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Lawyers Argue Hansen's LEAC Appeal

The legal battle to overturn LEAC-based electric rate increases approved by the Public Services Commission last summer is now in the hands of a judge after the two sides argued the case Thursday afternoon in Superior Court of the Virgin Islands.

Sen. Alicia "Chucky" Hansen is the lead petitioner in the suit seeking a stay and reconsideration of an increase in the Levelized Energy Adjustment Clause rates, which originated as a petition filed by Hansen before the PSC. The PSC denied that request on July 15.

Hansen followed up by seeking a restraining order, but Superior Court Judge Harold Willocks indicated such a move had little chance of success. Instead, he suggested the plaintiffs were skipping a step and should first appeal the PSC’s ruling.

Hansen’s attorney – George H. Hodge Jr. – and attorneys for the Water and Power Authority and the Public Services Commission – Samuel H. Hall Jr., Boyd Sprehn and Tanisha Bailey-Roka – met before Willocks to argue the case.

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The three issues raised by Hodge and the defendants’ responses:

The LEAC increase was wrong because it was based on the market price for oil, but a document known as "the third extension agreement" between WAPA and Hovensa called for Hovensa to supply refined fuel at the cost of crude oil, not passing on the cost of refining. The increase was approved by the PSC in an "arbitrary, capricious way," the lawyer argued.

  • Under questioning from Willocks, Sprehn and Hall said there is not a specific list of items or a checklist that must be crossed off before the PSC approves a rate increase. Instead, the PSC responds to a petition and the issues raised in it. After the hearing, the PSC’s Sprehn said Hovensa does charge the crude oil rate for refined oil. The company earns millions in tax credits, though he suggested, with oil prices now significantly higher than when the agreement was reached, Hovensa probably could do much better on the open market.
  • Hodge claimed that instead of representing the cost of fuel consumed, the LEAC charge represented a charge on possible future consumption. Hall said Hodge was completely mistaken on the point, that LEAC is a charge for fuel consumed to produce electricity already used by the ratepayer, not some future potential use.
  • "No one is billed in August for electricity they might consume in November or December," Hall said.

When raising rates or changing the rate structure, Hodge argued, WAPA must hold public hearing and take comment to make sure the public’s interest is represented.

  • Hall and Sprehn both pointed out that WAPA did not increase the rate or the structure. The law is clear that that power belongs to the PSC, and the record of the case showed that a public hearing was held and testimony taken.

The PSC lacked financial details necessary to make the decision.

  • Willocks interrupted Hodge, pointing out that in the initial challenge he had objected to uncertainty about the interest payment on a $40 million loan WAPA needed in order to pay Hovensa for past shipments. Now, he was trying to expand the issue. In an appeal, the lawyers can only argue points that were raised in the original hearing. For that reason, he couldn’t hear Hodge’s argument. When Hodge said he disagreed with that point of view, Willocks responded, "It’s not the court’s point of view. It’s the law. I have no choice in the matter."
  • Three times Hodge tried to work his way around the restriction, reasoning that the uncertainty over the loan interest and over WAPA’s finances were pretty much the same thing. Each time, Willocks took a deep breath, and then slowly and quietly repeated that, as a matter of law, Hodge could not raise new issues in an appeal.
  • Sprehn said there was no lack of detail: WAPA’s petition, a private outside analysis of the petition, and order itself outlined all the details necessary.

After two hours of wrangling, Willocks told the lawyers he would give Hodge five days in which to file any supplemental material. Then – if the plaintiffs do file additional material – the lawyers for WAPA and the PSC will have five days to respond, taking the case up to Dec. 23.

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The legal battle to overturn LEAC-based electric rate increases approved by the Public Services Commission last summer is now in the hands of a judge after the two sides argued the case Thursday afternoon in Superior Court of the Virgin Islands.

Sen. Alicia "Chucky" Hansen is the lead petitioner in the suit seeking a stay and reconsideration of an increase in the Levelized Energy Adjustment Clause rates, which originated as a petition filed by Hansen before the PSC. The PSC denied that request on July 15.

Hansen followed up by seeking a restraining order, but Superior Court Judge Harold Willocks indicated such a move had little chance of success. Instead, he suggested the plaintiffs were skipping a step and should first appeal the PSC's ruling.

Hansen's attorney – George H. Hodge Jr. – and attorneys for the Water and Power Authority and the Public Services Commission – Samuel H. Hall Jr., Boyd Sprehn and Tanisha Bailey-Roka – met before Willocks to argue the case.

The three issues raised by Hodge and the defendants' responses:

The LEAC increase was wrong because it was based on the market price for oil, but a document known as "the third extension agreement" between WAPA and Hovensa called for Hovensa to supply refined fuel at the cost of crude oil, not passing on the cost of refining. The increase was approved by the PSC in an "arbitrary, capricious way," the lawyer argued.

  • Under questioning from Willocks, Sprehn and Hall said there is not a specific list of items or a checklist that must be crossed off before the PSC approves a rate increase. Instead, the PSC responds to a petition and the issues raised in it. After the hearing, the PSC's Sprehn said Hovensa does charge the crude oil rate for refined oil. The company earns millions in tax credits, though he suggested, with oil prices now significantly higher than when the agreement was reached, Hovensa probably could do much better on the open market.
  • Hodge claimed that instead of representing the cost of fuel consumed, the LEAC charge represented a charge on possible future consumption. Hall said Hodge was completely mistaken on the point, that LEAC is a charge for fuel consumed to produce electricity already used by the ratepayer, not some future potential use.
  • "No one is billed in August for electricity they might consume in November or December," Hall said.

When raising rates or changing the rate structure, Hodge argued, WAPA must hold public hearing and take comment to make sure the public's interest is represented.

  • Hall and Sprehn both pointed out that WAPA did not increase the rate or the structure. The law is clear that that power belongs to the PSC, and the record of the case showed that a public hearing was held and testimony taken.

The PSC lacked financial details necessary to make the decision.

  • Willocks interrupted Hodge, pointing out that in the initial challenge he had objected to uncertainty about the interest payment on a $40 million loan WAPA needed in order to pay Hovensa for past shipments. Now, he was trying to expand the issue. In an appeal, the lawyers can only argue points that were raised in the original hearing. For that reason, he couldn't hear Hodge's argument. When Hodge said he disagreed with that point of view, Willocks responded, "It's not the court's point of view. It's the law. I have no choice in the matter."
  • Three times Hodge tried to work his way around the restriction, reasoning that the uncertainty over the loan interest and over WAPA's finances were pretty much the same thing. Each time, Willocks took a deep breath, and then slowly and quietly repeated that, as a matter of law, Hodge could not raise new issues in an appeal.
  • Sprehn said there was no lack of detail: WAPA's petition, a private outside analysis of the petition, and order itself outlined all the details necessary.

After two hours of wrangling, Willocks told the lawyers he would give Hodge five days in which to file any supplemental material. Then – if the plaintiffs do file additional material – the lawyers for WAPA and the PSC will have five days to respond, taking the case up to Dec. 23.