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WAPA Rate Hike Suspended By PSC

Dec. 10, 2004 – V.I. Water and Power Authority utility customers received good news from the Public Services Commission Friday. The commission suspended the rate hike WAPA included in bills sent out Wednesday.
The rate hike had brought the LEAC charge up from .134 cents per kilowatt hour up to .147 cents.(See "Higher Fuel Costs Result in Yet Another WAPA Rate Increase").
"It is the fair thing to do. We must do it," commission member Jerris Browne said.
Jim Madan, a technical consultant for the PSC, called it an "enormous increase" and recommended a rejection of it.
Alberto Bruno-Vega, executive director for WAPA, said the increase was necessary because WAPA was losing millions of dollars because of rising oil costs.
However, Madan framed the argument against the increase as one against inefficiency. He said WAPA had made a "substantial amount of computational errors."
Much of the discussion concerned whether in making its case for the hike, WAPA could use the actual cost of fuel versus the projected cost of fuel in its computations.
Madan said the agreement between the PSC and WAPA concerning automatic LEAC rate hikes allows WAPA only to use projected fuel costs in its formulas . He said when it was done this way, the rate hikes were based on a 6 percent line loss. He said if the actual figures were used, the line loss was 16 percent. He said the PSC had been "very tolerant" of line loss up to this point, but did not want to reward it.
Bruno-Vega said if WAPA was not able to integrate the actual cost figures, it would not be able to recoup losses and would be forced to borrow more money.
The PSC followed up that action by allowing only a .1377 cent amount for LEAC fees for the six-month period starting in January. WAPA had asked for an increase to .141 cents. Bruno-Vega did not offer any strong opposition to that action. He said that in conversations with Hovensa, he has come to believe that oil prices will be dropping.
The LEAC is the Levelized Energy Adjustment Clause. WAPA is permitted to automatically raise it when the price of a barrel of oil rises by at least $1.75 in a month.
In an exchange between Bruno-Vega and PSC Chairman Valencio Jackson, Bruno-Vega said, "I want it to be on the record. I pay a power bill. I know what the increases mean."
Jackson said, "You can afford to pay. The little grandmother down the street on a fixed income, she can't afford it."
Darryl Miller, an organizer of the St. Croix Alliance to Protect Utility Ratepayers, said he was happy about the PSC action. He said the PSC seems to be listening to ratepayers. On the other hand he said, "WAPA just keeps raising and raising the rates."
Outside after the meeting, Bruno-Vega said he was not sure how WAPA would react to the PSC action, but he raised the possibility of an appeal.
The PSC and WAPA are already involved in a lawsuit concerning WAPA's going out to bid for alternative power suppliers. PSC has indicated that WAPA should just negotiate with power suppliers the commission has certified as qualified.(See "PSC Denies WAPA Petition Concerning Bid Process").
Valencio tied the two issues together. He said WAPA was chained to its financial dilemma because of being dependent on oil when it should be working with the PSC and moving to getting alternative power suppliers. Bruno-Vega has insisted the best way, and the most transparent way, to get qualified power suppliers was through the bid process.
Territorial Judge Maria Cabret has stayed the PSC from interfering with WAPA's going out to bids. A hearing on the matter is scheduled for Monday.
Two of the potential power suppliers certified as qualified – Caribbean Energy Resources Corp and Renaissance Group – made presentations to the commission Friday.
Norman Kotraba, of South Carolina, said that Caribbean Energy planned an industrial park in two phases that in the end could employ over 700 people. The complex would include a facility to produce gypsum blocks and ceiling tiles. Kotraba said a by-product of that process could be used in the energy production process. The park would also include a small steel plant, making steel for export.
Kotraba said the project would not go through without a power-purchase agreement.
Caribbean Energy has not responded to WAPA's request for bids. Kotraba said, "We would prefer an amicable meeting with WAPA and coming to a good faith agreement," but efforts for that have failed.
He said the power plant could be up and running 30 months after the permit process was finished and that it would supply in excess of 18 megawatts of power to WAPA.
The representative of Renaissance Group said that it could supply power from a coal fire generator at a significant savings to WAPA. Renaissance already has a presence in the Virgin Islands and projects it could be up and running within 18 months of permit approval. Its plant would have the capacity to produce 30 megawatts of power.(See "Renaissance Certified by PSC as Potential Supplier"). Renaissance plans to participate in WAPA's bidding process.
Commission member Verne David said together the two providers could provide all the generating power WAPA now does.
In high demand periods WAPA produces about 55 megawatts of power.
Jackson said PSC Hearing Examiner Rosalie Simmonds-Ballentine would be looking at information from both companies and forwarding recommendations to the PSC.

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