Dec. 19, 2003 – The Water and Power Authority's executive director, Alberto Bruno-Vega, utilized Thursday's WAPA board meeting to outline the arguments he planned to present to the Public Services Commission on Friday in the hope of persuading the PSC to reverse its recent decision denying the utility an emergency rate increase for potable water service.
With water sales relatively steady in recent months, Bruno-Vega told the board, meeting on St. Thomas, it is probable that WAPA's cash reserves required to secure the utility's water bonds will drop below the mandatory minimum level of 125 percent of bond debt.
Bruno Vega warned the PSC several weeks ago that WAPA was at risk of going into technical default on its bonds if the cash reserves fell below 125 percent. At its last meeting, the PSC rejected the request for a water rate increase, citing inefficiencies in the potable water system, including significant water loss in the distribution process.
Claude "Tappy" Molloy, newly elected vice chair of the board, asked Bruno Vega how he planned to address commission concerns about water losses that cost WAPA money that could be saved if the system were improved. "We have been talking about line losses for years and still have a high percentage on St. Croix, not as high on St. Thomas," Molloy said. "For all these years, has anything been done to reduce these line losses?"
Bruno-Vega said he would place greater emphasis on WAPA's planned expansion of the water system and how denying the rate increase would hamper those plans. He also said he planned to describe initiatives designed to reduce the rate of water loss.
For one thing, he said, there is an investigation by the V.I. Inspector General's Office into reported theft of services. There also is a federal grant on its way, obtained with the help of the U.S. Environmental Protection Agency, to help address water quality and water loss problems.
Bruno-Vega said a temporary rate increase of 7.8 percent is needed to avoid a technical violation of the water bond covenants. "The debt service coverage ratio will fall below the 1.25 that is required under the indenture, and that, in essence, is a technical default," he said. And such a default occurs, WAPA might be required to deposit up to $4 million in cash to secure the bonds, he said.
Molloy and fellow board member Ira Hobson said they were not convinced about Bruno-Vega's dire outlook. But Hobson — the territory's Housing, Parks and Recreation commissioner — said that despite his misgivings, it was important for the board to support the executive director in his efforts to secure PSC approval of the rate increase.
"If we don't work with Mr. Bruno-Vega to try to get this situation under control, then it may become a lax situation where it may cause us to get in even worse a problem than we are in at this moment," Hobson said.
Reconsideration of the emergency rate increase was one of two matters Bruno-Vega planned to raise before the PSC. The other was the monthly Levelized Energy Adjustment Clause, or LEAC, surcharge on customers' bills that is tied to the cost of fuel on world markets.
Bruno Vega said the LEAC is continuing to rise because of escalating oil prices, now heavily impacted by the war in Iraq. He said he anticipates that a new round of price hikes will be felt by utilities everywhere, including in the Virgin Islands. And those costs, he said, are largely unavoidable.
The PSC considers adjustments in the LEAC surcharge as a pass-along to customers every six months based on market conditions in the preceding half year.
The board approved additional funding for two projects to increase reliability and reduce outages to electricity consumers when a fault occurs on one of the utility's 34.5Kv transmission feeders. According to a WAPA release, the projects are:
– Substation protection relay retrofit engineering to be done by Elexport International at a cost of $75,000 to $180,000.
– Substation protection relay equipment retrofit to be done by Alstom T&D at $216,063 to $282,554.
The board also approved an upgrading of the Unit 16 gas turbine excitation system by General Electric International for $110,371.
The board's new chair, Darryl "Mickey" Lynch, named the chairs and members of two committees:
Planning and Economic Development — Alphonso Franklin, chair; Hobson, vice chair; and members Roy Anduze and Lynch.
Finance and Audit — Molloy, chair; Yolanda Samuel-Deterville, vice chair; and members Lynch, Andrew Rutnik and Iver Stridiron.
The board also thanked former chair Carol Burke for her service.
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