April 17, 2008 — The V.I. Water and Power Authority (WAPA) board resolved to petition the Public Service Commission (PSC) for increases in base water and electric rates Thursday. If approved, water bills will go up a little. Total electric bills might not increase because of fuel savings from early completion on repairs to St. Thomas' waste heat recovery boiler.
WAPA will ask the PSC to approve an increase of a bit less than one cent per gallon, amounting to a six percent increase in the overall billing for the average residential water customer using 2400 gallons a month, according to WAPA spokeswoman Cassandra Dunn.
Without the water rate increase, WAPA may not meet the terms of one of its bonds, putting the utility at risk of having $29.2 million in bond debt called in for immediate payment.
The bond in question requires a debt coverage ratio of 1.25. The debt coverage ratio is a measure of how credit-worthy an organization is. In this case it is WAPA's annual operating income divided by the total amount of all interest and principal paid on all of WAPA's loans.
"We are currently showing a debt coverage ratio for 2007 of 1.16," said WAPA Executive Director Hugo Hodge Jr. at the meeting in WAPA's Sunny Isles offices on St. Croix. "That is below the minimum which is not by itself a default, but we must take corrective measures."
WAPA is also taking internal measures to help adjust the ratio, said Nellon Bowry, WAPA Chief Financial Officer.
The proposed water base rate increase will result in an additional $2.3 million in water revenues annually, according to Dunn.
On the electric side, WAPA will request an electric base-rate increase of about 28 percent, representing a real increase of just over six percent to the total billing of an average residential customer using 500 kilowatts a month. But total bills may not actually go up.
"The heat recovery unit on St. Thomas was previously scheduled for completion in January," Hodge said. "Actions last month mean we will be finished Iate in June or early July. This should save $12 to $16 million over six months, which is actually equivalent to the increase we are asking for on the electric side."
While customers have experienced increases in the fuel surcharge over the past several years, the water base rate has not increased since 1994 and the electric base rate has not increased since 2003, said WAPA Executive Director Hugo Hodge, Jr.
The proposed electric system base rate increase will produce approximately $14.5 million annually in additional base revenues, according to Dunn.
Hodge said that expenses have increased much more rapidly than the base rate allows. If our interest is to improve, right the ship and make the system work as well as possible while we shift from dependency on oil, we must seek these base rate increases, Hodge said. Sometimes it gets worse before it gets better. But it will get better.
Bowry said cash flow remains a challenge for WAPA. While Hovensa is charging just under $103 a barrel right now, the LEAC increase approved by the PSC in November collects $93 a barrel, he said.
In other business, Hodge said the St. John water line is expected to be in service by next week, bringing in water from the Red Hook Pond on St. Thomas. WAPA will then end its contract with Seven Seas, which has been running a reverse osmosis plant on St. John for decades, saving $500,000 a year.
The board also authorized Hodge to petition the V.I. Legislature to reprogram $388,438 in unspent funds and interest from a previous appropriation. WAPA wants to use the monies to purchase one bucket and one digger trucks for St. John. Presently, when such equipment is needed, it is shipped from St. Thomas by barge.
The two trucks cost a combined $525,000 and Hodge may ask for an additional appropriation to make up the difference.
All votes were unanimous. Members present were: Alphonso Franklin, Juanita Young, Noel Loftus, Donald Francois, Brenda Benjamin Robert Mathes, and St. Clair Williams.
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