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WAPA BOARD DISCUSSES AUTHORITY’S CURRENT FINANCIAL STANDING IN MONTHLY MEETING

(Saturday, November 17, 2012)

 

The Virgin Islands Water and Power Authority Governing Board received an update on the financial position of the utility today. Chief Financial Officer Julio Rhymer reported on performance indicators for the electric and water systems, for the quarter ending September 30, 2012. During this period, Rhymer said that while megawatt hour (MWH) sales for the electric system were above that anticipated for the first three months of the fiscal year 2013, by almost 3000 MWH, there was a decrease in sales as compared to the same time period last year by approximately 5000 megawatt hours. Rhymer attributed the declining sales to an increase in customers’ conservation habits, a reduction in the customer base in part due to the exodus of St. Croix residents after the closing of the HOVENSA refinery operations earlier this year, and the increase in the use of green technology (solar and wind) by WAPA’s customers. Water sales also declined by almost 5200 kilo gallons over sales during the same time period in 2011. As a result, Rhymer said the Authority is experiencing cash-flow issues. “We are drawing more from the line-of-credit to survive,” said Rhymer.

Governing Board members explored the continuing impact of volatile fuel oil prices on the Authority’s bottom-line. One of the major challenges faced by the Authority is a continual increase in the deferred fuel balance, which now stands at $50 million. A deferred fuel balance occurs when the Authority is unable to collect from its customers, through the fuel surcharge, the actual cost of the fuel oil it purchases to produce water and power. Executive Director Hugo V. Hodge, Jr. said that the most recent increase in the deferred balance occurred during the previous LEAC period from July through September. For that filing, WAPA estimated fuel charges to be $117 per barrel, and the PSC estimated $101 per barrel, but the actual came in at $123 per barrel. Governing Board Chair Gerald Groner emphasized that when the Authority has to use operating revenues earmarked for maintenance to pay for fuel, and must wait for long periods to recoup those costs, it impacts the Authority’s ability to provide reliable service. Hodge told the board that despite the challenges in meeting the fuel oil bill, WAPA has been able to stay current with payments to HOVENSA since June 30, 2012. He told the board that the last HOVENSA shipment to the authority will be Nov. 23, 2012, as the new fuel supplier Trafigura A.G. will start supplying fuel to the utility on Nov. 29, 2012. Hodge previously reported that the price WAPA will pay to Trafigura for fuel oil in December will be approximately $5 per barrel less than would have been paid to HOVENSA in that month.

In accordance with the requirements of the Public Services Commission and the Authority’s bond covenant, the utility must file a base rate case every 5 years. Today, the board authorized the Executive Director to file a Water System Rate Case petition, requesting a base rate increase, to go into effect on July 1, 2013, of $1.4 million or 5.4% increase and a line loss capital surcharge of $900,000 or $.71/kgal sold. Hodge says because of the subsequent LEAC decrease in the water system due to the use of reverse osmosis method of purifying water, customers will realize a reduction in their bills once the base rate goes into effect. In addition, the board approved the Executive Director to file an Electric System Rate Case petition, by requesting a base rate increase of $18 million or a 5.1% increase effective July 1, 2013. The increase will amount to an additional 2.5 cents per kWh. For the average residential customer using 400 kWh per month, this amounts to an increase of about $10 per month. Both increases will meet the electric and water system’s operating, capital investment and financial needs. If approved by the Public Services Commission, the increases will go into effect at the start of the 2014 fiscal year. The Authority was last granted a permanent base rate increase in 2009 and in August 2012 a temporary base rate increase was authorized by the PSC.

Other approved projects include:

  • A 20-year lease agreement with the Virgin Islands Government for the leasing of approximately 5.19 acres, zoned I-1 industrial, described as Plot 2A and Plot 3B, in Estate Spanish Town, St. Croix for a price not to exceed the annual total rental rate of $44,370 equating to a monthly rental of $3,897 or $2.37 per square foot. The property lease is needed for the design, construction and installation of a 69/25kV substation on the island of St. Croix, which will reduce line loss on St. Croix and provide better reliability and system protection for the Authority’s production and distribution system on St. Croix.
  • The purchase of parcels No. 11A and 11D, in Estate Penitentiary from the Virgin Islands Government, in the amount of $67,361.59 for the siting, construction and operation of the Reverse Osmosis Facility on St. Croix by Seven Seas Water Corporation. The 2.27 acres of land is situated across from the southwest entrance of the Richmond Plant.
  • A contract with Island Roads Corporation for $1,299,898 to construct and install electrical duct banks, manholes, pad-mount switchgears and pad-mount transformer pad foundations for the Main Street Hazard Mitigation Project on St. Thomas. The relocation of the overhead distribution power lines underground will improve the reliability of the electrical power system in the Main Street area. Project work locations include Dronningens Gade, Norre Gade, a section of Store Tvaer Gade, Raadets Gade, Post Office Alley, Hibiscus Alley, private properties and a section of Veterans Drive.
  • Payment to Skadden, Arps, Slate and Meagher & Flom, LLP in the amount of $1,069,851 for contract SC-25-10, for work that was completed on preparing requests for proposals for the purchase of solar electric energy and the preparation of a model power purchase agreement, interconnection agreement and other supporting documentation. This payment will allow for continued engagement of personnel, and legal advice/services with the legal firm.
  • A contract with ABC Concepts, Inc. in the amount of $1,111,000 for the cleaning of Tank 12 at the Randolph Harley Power Plant on St. Thomas, and disposal of waste from the tank to a hazardous waste site approved by the Environmental Protection Agency. The tank will be used to store No. 2 fuel oil shipments from the Authority’s new fuel supplier. Use of Tank 12 will allow for a larger supply of No. 2 fuel oil storage, which will provide adequate supply for both WAPA plants.

In the WAPA Working for You segment, which familiarizes the board with the role of WAPA employees and lets those employees see how the board functions, Legal Administrative Assistant Delores Donovan outlined her duties. Donovan, who has worked as a Paralegal for more than 20 years, said her department thrives on deadlines. She said having a level-head, the ability to think outside of the box and knowledge of the law are all attributes that are needed in her chosen field of work. Besides general administrative duties, Donovan described that the Legal Department’s staff of four reviews legal documents, pulls cases to support those documents, prepares legislative testimony, and appears in Small Claims Court on behalf of the Authority.

Attending today’s meeting were Board Chair Atty. Gerald Groner, Board Secretary Noel Loftus, Licensing and Consumer Affairs Commissioner Wayne Biggs, Energy Office Director Karl Knight and Planning and Natural Resources Commissioner Alicia Barnes. Board Vice-Chair Juanita Young, Donald Francois, Cheryl Boynes-Jackson and Brenda Benjamin were excused.

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