Jan 20, 2006 – The V.I. Water and Power Authority will be able to automatically raise electric bills for the next six months, but it will not be able to proceed with plans to place power lines underground in Christiansted and Charlotte Amalie.
WAPA officials Friday lobbied the Public Services Commission to extend the automatic LEAC, which expired in October, and to use $2 million from the Hazard Mitigation Fund to protect lines on St. Thomas and St. Croix from storms.
The Authority was successful in the former, but failed to win approval for the latter.
Alberto Bruno-Vega, executive director of WAPA, said the utility was in desperate financial shape in asking for the LEAC extension.
"We are asking for the commission's assistance to get us through this very, very difficult period," he said.
Bruno-Vega said WAPA's financial situation was so precarious that its insurance company was threatening to terminate its property insurance because it believed that WAPA did not have the wherewithal to maintain its equipment.
The PSC had in August 2004 given WAPA the power to automatically adjust its rates through LEAC to recoup costs when the price of oil rises. However, that permission expired in October. The PSC had granted temporary extensions through the end of last year.
The motion, which was made by member Verne David and passed, extends the permission though June 30, although Bruno-Vega indicated that it would be best for WAPA if it was extended for a year.
LEAC, the Levelized Energy Adjustment Clause, allows adjustments when the cost of a barrel of oil rises or declines by $1.75 or more. Customers' most recent bills were based on oil costing $56 a barrel. Nellon L. Bowry, WAPA's chief financial officer, said the most recent bill it received from Hovensa was $61 per barrel and the price is rising.
Commission member Joseph Boschulte several times questioned why WAPA is not better at predicting oil prices. He added an amendment to David's motion before it passed that WAPA work with the PSC's consultants and develop a tool that more effectively predicts oil prices. He also asked questions about when WAPA would become involved in hedge funds, funds that have the potential to lock in oil prices.
Bruno-Vega said the Hazard Mitigation Fund was instituted in 1994 with a surcharge on customers' bills. He said the fund now had $7.4 million. The fund was originally expected to be capped at $6 million, but no official action was ever taken to do so, he said.
Bruno-Vega suggested that the fund be capped at $10 million. WAPA presently borrows from the fund to fill up its tanks before a hurricane season. He said this not only gives WAPA leeway if oil deliveries cannot be made immediately after a hurricane, but it protects tanks from collapsing.
He said that if the fund is capped at $10 million it would allow the WAPA to borrow the money for oil before hurricane season and also use $2 million to bury power lines to the main concentration of businesses and people on the islands.
"It is a better investment to spend money up front to prevent damages than later have to spend it to repair damages," he said.
However, Boschulte argued that what Bruno-Vega was asking for, such as the funds to buy oil before hurricane season, was a general operating expense and should be budgeted as such.
The commission voted to cap the fund at $8 million, effectively halting any plans to put the power lines underground.
Bruno-Vega said later that he has been trying for more than a year to get lines around Charlotte Amalie and Christiansted underground.
As the PSC spent most of Friday morning on St. Thomas in executive session and then four hours debating WAPA issues, it then spent less than an hour on telecommunication issues.
The commission dismissed a complaint by Rick Russo and Ackley Communication that Vitelco was not following Federal Communication Commission rules concerning the transfer of phone numbers. Russo wanted to transfer his phone number from Vitelco to Ackley using voice over protocol on the Internet. PSC's legal counsel Frederick Watts said that Ackley was not a telecommunication company and therefore did not fall under the FCC rules.
Reports on Vitelco's fiscal viability, service loss on St. Croix, and its performance were postponed until PSC's next meeting. At the February meeting PSC is also scheduled to receive recommendations concerning WAPA's pursuit of an alternative energy provider.
The PSC will consider WAPA's petition when it meets later this month. The automatic LEAC has allowed WAPA to only partially recoup its fuel expenses of previous years resulting from the fluctuating cost of fuel that WAPA must pay to HOVENSA. The total under-recovery of LEAC for both the water and electric systems now stands at $24.8 million, Cassandra Dunn, WAPA spokeswoman, said in a release.
Share your reaction to this news with other Source readers. Please include headline, your name and city and state/country or island where you reside.