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Saturday, October 24, 2020
Home News Local news PSC Pushes Proposed WAPA Rate Increase to October

PSC Pushes Proposed WAPA Rate Increase to October

The possibility of the PSC ruling on a WAPA request for a rate increase brought out a crowd of demonstrators. (Source photo by Bethaney Lee)
The possibility of the PSC ruling on a WAPA request for a rate increase brought out a crowd of demonstrators. (Source photo by Bethaney Lee)
Activists wave signs protesting the proposed WAPA rate increase outside Wednesday's meeting. (Source photo by Bethaney Lee)
Activists wave signs protesting the proposed WAPA rate increase outside Wednesday’s meeting. (Source photo by Bethaney Lee)

Protesters crowded both inside and outside the Public Service Commission during Wednesday’s meeting, where a proposed Water and Power Authority base rate increase was scheduled to be acted on. Instead, the measure was continued until Oct. 3 due to concerns of WAPA mismanagement and potentially crooked loans.

Commissioners said WAPA had not furnished the appropriate documentation for them to make a decision.

Sen. Alicia Barnes, who sits on the commission’s board, said that for something of this magnitude, “without the transparency needed, I cannot make a decision.”

But what does this mean for Virgin Islanders who, according to WAPA Executive Director Lawrence Kupfer, will be met with rolling blackouts if the utility does not pay its debts to Glencore Ltd. and VITOL, and the two commodity companies cut off the territory from further fuel? WAPA owes the two companies and other vendors a total of more than $100 million, Kupfer said.

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Because of WAPA’s financial condition, islanders can expect “if VITOL stopped supplying propane, our rates will have to go up from 43 to 49 cents a kilowatt per hour,” Kupfer said. “APR Energy has three generators here in St. Thomas. If we can’t pay them, they would stop producing power, and that would mean we would not have enough generation here in St. Thomas to meet our average demand of 40 megawatts or our peak, which is closer to 50 megawatts. So, we would be in a situation where we would have rolling black outs. Glencore is our no. 2 oil supplier, and people need to understand we have two fuel suppliers that we are under serious financial condition with. Those are the only two suppliers we have. If both of those were to cut us off, we would have no fuel for St. Croix or St. Thomas. That is really how dire the situation is.”

Chair Raymond Williams said it was hard to believe Kupfer when “we are dealing with major trust issues” as it pertains to WAPA decisions. “I personally believe the sale of ‘if we don’t approve the rates then the island is going to go dark’… is just trying to evoke fear in our community and is disingenuous.”

A protester signals his dissatisfaction with WAPA. (Source photo by Bethaney Lee)
A protester signals his dissatisfaction with WAPA. (Source photo by Bethaney Lee)

But Kupfer was not the only one who provided a dark vision of what the island’s future utility concerns could hold.

Larry Gawlik with Georgetown Consulting Group Inc. said WAPA’s proposed policy “solves the immediate problem associated with the VITOL notice in the fall, there’s no question about that. However, it doesn’t do much to restore WAPA’s financial health.”

“It should be viewed,” Gawlik said, “as kicking the can down the road until the next crisis which will be shortly around the corner. It doesn’t solve WAPA’s problem or ability to address its record of banking overdrafts, its lack of cash reserves, its aged payables to other fuel supplies or vendors … liabilities and its own capital needs not being funded by the feds. At current energy sales levels and at the current state of the rates, it is highly unlikely that one is going to see any substantial increases in cash due to increased sales.”

Gawlik wasn’t the only one who had concerns about WAPA’s proposed policy changes. Commissioner Andrew Rutnik, who was a former WAPA board member, said there were things that needed clarity in this situation. He also said there was too much misinformation about what the LEAC represents.

“A LEAC is the ability of the utility to collect from each of its ratepayer’s money to pay for fuel. So, the question is why do we owe Glencore so much money? Why do we owe these vendors so much money … if the ratepayers are already paying for it? So, in essence, I sense that we are going to have to pay for it twice,” Rutnik said.

When Kupfer replied that perhaps WAPA doesn’t collect the monies from ratepayers fast enough, Rutnik interrupted and said no.

“No, you did collect the rates. You just didn’t use it for the correct purposes, otherwise you wouldn’t owe the vendors. I don’t think you can dance around that one,” Rutnik said.

He added that WAPA had made terrible mistakes, referring to choices like the $20 million spent for a unit that never produced. Rutnik also dismissed Kupfer’s accusations against the last hurricanes being a reason WAPA was in such a financial spiral, telling Kupfer the hurricanes were a blessing as the money allocated from FEMA has kept WAPA afloat.

Commissioner Kent Bernier said the federal government had already given WAPA $1.2 billion and said what was happening was “willful blindness.”

“I’m sitting here, but I’m not comfortable … you don’t even have an action plan submitted yet,” Bernier said.

“You see all these consultants here? We would not have to have hired them if WAPA was doing their job,” Bernier said.

Vice chairman David Hughes said the public needed to know what the alternatives to WAPA rate hikes might be.

“There are suppliers available and commodities that exist to address situations just as we have here that address, what are arguably and in an industrial sense, small power loans,” Hughes said. “He (Kupfer) has been advised that such things are feasible and with additional study could provide an alternative … nowhere in his discussion did he mention the alternatives to paying VITOL.”

“Nowhere in the discussions in front of this committee has Director Kupfer ever used the word ‘securitization,’ which is the process currently used … to refinance all its existing debt and to provide additional capital for the utility to rebuild its inefficiencies.”

Securitization is a financial practice defined by Wikipedia as a pooling of various types of contractual debt and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations. Investors are then repaid from the principal and interest cash flows collected from the underlying debt and redistributed through the capital structure of the new financing.

Hughes said that, through corruption, VITOL has recently brought down the governments in Brazil and Peru and has been indicted in Puerto Rico. This company, which WAPA is indebted to, has declined to provide the Virgin Islands with the documents for how approx. $50 million worth of expenditures were spent.

“Yet you’re proposing to go into the private market and find a way to pay that vendor without that disclosure and transparency … we would like to know where that $50 million went. Until we have that information, it would be irresponsible of the Public Service Commission of the U.S. Virgin Islands to approve anything.”

The audience, which grew to nearly 60 people within the conference room, began to shake their signs, and rumblings could be heard such as, “We won’t take it anymore,” and “Down with WAPA.”

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1 COMMENT

  1. so VITOL is the problem? Not that yall on an island…and decided to burn diesel for electricity…VITOL is the problem…delaying till October isn’t going to do anything but affect the poor…the rich are simply dusting off their private generators and cleaning the glass on their solar panels and could care less…the poor will suffer from this decision. The Virgin Islands needs a micro nuclear power plant on each island (built to withstand a cat 5…not some cheapo crap that’s going to turn into a Fukishima because politicians want to engage in nepotism with the construction contracts)…outside of that….the rates need to and SHOULD go up. Are some not going to be able to pay…yes…but at least the power will be on in one of their family member’s houses as opposed to a prolonged black out …then everybody is SOL…except for the Frenchies in St John and East St Croix of course…they will be alright.

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