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Charlotte Amalie
Thursday, June 20, 2024
HomeCommentaryOpen Forum: It's Time to Explore Full or Partial Privatization of WAPA

Open Forum: It’s Time to Explore Full or Partial Privatization of WAPA

Despite the best intentions and efforts of both the administration and the leadership of WAPA, the authority is still unable to provide reliable and affordable power to the community.  All three islands are plagued by systemic blackouts that occur regularly and have for decades. The damage to families and businesses by WAPA’s failures is incalculable.

On Monday, April 22, Gov. Albert Bryan Jr. declared a state of emergency to avoid a catastrophic shut down of the V.I. Water and Power Authority. This event underscores the precarious fiscal condition that WAPA is in.

A utility that operates at the brink of insolvency, undercapitalized and underfunded cannot get to the promised land. WAPA’s gross income will continue to drop precipitously as more hotels run turbines to generate power, and as businesses and families move to solar battery systems to avoid the grid. The most recent failure of government agencies to pay $11 million to WAPA for services rendered only exacerbates the revenue shortfalls. Stated simply, WAPA’s monthly income does not cover its operating expenses by a wide margin and is not sustainable.

The $95 million fully funded federal Wartsila project, which has been talked about for years as the answer to WAPA’s unreliability, is still not complete. The four Wartsila generators that arrived on island in 2021 sit idle at the Randolph Harley Power Plant.

To its credit the Bryan administration has protected rate payers over the past five years by subsidizing WAPA’s fuel costs to the tune of $100 million. Despite these admirable efforts, utility bills remain exorbitantly high and take a huge chunk out of personal income. Money that families should be spending on other important essentials must go to paying the power bill. The same applies for businesses where a disproportionate share of income goes to paying utility costs.

The administration should explore full or partial privatization with a statutorily empowered Public Services Commission regulating rates for the protection of the consumer. Privatization carries with it a level of expertise that the territory would otherwise not have access to. Although there are risks, a strong PSC could mitigate potential pitfalls for the territory.

Recently, V.I. Port Authority Executive Director Carlton Dowe formed a public/private partnership with a consortium of investors to secure the necessary funding to create world class airports for the territory with the support of Gov. Bryan and the executive and legislative branch of government. The administration should also explore this creative financing model with respect to restructuring WAPA.

There are a myriad of financial agreements or partnerships that the administration could enter into with a U.S. or multi-national power company  to increase efficiency and reliability without ceding total control or ownership and minimizing financial risk. The administration must be willing to think beyond the status quo.

It was almost 30 years ago after Hurricane Marilyn that Southern Electric made a substantial offer in excess of $150 million in cash to acquire an 80 percent stake in the assets of the utility for a period of 25 years. Southern Electric’s offer included the forgiveness of $31 million in debt that government agencies owed WAPA, the assumption of the authority’s bond debt, and retention of all union employees.

The Virgin Islands Government would have earned dividends yearly worth millions for its 20 percent stake. The VIG would also have retained ownership of the poles and line transmission through a lease agreement that would allow the VIG to apply for FEMA assistance in the event of future hurricane disasters.

The Southern Electric asset lease agreement with WAPA, strongly championed by then Gov. Charles Turnbull failed in a close Senate vote. Would the electrical infrastructure and rate payer be better off today had that deal succeeded?

It is time for the administration and legislative branch to take a hard look at the opportunities presented by privatizing some or all utility services in the territory. The economic prosperity of the citizens and businesses of the Virgin Islands hangs in the balance.

— Filippo Cassinelli, St. Thomas

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