PSC Board Approves Compromise LEAC Increases

June 10, 2008 — Attempting to strike a balance between the V.I. Water and Power Authority's need for more money and residents' complaints about unaffordable utility bills, the Public Services Commission board Tuesday approved a 22.9-percent increase in the electric Levelized Energy Adjustment Clause (LEAC) rate and a 14.6 percent increase in the water LEAC rate.
The increase — which would go into effect at the beginning of next month — takes the electric system LEAC from the current $0.254733 per kilowatt hour up to $0.333303 per kilowatt hour, putting the average residential bill at $209.29. The water LEAC rate would also jump from the current $7.58 per 1,000 gallons up to $10.25, putting the average 2,4000-gallon residential bill at $63.16.
WAPA's original petition to the PSC accounted for an electric system LEAC of $0.390792 per kilowatt hour and a water LEAC of $14.90 per every 1,000 gallons. The 40-percent increase would have put LEAC rates on the same scale as projected oil prices, bringing in enough revenue to help the authority maintain its fuel costs — which is projected to near $130 per barrel next month — and eat into its $24 million in deferred fuel costs, according to WAPA officials.
However, PSC members said they weren't dealing in projections. Instead, the increase is based on the $120 per barrel WAPA paid for oil this month, they explained.
"WAPA's costs right now are not above $120 per barrel," said Joseph Boschulte, PSC board chairman, after the six-hour meeting. "So this increase at least provides coverage for the costs they are incurring right now. We need to make sure we're being prudent and reasonable in our decision, and we will keep analyzing the situation in case the price per barrel of oil continues to go up."
The authority's petition will return to the PSC after three months for further consideration, board members said. Voting in favor of the new increase were board members Boschulte, Donald "Ducks" Cole and Alecia Wells. Board member M. Thomas Jackson voted against the increase, while board member Verne C. David abstained. Board member Sirri Hamad was absent from the meeting.
The board's decision was fueled by about 45 minutes of testimony Tuesday evening from residents packed into the authority's St. Thomas headquarters. The testifiers organized a protest before the meeting began, and stated their case to WAPA officials who were outside waiting for board members to emerge from an hour-long executive session.
During the meeting, residents said that it was becoming increasingly difficult for them to balance their WAPA bills with other costs — particularly those on fixed incomes, who have to choose between paying their utility bills and buying medicine, food or gas.
"I appear before you today as a casualty," said St. John resident Cheryl Miller. "After 15 years, I'm going to have to close my business because I can no longer afford to pay two WAPA bills, water bills and rent. I may also have to leave St. John because my business will be closed and I won’t have anything else here to support me. And it's not only me — the government and its society are built on small businesses. You have to realize that your foundation is crumbling."
While some residents urged WAPA to look into how much it's paying to Hovensa for fuel, others suggested that the utility file for bankruptcy.
"Bankruptcy is not a curse word in the private industry — in fact, it is a protection to preserve what you have," said St. Thomas resident Clarence Payne. "And it sounds to me like WAPA don't have anything. Whoever is in a position to force the hand of WAPA — whatever government board is in place to block this — it needs to be blocked, not negotiated or compromised. The structure of WAPA needs to be taken a look at also, because at this rate, the people of the Virgin Islands are not going to be able to sustain this way of life, and we're all going to be facing some dire problems down the road."
Speaking after the meeting, WAPA officials said they were disappointed, but not surprised, by the board's decision.
"I came back home to fix WAPA, not to partially fix it," said Hugo Hodge Jr., the authority's executive director. "But in order to make that happen, we need to make tough decisions, not decisions based on emotion."
The increase approved by the board would set WAPA back $1 million a month in deferred fuel costs, Hodge added during the meeting.
The board also decided to consolidate WAPA's petition to reinstate the automatic LEAC with another petition extending the authority's June 30 deadline to meet certain benchmarks set up to reduce line losses on the electric side. A report on the combined investigation is to be turned into the PSC within three months.
Board members present during Tuesday's meeting were Boschulte, Cole, David, Jackson and Wells.
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