In her bi-weekly column, “State of the Territory,” former Sen. Janelle K. Sarauw delves deeper into issues of concern for V.I. residents.
The V.I. Legislature voted to override the vetoes of two critical bills I sponsored, originally vetoed by the Governor in May 2021 and overridden in August 2021. One bill, 34-0021, now Act 8471, mandates a turnaround company for the Water and Power Authority (WAPA), and the other, 34 – 0026, now Act 8472, refines WAPA’s governing board qualifications while reducing its quorum size. Both became law in August of 2021 by virtue of a veto override.
The Need for an Apolitical and Competent Board
My advocacy for the latter bill stemmed from an October 1, 2019, Senate hearing, where Director Joel Lee, appointed by the Governor to the WAPA board, admitted zoning out of board meetings due to the technical complexity. This revelation underscored a significant issue: the board was filled with cabinet members who could potentially be influenced by gubernatorial directives. Essential service providers like WAPA should operate apolitically, free from political influences, to ensure unbiased and effective governance. This concern was not unique to the current administration but extends to any gubernatorial officeholder. Although the Governor challenged this bill, the Superior Court ruled in favor of the Legislature. However, the Governor has since appealed to the Supreme Court, and we await their decision.
Justification for a Turnaround Company
Systemic issues have long plagued WAPA, and delaying reforms is no longer an option. The residents of the Virgin Islands deserve transparency and accountability regarding the state of their utility provider. To make informed decisions, we need a clear and accurate starting point. Historically, WAPA’s leadership has not been forthcoming with critical information, particularly concerning fuel contracts and the controversial $145 million Vitol contract buyout. Despite numerous private and public meetings, the essential data needed to formulate sound policy remained elusive. Consequently, the Senate often had to make decisions based on incomplete information, a situation that is unacceptable given the substantial financial stakes involved. This lack of transparency made it difficult for me, both as a Senator and a political scientist, to support additional financial infusions into WAPA without a comprehensive understanding of its operations and financial health.
Legislative Action and Outcomes
In collaboration with Senators Vialet, Francis, and Frett-Gregory, I used my Senate allotment to hire an attorney to draft legislation mandating a turnaround company for WAPA. This bill required the company to submit a detailed report within 120 days of hire, covering WAPA’s financial status, ongoing projects, organizational structure, and energy plans. Despite the Governor’s veto in May 2021, the Legislature overrode it in August 2021, recognizing the urgent need for an independent assessment. We were intentional in not funding the turnaround company ourselves, clearly indicating that the Governor could use Public Finance Authority (PFA) funds for this purpose.
Fast forward to June 2024, after significant resistance, the PFA, chaired by Governor Bryan, selected Ernst & Young as the turnaround company. This decision, albeit reluctant, was seen as a final effort to resolve WAPA’s ongoing issues. This selection marked the Governor’s agreement to follow the law established by the Legislature’s override in 2021.
What Act 8471 Says
SECTION 6. (a) As used in this section. “turnaround management company” means a company that:
- Has experience in the financial recovery of poorly performing utilities;
- Has experience in improving the performance of utilities and utilities operations to include production, generation, and operational efficiency;
- Has experience with power and water utility planning, performance, and process improvements; and
- Does not have a current or previous relationship, within the last five years, with the Virgin Islands Water and Power Authority, its Governing Board, or any member of its Executive Leadership Team.
Responsibilities of the Turnaround Management Company:
- Assessment Timeline:
- Not later than 90 days after the enactment of this act, the Virgin Islands Water and Power Authority’s Governing Board shall hire a turnaround management company to conduct an assessment of the Authority’s status.
- Not later than 120 days after being hired, the turnaround management company shall submit a comprehensive report to the Legislature and the Governor.
- Assessment Requirements:
- An account of the financial status of the Authority.
- The status of all ongoing programs and projects at the Authority.
- An assessment of the current organizational and management structure of the Authority.
- An assessment of all energy plans considered by the Authority, which provide for appropriate base rates.
- An assessment of all debt consolidation and management plans considered by the Authority.
- An assessment of all water quality and distribution plans, including clean water standards and effective distribution to consumers.
- An assessment of all plans to increase service quality standards at the Authority and implement sound policy, rules, and regulations for consumer protection.
- Turnaround Report:
- Not later than 60 days from the submission of its initial assessment, the turnaround management company shall submit a Turnaround Report to the Legislature and the Governor, including:
- Recommendations for short-term measures to reduce the Levelized Energy Adjustment Clause (LEAC).
- Recommendations for gradually reducing the base rate over a 24-month period.
- Recommendations on how best to incorporate renewable resources for the generation of electricity and water and reduce dependence on fossil fuels within five years.
- An organizational plan, including an internal restructuring plan of all divisions.
- A debt consolidation and management plan.
- An energy plan that provides for appropriate base and LEAC rates.
- A water quality and distribution plan that includes assessing clean water standards and effective distribution to consumers.
- Not later than 60 days from the submission of its initial assessment, the turnaround management company shall submit a Turnaround Report to the Legislature and the Governor, including:
- Implementation and Reporting:
- The turnaround management company shall work with the Authority and the Governing Board to implement the recommendations.
- The Governing Board shall provide quarterly assessment reports to the Legislature and the Governor, detailing the status of the Authority and projections in complying with the Turnaround Report.
Looking Ahead
Within 120 days, Ernst & Young is expected to deliver a comprehensive report with recommendations on reducing energy costs, incorporating renewable resources, restructuring the organization, consolidating debt, and improving water quality and distribution. This turnaround company initiative, mandated by Act 8471, aims to bring much-needed clarity and direction to WAPA’s operations. Governor Bryan acknowledged the Legislature’s crucial role in this initiative, recognizing the value of a thorough, independent review to uncover and address previously unknown issues.
In conclusion, the establishment of the turnaround company represents a significant step towards restoring WAPA’s integrity and efficiency. This initiative is designed to address systemic issues directly and promote transparency, ultimately ensuring that WAPA can provide reliable and affordable services to all residents of the Virgin Islands. By prioritizing transparency and accountability, we can foster a more robust and trustworthy utility service for our community.
