The V.I. Public Services Commission voted Tuesday to reconsider two December orders directing the V.I. Water and Power Authority to provide the PSC with details of its plans for fuel diversification and improved efficiency and to meet unspecified minimum filing requirements before utility rate changes are approved.
While both orders relate to increases to the unpopular fuel cost recovery portion of electric bills, rates will remain unchanged during the reconsideration process and are not expected to be affected by the reconsideration, regardless of the outcome.
WAPA officials and hired consultants testified at the teleconferenced meeting Tuesday that WAPA objects not to the rate portions of the PSC’s two December orders; it objects to portions of a report produced by Georgetown Consultants, which WAPA regards as inaccurate. WAPA objects to the requirement that the authority report to the PSC on its plans, which it regards as an illegal overreach, and to the minimum filing requirements, which it sees as too vague.
The PSC approved increases to the Levelized Energy Adjustment Clause fuel cost surcharge on Dec. 18, but essentially copied and pasted 12 recommendations from a 45-page report by Georgetown Consulting Group into the motion. It also made the increase conditional on what WAPA considers vaguely defined new filing requirements and said the increase would be delayed if WAPA was not current with its assessments, which ultimately find their way to Georgetown by way of payment for consulting services.
In WAPA’s request for reconsideration, Executive Director Hugo Hodge Jr. argued that using the report as part of the PSC order violated V.I. law and constitutional due process because WAPA was given the highly technical report only one business day before the rate hearing and did not have a chance to review and respond in detail.
Hodge also argued that the PSC’s requirement, culled from the Georgetown report, that WAPA provide a detailed and specific plan to achieve the fuel diversification and efficiency strategies the WAPA board recently approved by Jan. 31 is illegal. Hodge said the WAPA board is given that authority by law and mandating comprehensive plans is unrelated to the rate-setting powers given by law to the PSC.
Hodge also asked the PSC to reconsider its directive that WAPA must meet all minimum filing requirements or the LEAC increase would be delayed. Hodge asked that the requirements be written down in one document, so that WAPA can know for certain what the requirements are, and that instead of automatically halting the increase, the PSC issue a deficiency letter and let WAPA respond to the specific concerns.
Otherwise if oil prices shoot up and WAPA is not allowed to bill for what it pays for fuel, Hodge argued that customers would ultimately suffer because WAPA would have to ultimately charge more to make up the difference.
WAPA also disputed many of the factual claims in the Georgetown report, especially its assertions that much of the LEAC increase is due to generator inefficiency rather than fuel prices.
According to Hodge and WAPA, the Georgetown report’s claim that 82 percent of the roughly 6.7 percent increase in the LEAC is due to not meeting efficiency goals is false. Instead WAPA alleged 28 percent of the increase (not the total LEAC, but of the increase) is due to generator inefficiency.
WAPA also disputed Georgetown’s conclusions that WAPA’s generators are operating well below efficiency benchmarks set by The Harris Group, WAPA consultants.
Georgetown’s "implication that the authority system can be operated at heat rates as low as 9,500 to 10,000 Btu per kWh or lower is not accurate and is misleading to the commission and the public," the WAPA response reads.
According to WAPA, those optimistic projections assume brand new generators, perfect temperatures and conditions, and a perfect, ideally situated and laid-out electric grid. In reality the generators are old, the system is split into two unconnected grids, the placement of the generators is constrained, and much past maintenance has been deferred due to financial constraints, according to the utility.
WAPA also claimed the Georgetown report inaccurately states that WAPA operates “at efficiencies below the standards set by the authority’s consultants, Harris Group," presenting graphs for St. Thomas/St. John and for St. Croix that show Harris projecting the "best expected heat rate" projection to vary between 13,000 and 14,000 Btu per kWh and the "worst expected heat rate" to fluctuate around 23,000 Btu per kWh. WAPA’s actual rate fell between the two extremes and gradually improving since 2010, according to the information it included with its response.
Responding briefly, James Madden and Larry Gawlik of Georgetown Consultants defended their report, saying they disagreed with WAPA’s claims about their report’s accuracy and saw items in WAPA’s response that they believe are inaccurate.
"One ‘not founded in fact’ statement is WAPA’s assertion that there was a $7 million cash deficiency from fuel collections," Gawlik said. That shortfall, caused by a slow payback rate set into the LEAC fuel surcharge, did not affect WAPA’s cash flow, Gawlik said, because "it offset an $8 million overpayment," where the LEAC collected more money than WAPA was paying for fuel.
That something was wrong at WAPA was indisputable, Gawlik said, because of the high price of electricity.
"Fifty-two cents per kilowatt hour is unreasonable by anybody’s measure," he said.
When the PSC holds hearings on the reconsideration, Gawlik said Georgetown will provide "information that is going to prove beyond any doubt that part of what you were presented with this evening is not founded in fact."
The PSC approved a single motion that:
– granted WAPA’s request for reconsideration;
– declared the existing LEAC rate remains in effect so long as WAPA submits a written request for a waiver to the legal requirement that new rates be suspended while the reconsideration ensues;
– declared that rates would revert to previous levels if the waiver was not filed;
– declared the PSC would shortly appoint a hearing examiner to look into the matters;
– declared the hearing examiner would set hearing dates, take testimony and return recommendations to the PSC;
– and open a separate docket to establish and promulgate rules and regulations for WAPA’s minimum filing requirements.
Voting yea were Sirri Hamad, Joseph San Martin, M. Thomas Jackson and Elsie Thomas-Trotman. Verne David was absent.
