In Wake of Power Rotations, WAPA Board Pushes CEO To Finalize Purchase of Leased Unit


After two days of rotating power outages on St. Thomas, V.I. Water and Power Authority board members voted in an emergency meeting Sunday to have its chief executive officer finalize the purchase of Unit 27, which has been under lease for years and, according to officials, was not in operation when the blackouts started.

Rotation ceased Saturday afternoon, after which the authority released a statement that said the loss of Unit 23 – WAPA’s workhorse generator – after the air conditioner in the unit’s control stopped working led to the control equipment overheating and shutting down.

The automatic shutdowns are by design to stave off any damage, and while the equipment cooled down Friday night, larger cooling fans were used to replace the air conditioning, according to the release. Subsequently, however, after a restart of the unit, a hydraulic pressure valve failed. Installation of the valve is underway.

“Unit 23 is currently responsible for providing a significant percentage of generation capacity to the St. Thomas-St. John District and with it offline, service was dramatically impacted and resulted in the power rotations,” the release said. “The power rotations, also known as load shedding, are necessary because without Unit 23, there is not enough generation capacity being supplied by the Randolph Harley Power Plant and Unit 15, which is primarily operated on liquified propane gas fuel, to power the district.”

According to officials, the ideal situation would have been to have WAPA’s Wartsila generators operating along with Unit 27, using Unit 23 as a backup unit. However, since WAPA was in negotiations to buy Unit 27 on lease from General Electric, it was out of commission, pending the close of purchase as an agreement was reached late last week. With Unit 23 now down, another agreement was reached with GE to return Unit 27 to service on Saturday.

Sunday, the board met to authorize WAPA CEO Andy Smith to finalize the transaction. According to another release – notice of the meeting was given Saturday night – WAPA had been paying $631,053 per month, or $7.5 million annually, for Unit 27. The lease ended on Thursday, but after several months of proactive negotiations, WAPA was able to finalize a purchase agreement for $6.75 million, with a one-time payment of $145,000 to rent Unit 27 until the purchase closes.

“Today’s action clearly demonstrates the Virgin Islands Water and Power Authority’s new leadership team’s commitment to pro-active versus reactive decision-making. While this decision comes on the heels of a disruptive rotating power incident in the St. Thomas-St. John District, the agreed-upon terms are the direct result of the leadership team’s data-based negotiations that began months ago,” said WAPA board chair Kyle Fleming. “The terms will allow for both improved efficiency and reliability to be achieved at a significant discount and sets a new benchmark relative to the commercial engagements the authority will pursue in the future,” he said.

According to the agreement:
• WAPA will acquire Unit 27 for approximately 35 percent less than what it owes in past due unpaid invoices – $5.2 million plus the contractual buyout option in the lease;
• WAPA will avoid the ongoing monthly payment of $631,053 under the current lease;
• If the current monthly lease arrangement remained in place, WAPA would spend $6.75 million in less than 11 months just to lease Unit 27 and would still not own Unit 27;
• Eliminating the ongoing lease payment captures approximately $0.013 cents per kilowatt-hour of the approximately $0.16 per kilowatt-hour revenue shortfall that WAPA is working to eliminate, or approximately 8 percent; and
• The full funding for the acquisition is being supported by the Government of the Virgin Islands, so ongoing costs for the acquisition will not be charged to WAPA’s customers.

“The board’s approval of the acquisition of Unit 27 is a key step in the strategic plan that the authority outlined earlier this year. Elimination of the costs for leasing Unit 27 removes a significant ongoing expense for the authority, and I’d like to thank the men and women at the authority for their efforts as we work hard to return the authority to a solid financial footing,” Smith said.