In an emergency meeting on Friday, the V.I. Water and Power Authority Governing Board approved a temporary authorization to purchase spot-market, or short-term propane supply, through March 31.
The approval for spot purchases of propane is key as it will allow the authority relief from 100 percent diesel utilization, WAPA announced in a press release, which is how the authority has been operating since propane supplier Vito suspended deliveries at the end of November over a payment dispute.
The dispute with Vitol hinges on payment owed not for its propane deliveries but for the dual-fuel infrastructure Vitol helped bankroll in 2014 and 2016. The Virgin Islands and Vitol disagree on the total amount owed — Vitol contends more than $145 million, of which WAPA CEO Andy Smith has said WAPA has paid $76 million.
Diesel’s market price is currently twice as high as propane, and the authority’s generators that utilize the fuel are less efficient and less reliable than its propane alternatives, WAPA said. Further, operating with only one fuel source reduces plant/generation redundancy and makes the loss of electricity and power rotations more challenging to mitigate, as was seen early last week on St. Thomas when a brief outage rotation schedule was instituted, it said.
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.
The governing board’s approval authorizes the authority to purchase spot market propane at a cost not to exceed the equivalent of $500,000 per day.
“For context, the authority, under its previous contract, averaged $350,000 to $400,000 per day for propane. The authorized amount will allow for flexibility in the event market prices increase or transportation costs fluctuate,” the release stated. “Additionally, while the authority has historically paid for propane daily, spot market supply may require the authority to pay for an entire delivery at once,” it said.
With access to the propane supply, St. Croix’s Estate Richmond Plant can operate entirely on the lower-cost fuel source. St. Thomas’ Randolph Harley Power Plant will operate on a hybrid configuration that utilizes both diesel and propane. Available inventory of propane will see dramatic cost savings for both facilities and improve reliability from a generation standpoint, the release stated.