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WAPA on Target to Convert to Propane First and Liquid Natural Gas

(Tuesday, January 29, 2013)

VIRGIN ISLANDS WATER AND POWER AUTHORITY ON TARGET TO CONVERT TO PROPANE FIRST
AND THEN LIQUIFIED NATURAL GAS AS A LESS EXPENSIVE ENERGY SOURCE

The Virgin Islands Water and Power Authority is on target to sign a contract in April with at least one of the respondents to the Request for Qualifications (RFQ) issued last October for liquefied petroleum gas or propane providers. The Authority entered the RFQ process to identify companies capable of implementing and operating a solution to supply liquefied natural gas and/or propane. Executive Director Hugo V. Hodge, Jr. reported to the Governing Board Monday that after fruitful meetings in Houston, Texas last week with the bidders, WAPA will move expeditiously to maximize its future ability to burn diesel, propane (LPN) and/or liquefied natural gas (LNG). Any combination of the three may be possible depending on the future market conditions and availability of supply. Thirteen companies responded to the RFQ and the three shortlisted companies selected for the propane option are Trafigura AG, Vitrol, and Geogas/Polaris. The Authority will provide the companies with the additional information they require in order to submit a detailed technical and commercial proposal for a turnkey solution for a reliable LPG supply, storage and transportation infrastructure, and turbine conversion to tri-fuel capability.

The Authority received eight responses to provide liquefied natural gas and Hodge’s team also met last week with the four shortlisted companies—Pacific Rubiales, Gasfin, LNG Enterprises, and Cheniere. The Authority intends to proceed in parallel in acquiring both LPG and LNG. While large scale LNG is currently available, small to mid-size LNG has not been as fully developed for exportation from the U.S or Caribbean region and is not as readily accessible to meet WAPA’s requirements. Liquefied petroleum/propane at the current market pricing makes it an attractive alternative to fuel oil and is in line with the Governing Board’s recently published Energy Production Action Plan, said Hodge.

Board Chair Gerald Groner said that the Authority is looking ahead in its planning as the utility intends to convert its generators to tri-fuel-- LPG, LNG and diesel, so that it can readily respond to whatever presents the best cost savings for the utility and its customers. The successful bidder will finance the conversion and will have to ensure that the LPG infrastructure design will permit WAPA to utilize the same infrastructure for both LPG and LGN and not preclude WAPA technically or economically from transitioning from LPG to LNG at some point in the future. The LPG conversion would take about 18 months after the contract is signed including the necessary time needed for agencies such as the Environmental Protection Agency to grant air quality approvals and the V.I. Department of Planning and Natural Resources to approve construction permits. Hodge also said that it is possible that a contract with an LNG provider could be ready for signing by midsummer. In the coming weeks, the seven shortlisted respondents will make site visits, and also provide more specific pricing information.

In other matters, Hodge reported that the Authority has prepared a response to the Public Services Commission’s recent LEAC order that became effective this month and to the report from the Commission’s technical consultants on the matter. The Authority had only been given one business day to review the report before the Commission met in December to discuss its contents. WAPA in consultation with its own technical consultants contends that the Georgetown Consultant Group’s report was misleading, incorrect, unsupported by any documentation or evidentiary support and counterproductive. The three principal issues that the Authority takes exception to are related to the report’s characterization of the reasons for the increase in the fuel surcharge referred to as the LEAC (levelized energy adjustment clause) factor, the cause of the deferred fuel fund balances, and the efficiency of plant operations. The report which addresses the errors in Georgetown’s report and provides a corrected analysis by the Authority will be sent to the Public Services Commission today and also released to the public, Hodge said.

The Governing Board also took the following actions:

Approved for submission as part of the Rural Utility’s Services (RUS) loan application process for the Advanced Meter Infrastructure (AMI) and Distribution Automation (DA) project a 5-Year Capital Improvement Plan for the electrical division, the Work Plan for Core Electric, Distribution Automation, AMI and Communications Infrastructure and related Environmental Report, and the VIWAPA Load Projections/Load Forecast evaluation. THE AMI/DA project will improve the Authority’s overall operational efficiency, reduce energy theft, improve the billing process, reduce line loss and introduce the technology of smart metering for energy savings programs to the Authority’s customers. The AMI system is projected to bring additional net yearly revenues of $26.6M to the Authority.

Approved the repair and re-assembly of Unit #11 Steam Turbine for return to service by ARM Services, LLC and authorized the negotiation of a repair agreement. The return of Unit #11 in the Harley Plant will provide substantial operational fuel savings at approximately $585,000.00 per month and in four months will pay back the cost of repairs at $1,947,139.

Amended the Scope of work with SACI (formerly R.W. Beck) to provide for auto staking implementation, and authorized a project completion extension for one year to January 2014 at no additional costs. The auto staking will further enhance the Authority’s GPS/GIS project by providing a mechanism to automatically update maps and other aspects of the Authority’s outside plant. The GPS/GIS system is currently providing the improvement of asset inventory in WAPA’s disaster recovery practices, targeting line loss reduction and increasing efficiency in business processes.

Approved the purchase of underground high voltage electric cable and associated materials from TEPCO for the Christiansted Phase II underground project at a cost of $362,064.

Approved the purchase of transformers from Electric Supply of Tampa, Inc. for the Christiansted Phase II project at a cost of $217,440

Authorized the Executive Director to seek funding in the amount of $2,339,000 to contract CDR Maguire Inc. to perform an Environmental Assessment of the Puerto Rico-Virgin Islands Interconnection project. This impact study is mandatory as a next step in securing permitting for the subsea cable connection which has been determined to be feasible and important to establishing a Caribbean grid. The connection will reduce the cost of energy for the utility’s customers, improve hazard mitigation against disastrous weather and other events, and allow more alternative energy to be put on WAPA’s system. The interconnection is also important in the event of equipment failure in the power plants because it will provide a backup for continuous service to utility customers.

Rescinded a September 2012 approval to purchase a used bucket truck from PECO International for $125,000 and approved the purchase of two used mechanically sound bucket trucks from 1-80 Equipment, Inc. for a total price of $158,000.

Authorized payment of Calendar Year 2011 Title V Permit Emissions fees to the Department of Planning and Natural Resources in the amount of $234,105 for the Estate Richmond and Harley power plants. The annual payment of emissions fees permits the Authority to remain compliant and in good standing with the Clean Air Act.
In the WAPA Working for You segment, Antoinette Baptiste Kragel, Administrative Assistant in the St. Thomas Water Division presented on her position as support for the Water Director Noel Hodge and several civil and mechanical engineers. Baptiste-Kragel, who holds a master’s degree in Business Administration, is responsible for assisting in the preparing of bid documents and reports, prepares correspondence, serves as a liaison with contractors, vendors, customers and other departments, and organizes training opportunities for the staff of the water division.

Attending yesterday’s meeting were Groner, Board Secretary Noel Loftus, Planning Committee Chair Energy Director Karl Knight, Licensing and Consumer Affairs Commissioner Wayne Biggs, DPNR Commissioner Alicia Barnes, Donald Francois and Cheryl Boynes Jackson.

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