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WAPA Retreat Clarifies Rate Issues, Considers Ethics

Oct 23, 2004 – "This year, the V.I. Water and Power Authority faced an unprecedented time in its history, as it struggled with rapid and sharp increases in the price of fuel oil."
That's according to WAPA Governing Board Chairman Daryl Lynch, in opening remarks for the board's retreat at the Carambola Resort on St. Croix, Oct. 22.
The high price of oil and what to do about it was a theme that dominated most of the presentations and focus-group discussions during the retreat.
Lynch said the oil prices caused WAPA to seek relief by raising the Levelized Energy Adjustment Charge.
The rising LEAC charges were one of the stated reasons for the formation of a ratepayer group – St. Croix Alliance to Protect Utility Ratepayers – this year. The organizer of that group, Darryl Miller was one of the half-dozen members of the public who chose to attend the WAPA retreat. (See the St. Croix Source story "Group Concerned About Utility Rates to Meet with PSC").
Lynch said that even raising the LEAC did not resolve WAPA's financial burdens during the year.
He said, "The lengthy procedure to change the LEAC could not, however, keep pace with the price of oil, which changed almost daily. As a result, the Authority's under-recovery of its fuel costs, as of September of this year, was over $17 million."
He said this has led to WAPA's falling behind on its bill to Hovensa, its fuel supplier, by $4 million.
WAPA responded to the Hovensa bill by drawing more on its line of credit. This activity, according to Lynch, attracted the attention of bonding agencies.
Lynch said that in July, Fitch Rating placed WAPA bonds on a "negative credit watch."
WAPA's financial problems are compounded, according to Lynch, by certain government agencies refusing to pay their bills and by the Public Services Commission's inability to act in a timely manner.
The Governing Board and WAPA officials have taken some actions in an effort to relieve those conditions. In August, WAPA received approval from the PSC to automatically raise or lower the LEAC according to fluctuations in fuel prices.
In September, WAPA went out for bid to get alternative energy suppliers. This process has run into some problems. (See "PSC Denies WAPA Petition Concerning Bid Process").
Lynch said that the government and its agencies owe WAPA a total of $15.6 million. One of the largest accounts belongs to the V.I. Housing Authority, which, according to Lynch, owed $4.7 million. He said WAPA entered into an agreement where the Housing Authority paid an initial payment of $350,000 and is now making $175,000 monthly payments to eliminate its debt to WAPA.
The WAPA board is also scheduling a meeting with the Governor Juan F. Luis Hospital, which, reportedly, owes $3.8 million.
Although Lynch mentioned other smaller initiatives, along with the above, to alleviate the power company's financial burden, he said nothing in his speech to indicate that the problems were going to go away.
The Associated Press reported on Saturday that oil prices continued to climb and were now over $55 per barrel.
A second component of WAPA's third annual retreat was ethics.
Leslie Smith, director of Internal Audit and Investigations for WAPA, gave a presentation. He said people who get involved in occupational fraud are generally people with no prior criminal record. He said people often get involved because of a personal financial crisis, and when they find they can get away with it, they continue the activities.
Inspector General Steven van Beverhoudt led a focus-group discussion, with Smith, on ethics and fraud.
Reporting back to the whole group, he said his group had concluded that ethics and fraud go hand-in-hand and management sets the ethical tone of a department or company.
He said his group has differences over whether policies concerning ethics needed to be drawn up and distributed. While some participants thought this would be helpful, others thought that most people already know right from wrong.
The group also discussed whistleblowers. Van Beverhoudt said he could not guarantee that things would always work out for a whistleblower, but added there is a time when people have to stand up for what is right. He asked, "If you don't look out for what is right for your organization, who will?"
Van Beverhoudt also said that if co-workers do not report fraud of which they have knowledge, they too could end up in trouble with the law and with company management.
Finally, to read about the alternative energy discussions at the retreat, see "Officials Say It's Time to Tap V.I.'s Biggest Resource".

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