On behalf of the Virgin Islands Water and Power Authority, I would like to respond to the gross inaccuracies and misinformation published in an August 5th edition of the Virgin Islands Daily News entitled, “How Does WAPA Compare?”
The article was published using incorrect, incomplete, or misleading valuations supporting the false claim that WAPA’s electrical rates are significantly higher than most islands in the Caribbean. Additionally, the article unfairly compares rates in the Virgin Islands to the Commonwealth of Puerto Rico, and even to states such as Florida. Large systems like Florida, Hawaii, and Puerto Rico in areas with large population concentrations are not comparative to island systems with a small population such as the U.S. Virgin Islands. The electrical systems in these locations have the advantage of economies of scale. For example, Florida-based utilities operate massive systems that have a wide array of fuel options (including coal, nuclear, natural gas, fuel oil, and solar); are tied to the grid of neighboring states such as Georgia and Alabama from which significant power can be imported; have underground pipeline access to inexpensive natural gas; and enjoy excellent transportation networks, due to the gentle topography. These factors result in significantly lower costs for the utility and the rate payers alike. As a further example, Puerto Rico has 25 times the number of electric customers as WAPA, and a much broader range of fuel options as well. Additionally, the Puerto Rico Electric Power Authority (PREPA) filed for bankruptcy in July 2017, and is still under bankruptcy protection. As such, including PREPA in the analysis is highly misleading.
To properly determine any utility’s per kilowatt hour charge, the utility’s base rate and fuel costs must be combined. WAPA’s rate of forty-three (43) cents per kilowatt hour is inclusive of both its base rate and fuel cost (LEAC). In most instances, the published information in the Daily News article referenced the rates that were published as per kilowatt hour charge. In actuality, that charge was the utility’s base rate only. The cost of fuel was omitted, and not included in the comparison, resulting in a misrepresentation of actual per kilowatt hour charges.
Based on an analysis by WAPA, the corrected rates for comparable Caribbean islands are:
• Anguilla: 23 cents reported / WAPA Analysis: 33 cents
• Antigua: 15 cents reported / WAPA Analysis: 39 cents
• British Virgin Islands: 24 cents reported / WAPA Analysis: 34 cents
• Dominica: 39 cents reported / WAPA Analysis: 35 cents
• St. Lucia: 28 cents reported / WAPA Analysis: 29 cents
• Grenada: 17 cents reported / WAPA Analysis: 35 cents
• Nevis: 19 cents reported / WAPA Analysis: 32 cents
• Average of WAPA Analysis: 34 cents (40% higher than originally reported in the Daily News article)
Other factors vital to understanding WAPA’s rates that were not addressed in the published report is that WAPA must maintain more generating capacity than other Caribbean utilities because of the deep trench and distance between St. Thomas and St. Croix. The approximate 43-mile distance between the two islands prevents the electric systems from being interconnected. Were it technologically possible to interconnect power production facilities on St. Thomas and St. Croix, WAPA would not require as much generation equipment, which could have resulted in rates that were 10-15% lower .
The Virgin Islands Daily News article also does not acknowledge the rigid environmental protection measures required by the U.S. Environmental Protection Agency, which provide a cleaner and safer environment for the territory’s residents. These rigorous environmental standards add to WAPA’s operating costs. One such example occurs with fuel oil. WAPA is required by the EPA to burn fuel oil with low sulfur content. The use of low sulfur fuel adds approximately 15% to the utility’s operating costs. Other regulations pertaining to the handling and proper disposal of oils, certain metals, scrap, and other compounds that are routinely used in operating an electric utility in the United States also add to the cost of electrical production.
When equally compared to similar-sized island utility systems with similar population levels and based on a per kilowatt hour price that is inclusive of a base rate and fuel costs, WAPA’s current residential rate of 43¢ per kilowatt-hour is not significantly out of line with our Caribbean neighbors, whose average rate is 34¢ per kilowatt-hour.
The Authority believe it is important to correct the record. We would be happy to share our analysis.
Lawrence J. Kupfer
Executive Director / Chief Executive Officer
Virgin Islands Water and Power Authority