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WAPA Explains Why Costs Are Rising

May 11, 2005 – The V.I. Water and Power Authority hosted two seminars for members of the media this week to explain the rising cost of electricity and how consumers are charged.
On Wednesday, media representatives from St. Thomas attended the seminar, "WAPA 101," at the utility's administrative building in Sub Base. A similar session was held Monday on St. Croix.
Daryl Lynch, chairman of WAPA's Governing Board, said everyone is concerned about the high cost of electricity, but the reality is the rising cost of oil is the main factor in the high electric rates.
WAPA depends solely on oil to produce electricity. The authority is allowed to pass on its fuel costs to the consumers with the approval of the Public Services Commission through a mechanism known as the levelized energy adjustment clause, or LEAC. The LEAC has been in use since August of 1981.
The PSC calculated the LEAC every six months when it was first established, but in August of 2004, WAPA was given the authority to automatically adjust its LEAC on a month-to-month basis if needed. The LEAC changes when the price of oil is above or below the projected price for a given month by $1.75.
Since the implementation of the automatic LEAC adjustment, residents have seen their electric bills steadily increase. The LEAC for May is $0.146 per kilowatt hour.
Other charges applied to the electric consumers' bill are:
– A customer charge of $5 for residential and $10.65 for commercial.
– A consumption charge of $0.07 per kilowatt hour. This charge depends on the amount of electricity a consumer consumes.
– A street lighting surcharge of $0.0029 per kilowatt hour.
– A Waste Heat Recovery Boiler surcharge of $0.002 per kilowatt hour. This is to recover the costs of using funds from the water side to purchase the boiler for the electric side of WAPA's operations.
– A self insurance surcharge of $0.002 per kilowatt hour.
"We recognize that the light bills are high," Lynch said. "But WAPA does not want it to remain that way. The board recognizes that the consumers, the employees want relief now."
Lynch said WAPA is working on several initiatives to help reduce costs to the consumer, though the results of the measures would not be realized immediately.
WAPA announced in April that it was seeking a short-term power purchase agreement with any of the small power producers certified by the Public Services Commission that could provide it with alternative power the soonest and at a reasonable cost to the utility. (See "WAPA Agrees to Purchase Alternative Power")
The savings to the consumers would not be noticed before 18 months or more, WAPA Executive Director Alberto Bruno-Vega said, because the company would have to build appropriate facilities for the successful transfer of power to WAPA's plants.
Currently, three companies are certified by the PSC as small power producers: St. Croix Renaissance Group, Caribbean Energy Resources Corporation (CERC) and Caribe Waste Technologies (CWT). A fourth company – West Indies Power – has applied for certification but has not yet gotten confirmation from the PSC.
Last week, the V.I. Legislature passed an amendment, sponsored by Sen. Norman Jn Baptiste, that forces WAPA to purchase power from a small power producer on St. Croix. The power producer must provide 400 permanent jobs and invest $150,000 annually in the Crucian economy, including donations to charitable organizations and scholarships. The legislation prevents WAPA from using the competitive bidding process, which the utility is required to do by law.
"It's a terrible bill," Lynch said of the legislation. "It will not benefit the people of the Virgin Islands, and we deserve better."
Bruno-Vega said the competitive process would have ensured that WAPA received the lowest possible cost for the alternative source of power.
If Jn Baptiste's legislation is enacted, WAPA will be forced to enter into an agreement with a company that meets the legislation's requirement at whatever cost that company wants to sell its power to WAPA. The measure gives no standard for the price at which power must be sold to the utility.
Bruno-Vega said only one of the three companies could meet the requirements of the mandate. He would not specify which of the three, saying only that the measure was "special-interest legislation."
"We have to ask ourselves why is it that certain entities are trying to forego the competitive bidding process," Bruno-Vega said, adding the legislation is not in the best interest of the entire community because it doesn't guarantee low electric costs.
Bruno-Vega said the authority is preparing letters to send out to the certified power producers this week. "We will continue to proceed as planned, because that bill has not become law yet," Bruno-Vega said.
In the meantime, consumers must reduce their consumption levels to notice savings in their bills. Bruno-Vega said this could be done by purchasing energy-efficient appliances and light bulbs, and investing in solar water heaters instead of electric ones. Electric water heaters are one of the main culprits leading to high electric consumption, Bruno-Vega said.
WAPA will also provide consumers with energy-saving tips in a consumer newsletter in the near future.

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