Senators Criticize WAPA Then Bail It Out

Senators Friday at an emergency legislative session had to make a decision that had the appearance of either throwing taxpayer money down a deep hole or having ratepayers throwing it down a deeper hole later. The Water and Power Authority said it needed a bailout to prevent a significant rate increase.

Sen. Kenneth Gittens said “This is beyond crazy.”

“Before us today we have a real terrible choice,” Sen. Marvin Blyden said.

Sen. Alicia Barnes said, “This is an unfortunate day.”

In the end, the Legislature voted to appropriate $6 million to pay past-due accounts to Vitol, WAPA’s propane supplier and creditor for its conversion from oil to propane. Vitol had cut propane deliveries to the utility Dec. 21, in response to the Public Services Commission’s denial of a base rate increase that would have created revenue to pay Vitol. This forced WAPA to burn diesel which costs much more than propane and would require a 20 cents per kilowatt hour increase to ratepayers’ fuel surcharge. Clinton Hedrington, acting executive director/chief executive officer at WAPA, told senators that St. Croix generators were back burning propane on Friday morning, but St. Thomas was still burning diesel.

Sens. Barnes and Steven Payne both questioned why Vitol had reacted to a ruling by PSC when the rulings by the PSC had no immediate effect on WAPA’s cash flow. Sen. Janelle Sarauw also said Vitol was under investigation in connection with a bribery scandal in Brazil.

The Water and Power Authority plant is located in the Subbase area of St. Thomas. (Source photo by Bethaney Lee)

WAPA also owes Vitol for the conversion of its generators to propane. The original contract was to cost the territory $87 million and be paid off in five years at 6 or 7 percent interest. However, with cost overruns of $73 million the loan went to 10 years and monthly loan payments were bumped up $2 million and the interest rate went to 15 percent.

Donald Cole, executive director Public Services Commission, told senators his commission had an emergency meeting earlier in the day and extended a leased generation surcharge it had previously denied. Cole might have been the only person at the meeting getting good news. Senate President Novelle Francis said he is ready to move on a bill that will give the PSC oversight powers over WAPA. Presently the PSC has no power over WAPA except setting rates.

Blyden said “many of the PSC’s recommendations to WAPA have routinely been ignored.”

Cole told Senators residents will be better served if the PSC has that “dual capacity.”

WAPA fell under heavy criticism from most of the senators. Gittens said, “You are testifying we are in this mess because the rates are not high enough. I haven’t been everywhere in the states, but I have been in a few places and we are paying much more than those jurisdictions are.”

He said to the WAPA representatives, “You act like everyone’s salary is $100,000.” He then commended Cole, “Thank-you for standing up for the people of the Virgin Islands.”

Although the measure passed with all senators present voting favorably, the legislation did not get off to favorable start.

At the beginning of the hearing, the bill introduced designating a Government Employee Retirement System fund from which the appropriation would come did not get enough votes to have a bill number assigned to it.

Nine hours later two bills were passed. The one making the $6 million dollar appropriation for WAPA would obtain funds from the budget stabilization fund and another fund used to fill vacancies. A second bill passed appropriated funds for a 3 percent increase in employer contributions required by the Retirement System.

Jenifer O’Neal, director of the Office of Management and Budget, in her closing statement, explained why the bill sent down from Gov. Albert Bryan tied the GERS bill with the WAPA appropriation. She said it was projected that the $19 million in the account to pay outstanding employer contributions would not be needed this year. It has been an ongoing problem for some employees when they retire there are contributions missing from the government into the retirement system and the retirees could not receive annuities until the missing contributions were made. For that reason, the Senate has in recent years set aside funds to make those contributions.

In his testimony, Hedrington said WAPA for some time now has been experiencing, and is still continuing to experience, the results of a chronic cash flow shortfall that is primarily the result of it not having the necessary, timely, rates that would allow the recovery of sufficient revenues to fund mandatory operating costs, and to build up operating reserves.It should be noted that the Authority has approximately $457 million in debt”

“Many critical vendors have indicated that they cannot continue to provide services to the Authority if the amounts owed are not addressed,” he said.

In a press release Friday evening, Bryan said “thank you to the senators who voted in favor of reappropriating funds to avert a crisis that would have significantly and negatively impacted the people of this territory,”

Attending the session were Sens. Barnes, Blyden, Dwayne DeGraff, Francis, Donna Frett-Gregory, Stedmann Hodge, Gittens, Jackson, Javan. James, Payne, Sarauw, Athneil Thomas, and Kurt Vialet.

The territory has a long history of ultimately costing ratepayers more as a result of trying to save them money and avoid unpopular decisions by starving WAPA in the short run.

Click the links to see reports documenting this pattern repeating again and again over the past two decades:

WAPA Budget Shortfall is $40 Million; Government Debt to WAPA, $41.2 Million
V.I. Debt Blamed for WAPA’s Inability to Pay Hovensa
WAPA Borrows to Pay What It Owed Hovensa
Deferred Fuel Costs Hurting WAPA Maintenance
Stagnant Rate Leave WAPA at Risk of Running Out of Fuel, Officials Say
PSC Board Approves Compromise LEAC Increases
PSC Board Approves LEAC Decrease
PSC denies LEAC Increase