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WAPA Board Approves Fuel Hedge Program

(Tuesday, January 13, 2015)

The Virgin Islands Water and Power Authority Governing Board voted at a special meeting on Tuesday to reestablish an Electric System Fuel Hedge Program.  The program, which is equivalent to taking out insurance the Authority’s fuel costs, seeks to cap a portion of the fuel costs in light of the reduction of fuel oil and LPG prices on the world market.

 A fuel hedge program existed at the Authority from July 2006 until early 2011.  Tuesday’s governing board action authorizes the Authority to reestablish the program, and allows for hedging of fuel oil, LNG, LPG and any and all other fuel sources used by the Authority presently, or in the immediate future. 

 The Authority firmly believes that given the decreasing cost of fuel, the time is right to re-establish the fuel hedge program to lock in current market rates for the last two quarters of 2015 and all of 2016.  “It’s advantageous for us to execute hedges now,” said WAPA Chief Executive Officer Hugo V. Hodge Jr., “to lock in the lower prices that will exist for about one and a half years, and will be a great benefit to ratepayers.”  Hodge said the hedging will start with small quantities, but will gradually ramp up to 50% of the Authority’s volume. 

 The benefit of the hedging program will be recognized in the Authority’s July LEAC filing, which will represent yet another period of savings as a result of switching to propane for power generation. Hodge noted that while customers currently receive a saving in the January 1 thru June LEAC, which reflects a portion of the switch to propane, the July 1 LEAC period will be entirely based on propane. The current rate of electrical service for residential customers is 39 cents per kilowatt hour and commercial clients are presently paying 42 cents per kilowatt hour, which is down from 51 cents for residential service and 56 cents for commercial users, as recent as September 1014.

 Board members in attendance at Tuesday’s Special Meeting were Chairman Atty. Gerald Groner, Vice Chair Juanita R. Young, Secretary Noel Loftus, Donald Francois, Cheryl Boynes Jackson and Elizabeth Armstrong.

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