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HomeNewsArchivesHodge Reports on WAPA Budget to Senate Finance Committee

Hodge Reports on WAPA Budget to Senate Finance Committee

After a general legislative session that ended early Tuesday morning, two members of the Finance Committee managed to make an afternoon hearing on St. Thomas, with other senators trickling in to hear an about the finances and operations of the V.I. Water and Power Authority.

WAPA receives grants from the V.I. government for capital projects and construction but doesn’t receive appropriations from the General Fund approved by the Legislature. The authority’s budget is approved by the WAPA board. Nonetheless, senators had questions about long-term debt, government payments to WAPA, renewal energy and, of course, utility rates, especially the Levelized Energy Adjustment Clause.

WAPA Executive Director Hugo Hodge first gave an overview of the utility company’s revenue and expenses for Fiscal Year 2013 and those projected for 2014. Revenue from electric sales was $341 million and expenses were $345.6 million for a $4.5 million loss in 2013.

That was an improvement over FY12 when revenue was $333.4 million and expenses were $348.7 million, resulting in a $15.3 million loss. Next year, WAPA projects to earn $1,059.

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Finance Committee Chairman Clifford Graham and Sen. Judi Buckley, the first senators on the floor, started the questioning. Buckley jumped on the subject of debt service and a Sept. 27 report by the Post Audit Division.

Hodge confirmed the authority has $303 million in long-term debt.

Buckley asked about the monthly payments on the debt and, by the end of the hearing, Hodge said WAPA pays almost $2 million a month.

Several senators asked about the LEAC.

Sen. Craig Barshinger asked Hodge if he is in favor of a monthly fuel surcharge instead of the LEAC. As consumers know, the LEAC can fluctuate widely and cause substantial increases in utility bills, whereas a surcharge is a “more manageable charge for the consumer,” Hodge agreed.

Barshinger said he would like to introduce a bill creating a monthly fuel surcharge, but another senator (unnamed) has “preempted” him. Barshinger promised to try to work on it.

“LEAC, which is charged to recover fuel expense, represents 76 percent of operating revenues, and fuel expense account for 70 percent of operating expenses,” Hodge said. He went on to explain that, in June 2013, the cost of fuel not billed to or recovered from customers was $51.7 million.

The water system earned small revenues each year and jumped from a mere $894 in 2012 to a projected positive figure of $4,600 as of June 30. More than $11,000 income is projected for FY14. To help consumers with their water bill, Seven Seas Corporation will produce 2 to 4 million gallons of water a day to the territory through reverse osmosis, resulting in a lower LEAC, Hodge said.

Hodge said the V.I. Government has made progress in paying down the millions owed for years to the authority. Currently the government owes $27.2 million but, this year, only the Gov. Juan F. Luis Hospital and Medical Center and funds for street lights are considered delinquent.

Hodge broke down the figures, saying the central government owes $17.2 million, which is an increase over last year, and it owes more than $11 million for street lights. The hospital’s current bill is almost $16 million, up from $7.5 million at the end of 2012, Hodge said.

Hodge said WAPA has been working to find alternative energy sources since 2005. As a result, by early next year there will be 15 megawatts of solar energy available to handle 15 percent of the peak demand.

Wind studies with the V.I. Energy Office are ongoing to determine the economic feasibility of developing a wind power program, Hodge said.

“The National Renewal Energy Laboratories – NREL – estimates that 12 megawatts to 33 megawatts of potential utility scale wind energy deployment exist in the Virgin Islands,” he said. NREL estimated the cost between 14 and 30 cents per kilowatt.

Hodge added that building 20 wind turbines for 33 megawatts would be difficult because of space and other logistical limits.

Hodge told senators there is a liquefied petroleum gas agreement with an unnamed “industry leading company.” He told Sen. Tregenza Roach, the anticipated 30 percent reduction in utility costs could be realized by consumers as early as July 2014.

A smaller but locally produced energy source will be provided by Tibbar Energy USVI. The St. Croix power producer could be selling King Grass biogas to WAPA to produce up to seven megawatts of power as early as 2016, Hodge reported.

When asked by Sen. Terrance Nelson what WAPA is doing to raise money, Hodge said the utility will earn 25 percent of the earnings when the V.I. Next Generation Network becomes profitable with their high speed internet services. VINGN is using WAPA’s fiber optic cable and other systems for the infrastructure.

Hodge also talked about new programs and future plans for customer service enhancements, community service projects and equipment repairs. In response to a question from Roach, Hodge said staff will be trained on safety and operations to work with new alternative energy sources.

At the end of his presentation, Hodge asked for help, noting that Act 7360 signed into law in May 2012 established the VI WAPA Generating Infrastructure Fund that allows seven cents out of the 14-cent gasoline tax designated for WAPA’s use.

The fund is to be used for new energy efficient generating units and/or heat recovery steam generators that can convert to natural gas and help issue bonds for WAPA through the V.I. Public Finance Authority. However, the legislation doesn’t allow WAPA to issue bonds, only the PFA, and only the Finance commissioner can disburse the funds.

Hodge’s suggested revision would allow the authority to issue bonds and have automatic access to the fund. He estimated the fund currently contains around $5 million.

Late Monday night, the Senate made the gas tax “available” to WAPA, Barshinger said.

“Basically, you’re going to get paid by the government,” he said.

Also approved late Monday night, Bill no. 30-0197 amends the V.I. zoning code to allow solar thermal or photovoltaic four energy systems to be constructed in the territory.

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After a general legislative session that ended early Tuesday morning, two members of the Finance Committee managed to make an afternoon hearing on St. Thomas, with other senators trickling in to hear an about the finances and operations of the V.I. Water and Power Authority.

WAPA receives grants from the V.I. government for capital projects and construction but doesn’t receive appropriations from the General Fund approved by the Legislature. The authority’s budget is approved by the WAPA board. Nonetheless, senators had questions about long-term debt, government payments to WAPA, renewal energy and, of course, utility rates, especially the Levelized Energy Adjustment Clause.

WAPA Executive Director Hugo Hodge first gave an overview of the utility company’s revenue and expenses for Fiscal Year 2013 and those projected for 2014. Revenue from electric sales was $341 million and expenses were $345.6 million for a $4.5 million loss in 2013.

That was an improvement over FY12 when revenue was $333.4 million and expenses were $348.7 million, resulting in a $15.3 million loss. Next year, WAPA projects to earn $1,059.

Finance Committee Chairman Clifford Graham and Sen. Judi Buckley, the first senators on the floor, started the questioning. Buckley jumped on the subject of debt service and a Sept. 27 report by the Post Audit Division.

Hodge confirmed the authority has $303 million in long-term debt.

Buckley asked about the monthly payments on the debt and, by the end of the hearing, Hodge said WAPA pays almost $2 million a month.

Several senators asked about the LEAC.

Sen. Craig Barshinger asked Hodge if he is in favor of a monthly fuel surcharge instead of the LEAC. As consumers know, the LEAC can fluctuate widely and cause substantial increases in utility bills, whereas a surcharge is a “more manageable charge for the consumer,” Hodge agreed.

Barshinger said he would like to introduce a bill creating a monthly fuel surcharge, but another senator (unnamed) has “preempted” him. Barshinger promised to try to work on it.

“LEAC, which is charged to recover fuel expense, represents 76 percent of operating revenues, and fuel expense account for 70 percent of operating expenses,” Hodge said. He went on to explain that, in June 2013, the cost of fuel not billed to or recovered from customers was $51.7 million.

The water system earned small revenues each year and jumped from a mere $894 in 2012 to a projected positive figure of $4,600 as of June 30. More than $11,000 income is projected for FY14. To help consumers with their water bill, Seven Seas Corporation will produce 2 to 4 million gallons of water a day to the territory through reverse osmosis, resulting in a lower LEAC, Hodge said.

Hodge said the V.I. Government has made progress in paying down the millions owed for years to the authority. Currently the government owes $27.2 million but, this year, only the Gov. Juan F. Luis Hospital and Medical Center and funds for street lights are considered delinquent.

Hodge broke down the figures, saying the central government owes $17.2 million, which is an increase over last year, and it owes more than $11 million for street lights. The hospital’s current bill is almost $16 million, up from $7.5 million at the end of 2012, Hodge said.

Hodge said WAPA has been working to find alternative energy sources since 2005. As a result, by early next year there will be 15 megawatts of solar energy available to handle 15 percent of the peak demand.

Wind studies with the V.I. Energy Office are ongoing to determine the economic feasibility of developing a wind power program, Hodge said.

“The National Renewal Energy Laboratories – NREL – estimates that 12 megawatts to 33 megawatts of potential utility scale wind energy deployment exist in the Virgin Islands,” he said. NREL estimated the cost between 14 and 30 cents per kilowatt.

Hodge added that building 20 wind turbines for 33 megawatts would be difficult because of space and other logistical limits.

Hodge told senators there is a liquefied petroleum gas agreement with an unnamed “industry leading company.” He told Sen. Tregenza Roach, the anticipated 30 percent reduction in utility costs could be realized by consumers as early as July 2014.

A smaller but locally produced energy source will be provided by Tibbar Energy USVI. The St. Croix power producer could be selling King Grass biogas to WAPA to produce up to seven megawatts of power as early as 2016, Hodge reported.

When asked by Sen. Terrance Nelson what WAPA is doing to raise money, Hodge said the utility will earn 25 percent of the earnings when the V.I. Next Generation Network becomes profitable with their high speed internet services. VINGN is using WAPA’s fiber optic cable and other systems for the infrastructure.

Hodge also talked about new programs and future plans for customer service enhancements, community service projects and equipment repairs. In response to a question from Roach, Hodge said staff will be trained on safety and operations to work with new alternative energy sources.

At the end of his presentation, Hodge asked for help, noting that Act 7360 signed into law in May 2012 established the VI WAPA Generating Infrastructure Fund that allows seven cents out of the 14-cent gasoline tax designated for WAPA’s use.

The fund is to be used for new energy efficient generating units and/or heat recovery steam generators that can convert to natural gas and help issue bonds for WAPA through the V.I. Public Finance Authority. However, the legislation doesn’t allow WAPA to issue bonds, only the PFA, and only the Finance commissioner can disburse the funds.

Hodge’s suggested revision would allow the authority to issue bonds and have automatic access to the fund. He estimated the fund currently contains around $5 million.

Late Monday night, the Senate made the gas tax “available” to WAPA, Barshinger said.

“Basically, you’re going to get paid by the government,” he said.

Also approved late Monday night, Bill no. 30-0197 amends the V.I. zoning code to allow solar thermal or photovoltaic four energy systems to be constructed in the territory.