On Tuesday the V.I. Water and Power Authority petitioned the V.I. Public Services Commission to remove consultant report recommendations from December’s fuel surcharge increase, saying the report is wildly inaccurate and that its conditions illegally encroach on WAPA board duties and violate due process.
The PSC approved increases to the Levelized Energy Adjustment Clause fuel cost surcharge on Dec. 18, but essentially copied and pasted 12 recommendations from a 45-page report by Georgetown Consulting Group into the motion. It also made the increase conditional on what WAPA considers vaguely defined new filing requirements and said the increase would be delayed if WAPA was not current with its assessments, which ultimately find their way to Georgetown by way of payment for consulting services. Those assessments currently amount to $239,000.
In the 39 pages of WAPA’s petition and responses to the PSC’s orders, [WAPA Petition for Reconsideration] WAPA Executive Director Hugo Hodge Jr. argued that using the report as part of the PSC order violated V.I. law and constitutional due process because WAPA was given the highly technical report only one business day before the rate hearing and did not have a chance to review and respond in detail.
Hodge also argued that the PSC’s requirement, culled from the Georgetown report, that WAPA provide a detailed and specific plan to achieve the fuel diversification and efficiency strategies the WAPA board recently approved by Jan. 31, is illegal. Hodge said the WAPA board is given that authority by law and mandating comprehensive plans is unrelated to the rate-setting powers given by law to the PSC.
The extent to which the appointed PSC can use the leverage of its rate-setting authority to duplicate the powers of the appointed WAPA governing board has been the subject of several past lawsuits and appeals. The V.I. Supreme Court ruled in 2008 and 2012 against the PSC on similar legal questions. (See related links below)
Hodge also asked the PSC to reconsider its directive that WAPA must meet all minimum filing requirements or the LEAC increase would be delayed. Hodge asked that the requirements be written down in one document, so that WAPA can know for certain what the requirements are, and that instead of automatically halting the increase, the PSC issue a deficiency letter and let WAPA respond to the specific concerns.
Otherwise, if oil prices shoot up and WAPA is not allowed to bill for what it pays for fuel, "this is likely to be harmful to the authority’s customers, in that it may lead to subsequent LEAC filings of a greater magnitude. Also any delay in implementing LEAC rate changes can have dramatic effects on the ability of the authority to meet its financial obligations and operate effectively," Hodge said in WAPA’s petition.
WAPA also disputed many of the factual claims in the Georgetown report, especially its assertions that much of the LEAC increase is due to generator inefficiency rather than fuel prices.
According to Hodge and WAPA, the Georgetown report’s claim that 82 percent of the roughly 6.7 percent increase in the LEAC is due to not meeting efficiency goals is false. They said WAPA alleged 28 percent of the increase (not the total LEAC, but of the increase) is due to generator inefficiency.
WAPA also disputed Georgetown’s conclusions that WAPA’s generators are operating well below efficiency benchmarks set by the Harris Group, WAPA’s consultants.
Georgetown’s "implication that the authority system can be operated at heat rates as low as 9,500 to 10,000 Btu per kWh or lower is not accurate and is misleading to the commission and the public," the WAPA response reads.
According to WAPA, those optimistic projections assume brand new generators, perfect temperatures and conditions as well as a perfect, ideally situated and laid-out electric grid. In reality, the generators are old, the system is split into two unconnected grids, the placement of the generators is constrained, and much past maintenance has been deferred due to financial constraints, according to the utility.
WAPA also claimed the Georgetown report "is not correct in stating that the authority operates ‘at efficiencies below the standards set by the authority’s consultants, Harris Group.’ The efficiency of the authority’s operations has been reasonably consistent with the estimated ranges of expected efficiency presented in the Harris Report," which WAPA said "considered the real world issues that impact the efficiency of the St. Thomas portion of the authority’s system."
The WAPA response included graphs for St. Thomas/St. John and for St. Croix that show Harris projecting the "best expected heat rate" to vary between 13,000 and 14,000 Btu per kWh and the "worst expected heat rate" to fluctuate around 23,000 Btu per kWh. WAPA’s actual rate fell between the two extremes and has been gradually improving since 2010, according to the information it included with its response.
The PSC issued a short response to the WAPA petition on Wednesday, saying that "as a responsible regulatory body” it “cannot rush to judgment” and, “consequently, it cannot provide a detailed response” to WAPA’s filing “at this time."
According to the PSC it will consider WAPA’s petition for reconsideration within 30 days, and will schedule a public meeting on the matter "shortly."
