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Governing Board Approves Petition for Emergency Interim Electric System Base Rate Relief

(Friday, May 20, 2016)

WAPA GOVERNING BOARD APPROVES PETITION FOR EMERGENCY INTERIM ELECTRIC SYSTEM BASE RATE RELIEF

          In an emergency meeting Thursday, members of the governing board of the Virgin Islands Water & Power Authority ratified a petition WAPA has filed with the Public Services Commission for an emergency interim electric system base rate relief.

          Interim Chief Executive Officer Julio Rhymer Sr. told board members that the emergency filing seeks to improve WAPA’s financial stability and avoid further credit rating agency downgrades while allowing the utility to become current with some of its outstanding payables.

           Rhymer said that the rate relief filing with the PSC comes against the backdrop of continued liquidity problems, an overall cash shortfall due to outstanding receivables and increasing operating costs while WAPA awaits final approval by the PSC of a base rate increase. “As a result, WAPA has been placed on a rating downgrade by Fitch Rating Agency and on review for downgrade by another rating agency, Moody’s.”

           The emergency rate increase WAPA is seeking will allow the Authority to begin to accrue the levels of cash on hand that both rating agencies have called for. “We need to have 45 days of cash on hand, approximately $34 million, to avoid a further downgrade of our ratings and to pay our outstanding bills. The industry norm is to have 85 days of cash on hand and we are nowhere near that level at this point. We are at a place where we simply cannot await the outcome of pending base rate case to stabilize our finances,” Rhymer said. 

           He said continued rating downgrades will have detrimental effects on WAPA such as its relationships with fuel and supply vendors and with ongoing capital projects such as the propane conversion that is continuing in both districts.

           Rhymer explained that the emergency base rate relief will translate into a 2.687 cents increase per kilowatt hour to WAPA’s customers, both residential and commercial. The increase will represent a $13 per month hike on the average residential electric bill. As we look back to a year ago, electric rates have dropped significantly…approximately $115 per month on the average residential bill assuming usage of 500 kilowatt hours per month. “When this proposed increase is factored into the present cost of electricity, our rates will still be some 20 cents per kilowatt hour less than they were one year ago.”  Rhymer said the rate increase, assuming PSC approval, would take effect on July 1 and remain in effect until the 45 days of cash on hand is achieved. At that point, the increased rate will be lowered to a level to be determined by both WAPA and the PSC as the Authority continues the effort toward building a total of 85 days of cash on hand to satisfy the credit rating agencies.

          The board’s approval of the petition was unanimous. Thursday’s meeting was held via video conference from WAPA’s offices on St. Thomas and St. Croix.  

           Board members in attendance included Chairman Gerald Groner, Esq., Vice Chair Juanita Young, Secretary Noel Loftus, Commissioners Devin Carrington and Gustav James, Director Marvin Pickering and Cheryl Boynes Jackson. Member Elizabeth Armstrong was excused.

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