Privatizing the V.I. Water and Power Authority or capping billing for the fuel it buys would backfire, costing ratepayers more or forcing power production to cease, according to independent consultants, WAPA representatives and the Public Services Commission who were speaking before a Senate panel on Tuesday.
But WAPA officials testified the territory’s electricity rates should go down later this year, when solar power comes online, and decrease by some 30 percent within a year when the territory completes converting several units to operation on natural gas, propane or fuel oil.
Sen. Craig Barshinger said he called the meeting of the Energy and Environmental Protection Committee to get information, hear proposals and get testimony to help senators evaluate those proposals.
The committee took testimony in the morning on the notions of privatizing WAPA or privatizing the power generation, leaving WAPA to operate the distribution system and billing. There was no corresponding legislation and Barshinger characterized the hearing as "a discussion."V.I. Public Services Chairman M. Thomas Jackson testified that any private purchaser would face the same problems WAPA currently faces, but "would still be a monopoly and would still need to be regulated," and would not necessarily have the same level of public oversight as WAPA currently has. He said the Legislature would need to consider what powers the PSC would have if WAPA were privatize
Jackson also emphasized that the PSC had not met prior to the committee hearing, and he was expressing his views as a member and not the official position of the PSC.
Rusty Wood, a vice president of California-based energy company West Hills Construction, testified that his company could supply power at substantially lower rates. WAPA officials said this was impossible and based on leaving out or drastically lowballing many hundreds of millions of dollars in costs.
"Privatization would immediately result in an increase in utility rates," said Gerald Groner, chairman of the WAPA’s voluntary citizen governing board.
Any company that bought the plant would have exactly the same sets of problems WAPA faces now, with the same equipment, but unlike WAPA, it would be for profit and also have to deliver a rate of return to investors, Groner said. It would have to purchase new generators at the same cost that WAPA would have to pay and the costs ultimately would go to the ratepayers.
And WAPA has about $305 million in bond debt that would have to be taken over or paid off by the purchaser, Groner and other testifiers repeatedly emphasized.
Several testifiers, including WAPA bond counselor Patricia Goins, also said any effort at privatization would raise problems with WAPA’s bond holders and could affect its bond rating for future bonding or push its current bonds into technical default.
Goins, Hodge, Groner and others also testified that a bill sponsored by Sen. Janette Millin Young to cap the amount WAPA can charge customers for fuel at just under 10 cents per kilowatt hour – about a quarter of what it pays for the fuel – would wreck WAPA’s finances and stop power production. [30-0115]
Young said she understood the bill would need a funding source and would be held in committee, but she said it was "a step in the right direction" and "a start" – sentiments echoed by several other senators. It was held in committee due to the absence of a quorum.
The committee approved a resolution sponsored by Sen. Myron Jackson declaring an "energy crisis" in the territory and urging the governor to make a similar declaration. [30-0140]
Voting yea were Barshinger, Sens. Diane Capehart, Clarence Payne and Sammuel Sanes. Sen. Alicia "Chucky" Hansen abstained. Sens. Donald Cole and Clifford Graham were absent at the time of the vote but both attended part of the hearing.
Editor’s Note: The story has been corrected to reflect that PSC officials did not directly comment on West Hills Construction’s specific proposal but on privatization generally.