July 23, 2008 — The V.I. Water and Power Authority should continue to push for a government subsidy to help cover its fuel and maintenance costs — even if it means going all the way to Venezuela to get it, senators said Tuesday during the final round of budget hearings.
WAPA's cash position has gone from bad to worse over the years, leaving the authority with a daily deficit in fiscal year 2008 that ranges from $8 million to $12 million. As of last month, the authority's deferred fuel costs had hit $30.6 million — $16.6 million more than last year — while utility bills owed by the government topped $16.4 million, according to WAPA head Hugo Hodge Jr.
The debts leave WAPA with a $46 million cash shortfall that prevents the utility from keeping up with repairs and maintenance on equipment housed at power plants in both districts. This has forced the authority to shift around its bond proceeds to critical projects and increase its lines of credit with local banks to pay an outstanding fuel bill to Hovensa, he added. The results have been evident over the past few weeks — constant power outages and rolling blackouts continue on all three islands, as generating units continue to fail or have to get taken out for repairs.
"The sheer size of our fuel bill (which accounts for 76 percent of operating expenses) and the wide swing of as much as $54.17 per barrel in a 12-month period, make it the most challenging aspect or our operational and financial management," Hodge said. The authority's fuel bill has climbed from $76.3 million in FY 2003 to $195.6 million in FY 2008, he said.
The authority's FY 2009 budget has only increased by 1 percent over last year's — which also takes into account a decrease in sales because residents have been conserving power. On the electric-system side, projected revenues are pegged at $341.5 million, while projected expenses are budgeted at about $346.3 million — a net loss of $1.5 million.
The electric system's capital budget totals $52.2 million, of which $26.9 million is funded through bond proceeds. The balance is covered by the authority's revenues, along with the anticipated recovery and collection of deferred fuel costs and outstanding government bills. Capital projects include the installation of a heat-recovery steam generator on St. Croix, various underground projects and repairs to equipment at St. Thomas' Randolph Harley Power Plant.
Fuel expenses of $272.5 million take up about 81 percent of the authority's budget.
The authority's FY 2009 budget also factors in no projected growth in sales on the water-system side. Projected revenues of $47.5 million are expected to fund $47.8 million worth of expenses, resulting in a net loss of $307,000. The system's capital budget of $14.7 million depends primarily on grants from the local and federal governments, which is projected to total about $7.9 million in FY 2009. The shortfall will only allow WAPA to complete a water-line expansion project to Williams Delight on St. Croix and Ivanna Eudora Kean High School on St. Thomas, along with the rehabilitation of a pipeline that runs through downtown St. Thomas, Hodge said.
The governor recently sent down a bill shifting $13.7 million in previously appropriated funds to WAPA to take care of outstanding utility bills owed by some of the government's semi-autonomous agencies. But the Legislature could still provide funding for other expenses, Hodge said. Senators could also approve a bill proposed by the governor that would increase the amount of funding for the authority's street-lighting program and impose a cap on the amount WAPA has to pay in damages when consumers file lawsuits, he added.
"Although the authority has liability insurance, it is expensive," Hodge explained. "Premium costs are over three quarters of a million dollars. Additionally, the authority's deductible is $200,000, which means that for extremely large claims, the authority must pay or absorb that cost before the insurance coverage will kick in."
Senators said they would support finding more money for WAPA, but suggested that the authority consider hitting the Venezuelan government up for money. The country's petroleum company, Petroleos de Venezuela,owns 50 percent of Hovensa's stock.
While the federal government might be against the request, Hodge said, senators countered that Venezuela's partnership with the territory justifies a subsidy from that country's government. Either way, the cost of energy needs to more of a priority to "all parties involved," senators said.
Present during Tuesday's meeting were Sens. Liston Davis, Juan Figueroa-Serville, Louis P. Hill, Neville James, Terrence "Positive" Nelson, Ronald E. Russell and James Weber III.
Back Talk 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.
