In a press conference called to clarify public concerns about the Levelized Energy Adjustment Clause (LEAC), V.I. Water and Power Authority Executive Director Hugo Hodge Jr. said a Senate proposal that would eliminate the surcharge after the next two billing cycles would leave the authority without any money to keep its customers lights on.
The bill is being offered by Sen. Alicia "Chucky" Hansen, who has also questioned if WAPA is being treated fairly in its billings from Hovensa for fuel. Hodge said Tuesday that WAPA is being billed according to an agreement the government has with Hovensa and is paying the lowest price per barrel of oil based on its terms.
The only thing that WAPA negotiates annually is the cost of delivery, which represents 2 to 3 percent of what is paid to Hovensa, he said.
"To ensure that we receive below market prices, the authority, upon receipt of Hovensa’s invoices, would use the oil buyer’s guide for the month in which the invoices were issued to determine the New York hover price and compare them against the prices being charged by Hovensa," Hodge said at the press conference.
Hodge said that when an LEAC increase is approved by the Public Services Commission, there is a lot of analysis that goes into the process, both from WAPA and the PSC’s consultants.
"It is far from a rubber stamp," Hodge said. "The primary purpose of the LEAC is to ensure that the authority receives payments from its customers that are sufficient to purchase the fuel from its supplier."
Hodge also said that similar surcharges have been in place throughout the United States and that they are beneficial because they minimize the customer’s exposure to price fluctuations on the oil market, while allowing the cost to be spread over a longer period of time to keep the bills lower.
"About 45 days, or three months before the end of a LEAC period, we project for three months to come, what the price of fuel is going to be, what units are going to be available and how efficient they are going to operate," Hodge said. "It is very forward looking."
Addressing the most recent LEAC filing, Hodge said that WAPA has received a petition to stay a 9.9 percent increase approved by the PSC, and will soon be filing a response. But he warned that keeping the authority from recouping the money it needs to pay for fuel will have detrimental effects on the territory, including keeping WAPA from being able to pay off its bonds and maintain a good credit rating.
He also said that if Hansen’s bill to eliminate the LEAC after two billing cycles were to become law, the territory would be in darkness three weeks later.
"The company would be insolvent, the economy on a whole would shut down," Hodge said. "It would be catastrophic." There is also no way any other company would want to buy WAPA if there is no way for it to pay for oil, he said.
Hodge said WAPA is working to bring on renewable energy and is in the final steps of an agreement with Alpine Energy Group, which will operate waste to energy plants in the territory.
Hodge said that while Alpine’s first attempts to use pet coke for its plants were defeated by the Legislature, the company has proposed a scaled-back project and WAPA, along with the V.I. Waste Management Authority, has been negotiating new contracts. The final step is approval by the Legislature for the sites for the plants, he said.
He also discussed other renewable energy projects, including interconnecting with Puerto Rico’s power grid. Hodge said WAPA has also sent out a request for proposals for companies that can bring solar energy onto the grid and that he should have the bids in hand by September.
"We need all of them to come to fruition so we can begin to have some way of shaping the future for our own energy resources," Hodge said.
