Senate Might Override Veto of WAPA Bill That Triggered Ratings Warning

PSC Executive Director Donald Cole testifies before the Finance Committee in 2020. (Photo by Barry Leerdam)

Legislation whose potential passage triggered Fitch Ratings to put the Water and Power Authority’s credit rating on a negative watch might reappear, a senator suggested during budget hearings Tuesday.

During the Finance Committee hearing, Public Services Commission Executive Director Donald Cole submitted substantial written testimony that included a small part about the Commission’s long-standing concern that it should have more power over decision making at the utility.

“Prior to 2012, WAPA came to the Public Services Commission for approval of bonded debt issuance before committing to new long-term debt; since 2012 WAPA has utilized other financing mechanisms and has substantially increased its debt without review or prior approval,” Cole wrote.

While that portion was not read aloud, Sen. Janelle Sarauw referenced legislation about the PSC’s authority during her questioning.

“Director, we are going to move for the override. We just haven’t had a session since then, so we are going to definitely move for the override,” Sarauw said to Cole. She did not elaborate or specify what bill she meant.

Sen. Janelle Sarauw presents Bill No. 34-0021 in April of 2021. (Legislature photo)

In May, Gov. Albert Bryan vetoed two measures impacting WAPA, of which one, Bill 34-0021, impacted PSC power over WAPA.  Bryan wrote that by passing that bill “the Legislature has, again, intruded into the supervisory and decision-making powers of the executive branch and violated several federal statutes.”

“The most fatal component of the bill is the inclusion of the directives that WAPA must hire a turnaround management company, implement its recommendations and comply with its Turnaround Report,” Bryan added, in his letter to Senate President Donna Frett-Gregory about his actions on that and other bills.

A few days later, Fitch Ratings issued a negative ratings watch for WAPA, indicating it was concerned the legislation could make WAPA less able to pay lenders.

According to a statement from Fitch, the move “reflects the ongoing prospects for additional governmental oversight of WAPA, which could adversely affect operating performance and increase the authority’s vulnerability to default.”

The PSC has regulatory authority affecting most public utilities in the territory, including electric and water, telephone and cable, ferry franchisees and the Waste Management Authority. In some areas, including cable television and phone service, it is limited due to federal preemption, statutory limitations and the roles of other local oversight bodies.

Cole presented that agency’s operating budget proposal of just under $1.8 million, which is a scant $4,903 more than the previous year but according to the Legislature’s post-audit, almost $400,000 more than the PSC’s actual spending two years ago, for FY 2020.

PSC has budgeted $917,781 for wages and salaries; $414,201 for fringe benefits, Social Security and Medicare taxes; $367,452 in “other services and charges,” $54,600 for utilities, and $43,300 for supplies.

The PSC’s operating budget comes entirely from its regulated utilities in the form of regular, annual revenue-based assessments collected in the PSC Revolving Fund, not from the General Fund.

For FY 2022, PSC expects to assess WAPA $1.19 million out of WAPA’s projected $136.6 million in revenue, for 66 percent of the PSC’s funding. The Waste Management Authority is the next largest payee, with $33.6 million in revenue and a $291,420 assessment, accounting for 16 percent of PSC revenue. Combined, those two government-owned entities provide 82 percent of PSC funding.

Viya’s telephone operations will be assessed $178,160, for 9.9 percent of the PSC budget, out of Viya’s projected $20.6 million in regulated revenue. Innovative Cable is to be assessed $43,815 out of $5 million in projected revenue.

Ferry companies Varlack Ventures and Transportation Services are to be assessed $23,593 and $22,262, respectively.

Present at Tuesday’s budget hearing were: Sens. Sarauw, Kurt Vialet, Donna Frett-Gregory, Marvin Blyden, Dwayne DeGraff, Carla Joseph, Samuel Carrion, Javan James, Franklin Johnson, Novelle Francis, Jr., Milton Potter, Steven D. Payne, Alma Francis-Heyliger and Kenneth Gittens.