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WAPA CHIEF SAYS POWER BASE RATE COULD DROP

Jan. 15, 2004 – Although the Public Services Commission may find it hard to believe, Alberto Bruno-Vega, executive director of the Water and Power Authority, told the WAPA board on Thursday that he may be able to approach the PSC seeking a reduction of as much as 5 to 10 percent in the electric service base rate.
The PSC granted hefty electricity rate increases last year amounting to about $14 a month for the average consumer.
Bruno-Vega reported to the board on Thursday that a combination of improved revenues and recently implemented austerity measures has created the unlikely, albeit welcome, situation. This may be "the first time in WAPA history" that the base rate could go down, he said.
He said the austerity measures include reduced travel, reduced overtime, and a freeze on non-essential hiring for vacant or new positions. He told the board that he will supply specific numbers at its February meeting.
Bruno-Vega even had good news for water consumers, if not for WAPA, itself, as producer.
In December, the PSC agreed once again to hear WAPA's request for the water rate increase it had earlier turned down. WAPA officials maintain that without the increase, the utility could default on its bonds. With water sales relatively steady in recent months, Bruno-Vega told the commission members then, it was probable that WAPA's cash reserves required to secure its water bonds would drop below the mandatory minimum level of 125 percent of bond debt unless rates were increased.
Bruno-Vega said on Thursday that he will ask the PSC to establish a "regulatory asset" for use in the event that a technical default of WAPA's bond covenant should occur, causing its reserves to fall below the required minimum. The regulatory asset would serve as a reserve or safety net, Bruno-Vega said, and would absorb any risk of WAPA not meeting its contracted debt service coverage without undue increase in rates.
According to a WAPA release, the regulatory asset "is a mechanism designed to transfer existing expenses for payment in the future over a period of two years." The authority's evaluation is based on the last six months of actual data, and the regulatory asset is being sought because of the risk that the data may change significantly in the next six months, Bruno-Vega said.
The WAPA board voted unanimously on Thursday to ask the PSC to postpone action on the utility's petitions now before it for both interim and permanent water rate increases.
According to Bruno-Vega, the permanent rate increase would fund expansion of the potable water system throughout the territory. Although the expansion would provide future savings to customers, "it is not prudent for existing water customers to pay for that capital project at this time, due to the overall depressed economical conditions," he said.
With regard to the electric power rates, Bruno-Vega cautioned that reduction in the base rate would not affect the monthly surcharge based on the so-called Levelized Energy Adjustment Clause. The base rate reflects costs that WAPA can control directly, he said, but WAPA cannot control its energy costs — what it must pay for the oil used to produce water and power. It is a cost that is passed directly from Hovensa to customers, he said.
In other business Thursday, the WAPA board:
– Approved the purchase of a $139,052 Saab Rosemont automatic fuel tank gauging system for the Estate Richmond Power Plant on St. Croix, to replace the existing system.
– Awarded contracts of $420,000 for fiscal year 2004 and $432,000 for FY 2005 to Asplundh Tree Trimming Co. for trimming operations.
– Authorized a $68,149 payment for extension of an expired contract with Commercial Security Services, for services rendered last November.
– Approved extending a bond services contract with its bond counsel, Hawkins, Delafield and Wood, through the end of 2004.
– Approved extending a consulting contract with R.W. Beck. through the end of 2004.

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