Chamber Opposes WAPA Rate Increase, Supports Government Paying Its WAPA Bills

St. Thomas-St. John Chamber of Commerce statement:

The St. Thomas-St. John Chamber of Commerce has had the opportunity to meet with Water and Power Authority executives a number of times over the past months to learn more about the utility’s short-term and long-range plans to improve service reliability and reduce costs to residents. WAPA’s three to five year plan includes many laudable initiatives, funded by FEMA and HUD, that will improve efficiency and reliability of the grid such as shifting to underground power distribution, installing composite poles on all islands, continuing to shift to more efficient power generation using propane as the primary fuel, and installing over 60MW of solar capacity in the Territory. All these initiatives are expected to reduce the long-term cost to residents but will take time to implement and realize the benefits.

The Chamber supports these initiatives but is gravely concerned that the current debt load ($500 million) and other third-party liabilities (>$200 million) put WAPA in a very fragile financial position and jeopardizes its ability to implement these changes. Based on the most recent financial forecast provided to the Chamber, WAPA is expected to generate a $30M+ operating loss in 2020, driven largely by a deterioration of customer revenue caused by grid migration (shift to solar, etc.) and hurricane related impacts (hotels being offline, etc.). And since the majority of WAPA’s annual operating expenses are fixed in nature (debt service, fuel and contractual expenses, critical personnel), there is little opportunity for meaningful expense reduction to cure this. Last, the past failures of the Government of the Virgin Islands entities to pay WAPA in a timely manner hurts all of us. The hospitals until earlier this month owed WAPA $22.5 million, which essentially shifts these costs onto our residents and businesses. While we acknowledge that the GVI has kept current with WAPA since mid-2018, GVI entities still owe WAPA over $7 million. These amounts need to be paid and the GVI needs to remain current with WAPA.

It is therefore the Chamber’s position that the financial woes of WAPA will not be cured with another rate increase to its customers. Such an increase may temporarily ameliorate the operating deficit, but the ongoing migration of customers off the grid combined with an unsustainable debt load will suffocate the utility unless major structural changes are made such as:

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A comprehensive government strategy for the payoff or relief of the debt load must occur – we are supportive of the strategy by WAPA to increase the base rate by $.03 while at the same time reducing the LEAC by the same amount (which is a net neutral or no impact to customers) in order to gain access to more favorable capital markets to facilitate debt refinance.

A complete road map, with a financing strategy, for efficient and less costly power generation using micro-grids, renewables and other power sources.

We recommend that investments be made to update systems and processes so that the appropriate information is readily accessible. It is our expectation that basic information can be provided easily, perhaps in real time, and will not constitute an undue burden, which is key to providing a strategic response to the crisis at hand.

We therefore request that the Public Service Commission reject any request for a net rate increase until WAPA and the VI Government develop a complete plan, vetted by external professionals, to permanently address these issues.

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