ”All purchase and leases were subject to payment of fair market value as set by the Department of Property and Procurement.”

A contract was awarded to Island Roads Corp. for $1,299,898 for the construction and installation of electrical ducts, manholes and transformer pad foundations as a part of the Main Street Hazard Mitigation Project on St Thomas.

In Hodge’s monthly report, he asked the board, “Where are the environmentalists when it comes time to speak out about the various large power users who have recently opted to go off-line, but are still utilizing fossil fuels to generate power at their facilities?”

He said it was unfair for the outcry of environmental concern to be directed at only one entity. He warned that the current base rate of consumers would have to change as more large users come off the grid.

Board member and DPNR Commissioner Alicia Barnes suggested that WAPA attend all future Title 5 permit hearings that allow this practice, until such a time as a territorial energy policy be put into place addressing the financial sharing of LEAC costs for all users, not just those currently on the grid.

The LEAC is an acronym for the Levelized Energy Adjustment Clause. The Public Services Commission authorized the LEAC in 1989 to allow WAPA to recover the cost of the fuel oil used to produce power and water. WAPA must file quarterly petitions with the PSC for an adjustment in the LEAC factor in order to recoup fuel cost increases or to pass along the savings if fuel costs decrease.

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