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PSC Sides with Consultants, Lowers Electric LEAC and Takes Out Money for Maintenance

A petition by the V.I. Water and Power Authority to lower the electric Levelized Energy Adjustment Clause rate was discarded Tuesday in favor of a proposal from Public Services Commission advisors Georgetown Consulting Group, who recommended that money set aside in consumers’ monthly bills to cover maintenance and the cost of spare parts be removed.

At the PSC’s last meeting, the commission voted to remove that portion of the rate financing mechanism, a small surcharge included in the LEAC that would have allowed WAPA to bring on an independent agency (IAC) to monitor the day-to-day operations of the utility. At the meeting in November, WAPA officials testified that proposals received from companies that could do the job were too expensive and what had so far been collected was not enough to cover the cost.

On Tuesday, based on additional recommendations from Georgetown, the PSC voted to further reduce the rate financing mechanism so that it took away funds that are collected to cover WAPA’s maintenance and spare parts costs, which the authority has said is needed to keep its plants operating at an efficient level. Commission members said they found the RFM had “exceeded its useful life” and was no longer needed as an emergency charge, but said WAPA could seek to cover the costs through the base rate, which will be up for evaluation next month.

“I think you will see further deterioration of the operating units. I guess we’ll lose our access to capital and we’ll see how it works out,” WAPA Executive Director Hugo Hodge Jr. said in response to the PSC’s comments. “I think this is a big mistake. I warn you, the rating agencies listen every day. They read the newspapers every day and, if we take this lightly, we’re going to be sitting here talking about what could have been because this could cost us the LPG (liquefied propane gas project), the solar … everything.”

Hodge said WAPA’s previous efforts to get an increase in the base rate took more than a year, and any “disconnect” now between reducing the RFM and putting the cost elsewhere could mean “major issues for the authority.”

PSC members asked what could be done to help the authority in the meantime, including the possibility of collecting more of the $34.6 million in outstanding government utility bills. Hodge said that while the authority has been trying to collect, it is still not possible to shut off the government – which includes the territory’s two hospitals and schools.

A recent Senate effort that would have allowed WAPA to bill customers for its streetlight program, which is also a major expense for the authority, failed and since some of the senators that backed the bill were not reelected, Hodge said he doubts it will ever be reintroduced.

In the end, the PSC voted to take out the money for spare parts and maintenance, saying that WAPA could seek to put it in the base rate, and additionally accepted its consultants’ recommendations to lower the electric LEAC by more than what was proposed by WAPA.

Effective Jan. 1, the electric LEAC will drop to $0.279991 per kilowatt hour, instead of the $0.301191 proposed by WAPA, while the water LEAC will also drop to $7.22 per thousand gallons.

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