The Virgin Islands Water and Power Authority is planning to increase the Levelized Energy Adjustment Clause (LEAC) rate for water across the territory in hopes of gaining some $2 million in revenue, however, senators criticized Tuesday what they claim is the utility’s lack of planning.
“There is no way, and it’s unacceptable that you put a rate increase on the island of St. Croix because you cannot use the water. It cannot be done, not on the island of St. Croix. You need to work out another solution. It’s wrong. It’s not right,” said Sen. Marvin A. Blyden during Tuesday’s hearing of the Committee on Budget, Appropriations and Finance.
The Public Services Commission approved the water rate hike for residents at a meeting on July 13, increasing the LEAC charge – a fuel surcharge included on residents’ utility bills – for 1,000 gallons of water from $7.82 to $9.53.
Legislators also questioned the progress the utility’s management team has made to bring WAPA’s financial infrastructure out of the red.
In FY 2023 the authority had roughly $8 million in free cash flow, Chief Financial Officer Jacob Lewis said. However, the amount was calculated without taking outstanding accounts payable into consideration, he added. Lewis said the utility previously structured its last two budgets by not contemplating paying balances carried over from prior years.
With more than 521 employees and 56 vacancies, senators inquired if the vacancies were included into the FY 2024 cash flow. According to CEO Andrew Smith, “not all of the vacancies are in the summary,” with a three percent head increase implied in the budget, “which is about 10-15 heads.”
Smith also said legislation concerning the government’s $45 million payment to WAPA’s propane supplier Vitol, to acquire infrastructure it built for the utility, left him uncertain about the implications of hiring additional employees and required further explanation from the Senate body.
“The way the budget is structured, and this is similarly to FY 2023, is that, for expenditures to be incurred in FY 2024, they need to be below the revenues we can bill and collect in FY 2024. We will need to beat the budget to continue to materially address our payables,” Lewis said.
Overall WAPA’s $8 million cash flow was absorbed by the total $240 million it owed to Vitol for the propane infrastructure, including the reimbursement of government funding from the bailout. Additionally, a total of $52 million is owed in outstanding payments to businesses.
Smith thanked the Senate in his testimony for supporting legislation to pay Vitol, noting that without the $45 million payment, WAPA would have been forced back onto operating on 100 percent diesel as it was forced to operate in December, when Vitol cut off deliveries of propane as it demanded payment. “At a 60 percent higher fuel cost than propane, WAPA finances would collapse, and its operations and the environment would be severely impacted,” said Smith.
The Vitol acquisition is scheduled to close on Aug. 14, with a final payment of $100 million due, said Smith. “Upon making that payment WAPA will have no further financial obligations to Vitol,” he said. The utility has provided the necessary information to the V.I. Housing Finance Authority, in order to receive funding from the federal department of Housing and Urban Development, “and we look forward to closing the transaction soon,” said Smith.
WAPA is projecting sales of $260.5 million worth of electricity in the coming year, according to Tuesday’s testimony. However, with a combination of project expenses, debt service, personnel costs, and fuel bills of about $118 million, the utility may not have any excess cash on hand at the end of the year. Finance committee chair Sen. Donna Frett-Gregory also questioned outstanding payments owed to vendors that she said is also adding to WAPA’s debt, along with uncollected receivables – mentioned during the hearing were payments owed by the Waste Management Authority and the territory’s two hospitals – that prevents the authority from keeping a balanced revenue picture.
Among the projects detailed by Smith is the utility’s Automated Metering Infrastructure, to automatically read customer meters, among other functions, which was badly damaged in the twin hurricanes of September 2017. Senators noted that has led to irregular fluctuations in their electric bills.
“A FEMA-funded study of the AMI system was recently completed, and an application is currently pending with FEMA for grant funding for a project to fix the AMI system,” according to Smith’s testimony. “We are targeting an executed contract for the project by the end of calendar year 2023.”
Senators also questioned WAPA officials about the last fuel relief payment from the GVI, which was reportedly in June. Smith outlined plans to move forward without the fuel support and said that buying out Vitol was a top priority.
“We are stretching our cash position until we can get the Wartsilas online, get the Vitol transaction closed, and get a market competitive price propane supply and continue to live within our means,” Smith said.
“Four new efficient Wartsila generators at the Randolph Harley Power Plant on St. Thomas are currently being commissioned. The first of the four new units was successfully fired last month. The new generators are slated to be in service in September and will materially lower WAPA’s fuel cost because they operate on propane, which is significantly cheaper than diesel, and the generators are approximately 30 percent more efficient than WAPA’s old generation,” said Smith. “The project also includes battery storage, which will improve reliability of power generation to the community. The battery storage is slated to be in service in August,” he said.
Frett-Gregory, along with Sens. Novelle Francis Sr., Franklin Johnson, Angel Bolques Jr., Carla Joseph, Javan James Sr., Marvin Blyden, Samuel Carrion, Dwayne DeGraff, Ray Fonseca, Alma Francis Heyliger, Kenneth Gittens, Milton Potter, and Diane T. Capehart attended Tuesday’s hearing.
