Payment of $45 million was made to Vitol on Monday as part of a settlement agreement between the company, the V.I. Water and Power Authority, and the V.I. government.
“I am pleased to announce today that we have fully satisfied the initial $45 million payment to Vitol on behalf of WAPA as part of the negotiated settlement agreement for control of the propane terminals at the authority’s Randolph Harley plant in St. Thomas and Estate Richmond in St. Croix,” Gov. Albert Bryan Jr. said in a statement Monday night.
“Once completed, this settlement agreement will afford WAPA better financial footing to complete its resiliency projects, which include the addition of a substantial amount of renewable energy to the grid. It also affords the authority the ability to satisfy its obligations to other vendors, and more importantly, put the authority in the position to ultimately deliver more affordable and efficient service to its rate payers,” Bryan said.
The first payment of $45 million to Vitol was due Monday and the final is due in August. The payments are possible because the Legislature, after a bitter debate, and the governor approved a $100 million line of credit to help bail out the utility. WAPA CEO Andrew Smith has said he is optimistic that WAPA will be able to pay the government back with a federal grant.
The measure has not been without controversy, including at a meeting of the WAPA board on Friday at which two of its members voted against the loan.
Smith told the board the agreement would “dissolve” the “problematic” relationship WAPA has had with Vitol, the company that helped the authority convert generators to use propane.
When the deal was signed in 2012, then WAPA Executive Director Hugo Hodge Jr. said the partnership with Vitol would cut costs by 30 percent and WAPA would be able to buy the infrastructure from Vitol for a dollar in 2021. That did not happen.
The matter came to a head in November, when Vitol suspended propane deliveries over the payment dispute, forcing WAPA to revert to more expensive diesel and to purchase spot-market, or short-term, propane supplies.
Meanwhile, the V.I. government has been subsidizing WAPA’s fuel costs to the tune of about $4 million per month in a bid to avoid raising electric rates, which are already among the highest in the United States, according to the U.S. Energy Information Administration.
Smith texted the Source after Friday’s meeting that the total obligation for infrastructure is $312 million, and WAPA had paid $84 million to date. The utility has also paid more than $40 million for the operation of the propane system through a maintenance fee, and almost $400 million for fuel, Smith has said previously.
The negotiated agreement will settle the authority’s debt to Vitol and terminate the contract that required WAPA to buy its fuel from Vitol.
“This is a critical path to continue to fix the single largest debt and expense that the authority has been unable to pay,” Smith told the board. “The finalization of this settlement will enable WAPA to effectively manage fuel supply, remove some risk and lower the cost of fuel.”
“We still have a long way to go, but today represents the first real step toward this long-sought-after goal,” Bryan said in his statement on Monday.
“I want to, again, thank the members of the 35th Legislature for authorizing the Government of the Virgin Islands to establish a line of credit to meet today’s payment deadline as part of the negotiated agreement, and I also want to thank our financial team, the leadership team at WAPA and our financial partners in making this arrangement possible on behalf of the people of the Virgin Islands,” Bryan said.