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HomeNewsArchivesSenators Scrutinize LEAC Rates as WAPA Presents 2012 Budget

Senators Scrutinize LEAC Rates as WAPA Presents 2012 Budget

Frustration over recent increases in local utility bills fueled the Senate’s discussion Tuesday with V.I. Water and Power Authority officials, who appeared before the Finance Committee to explain their fiscal year 2012 budget.

While the authority does not receive any money from the General Fund for expenses, WAPA officials still come before the Senate each year to discuss their projected costs, highlight their accomplishments and generally spend hours explaining the mathematics behind Levelized Energy Adjustment Clause (LEAC) rates and why they are so high.

While this year was no exception, WAPA was given a reprieve by Sen. Alicia "Chucky" Hansen, who suggested the focus of residents’ frustrations — are at least part of it — be turned to Hovensa. The refinery has an agreement to charge WAPA below market price for fuel but won’t let anyone "look at the books," so there’s no real way of telling whether the authority is paying more than they should, Hansen said.

WAPA Executive Director Hugo Hodge Jr. said that the authority’s fuel expenses are being calculated in accordance with the agreement — now on its third revision — but added that he has spoken to the governor about intervening with Hovensa on WAPA’s behalf. Fuel costs are usually at least three-fourths of the authority’s budget and are expected to total nearly $266 million in FY 2012, Hodge said.

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Hodge distributed an invoice to the committee Tuesday showing a $2 million charge from Hovensa for the delivery of oil for July. He also once again explained that the biggest driving factor behind LEAC rates, which have continued to spike over the past few months, is the price of oil on the world market. So far, LEAC projections have been based on a per-barrel price of $120 to $125, he said.

While WAPA lobbies for reductions in LEAC when it can, Hodge has continued to say that without any other renewable resources coming on the grid, the territory is stuck in its dependence on oil. In response to questions from Sen. Sammuel Sanes about WAPA’s progress on various energy diversification initiatives, Hodge said that WAPA has completed its study on possible interconnections to Puerto Rico, the British Virgin Islands and St. Croix.

Hodge said that while a connection between St. Thomas and St. Croix is the least feasible option, given the depths of the ocean between the two islands, the other two options could bring greater reliability in service to the territory and help drive down costs — especially since Puerto Rico has made headway in incorporating natural gas into its energy portfolio.

A line between Puerto Rico and St. Thomas, however, would take two years, but Hodge said now that the study is complete, the authority will be renewing its efforts to lobby for funding in Washington, D.C. President Barack Obama has been advised about the project from two of his cabinet members, including Secretary of State Hilary Clinton, so there is a "good chance" some federal money could come through, he said.

In the meantime, WAPA will be sending out a Request for Proposals for companies that can bring up to 10 megawatts of solar to the territory, Hodge added.

Hodge said that WAPA’s FY 2012 budget is based on projected revenues of $352.8 million. Operating expenses and other deductions, however, are budgeted at $361.5 million, for a net loss of $8.7 million. After fuel, WAPA’s second-highest budget category is personnel costs, which are projected at $36.2 million.

Inspector General’s Office

The territory’s Inspector General, Steven van Beverhoudt, presented his agency’s budget during the afternoon. Giving much of the same testimony as he has in the previous six years, van Beverhoudt said that the Inspector General’s Office has had to balance out its workload amidst "dwindling" financial resources, which has, in the past year, continued to affect how many audit requests and complaints his staff can investigate.

Under questioning from Sen. Nereida Rivera-O’Reilly about the status of a Lottery audit looking into a shipment of guns into the office, van Beverhoudt explained that his agency’s main agent has been tied up with other matters, which has caused the Lottery investigation to span one to two years. More staff would help cut down the time and make operations more efficient, he added.

The agency’s proposed General Fund budget for FY 2012 is approximately $1.46 million, or 8 percent less than the FY 2011 appropriation, he said, adding that the funding provided the "bare minimum to maintain the status quo."

The proposed budget includes enough money for 15 positions — two less than the current fiscal year — and does not factor in any of the recent salary cuts recently passed by the Senate and signed into law by Gov. John deJongh Jr., he said.

"With the ever-changing estimates and projections of the funding levels for FYs 2011 and 2012 and the various options being used to address the budget shortfall, it is difficult to fully establish the item needs for personnel services and fringe benefits," van Beverhoudt explained.

The raw numbers at this point, however, are $925,797 for personnel costs, and $331,291 for fringe benefits, he added. Another $40,000 has been budgeted for supplies, along with $132,954 for other services and charges, and $38,400 for utilities.

The office’s unfunded needs — including an electronic paper work system — stand at $95,000.

Present during Tuesday’s hearing were Sens. Louis P. Hill, Hansen, Patrick Simeon Sprauve, Sanes and Janette Millin-Young.

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Frustration over recent increases in local utility bills fueled the Senate's discussion Tuesday with V.I. Water and Power Authority officials, who appeared before the Finance Committee to explain their fiscal year 2012 budget.

While the authority does not receive any money from the General Fund for expenses, WAPA officials still come before the Senate each year to discuss their projected costs, highlight their accomplishments and generally spend hours explaining the mathematics behind Levelized Energy Adjustment Clause (LEAC) rates and why they are so high.

While this year was no exception, WAPA was given a reprieve by Sen. Alicia "Chucky" Hansen, who suggested the focus of residents' frustrations -- are at least part of it -- be turned to Hovensa. The refinery has an agreement to charge WAPA below market price for fuel but won't let anyone "look at the books," so there's no real way of telling whether the authority is paying more than they should, Hansen said.

WAPA Executive Director Hugo Hodge Jr. said that the authority's fuel expenses are being calculated in accordance with the agreement -- now on its third revision -- but added that he has spoken to the governor about intervening with Hovensa on WAPA's behalf. Fuel costs are usually at least three-fourths of the authority's budget and are expected to total nearly $266 million in FY 2012, Hodge said.

Hodge distributed an invoice to the committee Tuesday showing a $2 million charge from Hovensa for the delivery of oil for July. He also once again explained that the biggest driving factor behind LEAC rates, which have continued to spike over the past few months, is the price of oil on the world market. So far, LEAC projections have been based on a per-barrel price of $120 to $125, he said.

While WAPA lobbies for reductions in LEAC when it can, Hodge has continued to say that without any other renewable resources coming on the grid, the territory is stuck in its dependence on oil. In response to questions from Sen. Sammuel Sanes about WAPA's progress on various energy diversification initiatives, Hodge said that WAPA has completed its study on possible interconnections to Puerto Rico, the British Virgin Islands and St. Croix.

Hodge said that while a connection between St. Thomas and St. Croix is the least feasible option, given the depths of the ocean between the two islands, the other two options could bring greater reliability in service to the territory and help drive down costs -- especially since Puerto Rico has made headway in incorporating natural gas into its energy portfolio.

A line between Puerto Rico and St. Thomas, however, would take two years, but Hodge said now that the study is complete, the authority will be renewing its efforts to lobby for funding in Washington, D.C. President Barack Obama has been advised about the project from two of his cabinet members, including Secretary of State Hilary Clinton, so there is a "good chance" some federal money could come through, he said.

In the meantime, WAPA will be sending out a Request for Proposals for companies that can bring up to 10 megawatts of solar to the territory, Hodge added.

Hodge said that WAPA's FY 2012 budget is based on projected revenues of $352.8 million. Operating expenses and other deductions, however, are budgeted at $361.5 million, for a net loss of $8.7 million. After fuel, WAPA's second-highest budget category is personnel costs, which are projected at $36.2 million.

Inspector General's Office

The territory's Inspector General, Steven van Beverhoudt, presented his agency's budget during the afternoon. Giving much of the same testimony as he has in the previous six years, van Beverhoudt said that the Inspector General's Office has had to balance out its workload amidst "dwindling" financial resources, which has, in the past year, continued to affect how many audit requests and complaints his staff can investigate.

Under questioning from Sen. Nereida Rivera-O'Reilly about the status of a Lottery audit looking into a shipment of guns into the office, van Beverhoudt explained that his agency's main agent has been tied up with other matters, which has caused the Lottery investigation to span one to two years. More staff would help cut down the time and make operations more efficient, he added.

The agency's proposed General Fund budget for FY 2012 is approximately $1.46 million, or 8 percent less than the FY 2011 appropriation, he said, adding that the funding provided the "bare minimum to maintain the status quo."

The proposed budget includes enough money for 15 positions -- two less than the current fiscal year -- and does not factor in any of the recent salary cuts recently passed by the Senate and signed into law by Gov. John deJongh Jr., he said.

"With the ever-changing estimates and projections of the funding levels for FYs 2011 and 2012 and the various options being used to address the budget shortfall, it is difficult to fully establish the item needs for personnel services and fringe benefits," van Beverhoudt explained.

The raw numbers at this point, however, are $925,797 for personnel costs, and $331,291 for fringe benefits, he added. Another $40,000 has been budgeted for supplies, along with $132,954 for other services and charges, and $38,400 for utilities.

The office's unfunded needs -- including an electronic paper work system -- stand at $95,000.

Present during Tuesday's hearing were Sens. Louis P. Hill, Hansen, Patrick Simeon Sprauve, Sanes and Janette Millin-Young.