The Power Players: A Short History of WAPA Part II

In the beginning there was CWT
In early 2000s, during the administration of Gov. Charles W. Turnbull, Caribe Waste Technologies was the first entity to make a foray into the waste-to-energy model.

A waste-to-energy plant in Covington, Tennessee. Plans have been advanced more than once for such a project in the territory, but they have never come to fruition.
A waste-to-energy plant in Covington, Tennessee. Plans have been advanced more than once for such a project in the territory, but they have never come to fruition.

Public Services commissioners loved the company and gave it their blessing from the beginning. The Legislature also approved of CWT.

But WAPA wanted no part of the untested technology and balked every time it came up.

CWT had been selected by the PSC over strong objection by WAPA to build and operate a plant, or plants, to process the territory’s solid waste, using technology called gasification.

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CWT’s proposal called for WAPA to buy the electricity – at an estimated $10 million to $12 million a year for 30 years – that would be produced in the waste processing.

WAPA contended that the process was not commercially proven and that the utility was able to meet consumer demands for power on its own.

It is important to note the enthusiasm shown for a company in 2002 that WAPA’s lawyer Sam Hall warned “owns no waste disposal equipment, does not own any generating equipment, owns no land in the Virgin Islands and has no finances.”

As far as can be determined, no one ever knew exactly who was behind CWT and how and when the company disappeared is lost to history. But they did, at least for a while. CWT turned up later under another bill that required WAPA to hire small power producers under the aegis of the Public Service Commission.

Legislative remedy
With pressure building to get rid of oil – more because of the cost than climate change, then-Sen. Norman Jn Baptiste introduced a bill in 2006 and again in 2008 that would require WAPA to request bids for small power suppliers that WAPA would be forced to hire. But the criteria, certification and authority would once again be left to the PSC.

The bill, sponsored solely by Jn Baptiste, sought to force the utility to negotiate and purchase an alternative source of power from any small power producer or co-generator that would be certified by the Public Services Commission and that would invest no less than $150 million on the island of St. Croix within a four-year period. The legislation required WAPA to enter in the agreement by September of that year.

Somewhere along the line, the bill was amended to include the as-yet-to-be contracted small power provider would be required to hire 400 people.

The 2008 version also authorized the government to use taxpayer dollars to guarantee loans of up to $50 million to the nebulous potential power supplier.

In vetoing the 2006 bill, then-Gov. Turnbull said, “This bill favors one company, which actually forces WAPA to enter into an agreement with a particular company whether or not it is determined to be the best small power producer or co-generator,” adding, “It should be duly noted that WAPA is an autonomous governmental instrumentality of the government and is governed by a board. Therefore, the Legislature is sidestepping its authority to mandate that WAPA enter into an agreement with a particular entity by a particular time.”

Sick of being hog tied and stymied at every turn, WAPA filed and ultimately won a suit that challenged the PSC’s right to enforce anything but rates, effectively curtailing the PSC’s ability to enforce services or facilities.

The PSC could reasonably have been expected after that to prevail upon the senators to amend the law to give it power again to enforce its recommendations, but that never happened. Instead the PSC, with the help of the Legislature, repeatedly used its one remaining super power to thwart attempts by the authority to keep up with the fuel bills.

Let’s Talk LEAC
The Levelized Energy Adjustment Clause has been in use since 1981. It was enacted to cover fuel consumption and related costs, which are highly susceptible to wide market fluctuations.

These costs are recovered through the LEAC factor. Around the time that Hugo Hodge took over leadership of the authority, in 2007, oil was at $55 a barrel. It more than doubled shortly thereafter, triggering the need for an increase in the LEAC. At the time, WAPA was 100 percent dependent on fossil fuel. With fuel being 80 percent of WAPA’s budget, the LEAC became by far the largest portion of consumers’ bills.

By 2008 the LEAC was the full 80 percent of the bill. Naturally, that was not a popular reality, so both the PSC and Legislature threw up roadblocks to try to artificially restrain the LEAC below the real cost of fuel. This only forced WAPA to borrow money and pay interest on the loans, ultimately costing V.I. consumers more money than if they had left it alone.

It is worth repeating. The LEAC was designed to fluctuate. What goes up, can and does go down. Again, as the transition report called it, political posturing is a major factor in the mistakes that have been made over the years that have cost ratepayers dearly. Putting off the inevitable was another. That bowing to the perceived desires of a few constituents will become clearer as we later discuss the demise of Alpine Energy in WAPA’s muddled history.

Privatization – Southern Energy
In the early days of the Turnbull administration, a company, known as Southern Energy offered to purchase WAPA for $100 million cash and to buy back another $150 million in bonds in exchange for 80 percent of the Water and Power Authority. The deal went south like all the deals attempted over the last 20 years.

That was a good thing, as it turned out.

Recent talk and letters to the editor suggest there are people who think privatization could be a quick fix. Reality suggests otherwise.

The following real time story emphasizes the disaster awaiting such a move – even if it were possible that private investors had an interest.

California power shutoffs: When your public utility is owned by private investors

Pacific Gas and Electric, the United States’ largest investor owned utility, shut off power in October to millions of people in California, in part to avoid sparking more wildfires in the state as it has done before, but also due to the company’s financial bottom line.

The cost of the blackouts to businesses is estimated at $2.5 billion, according to an article in the Atlantic.

PG&E is the first privately owned utility to declare bankruptcy. Climate change played a part in it, but privatization and its investor decisions were a major factor.

“PG&E made shutting down its grid in dry, windy weather a core part of its wildfire management strategy in 2018, after the company faced $30 billion in liabilities for their role in sparking two of the deadliest and costliest fires in California history. PG&E filed for bankruptcy shortly after,” the Guardian article stated.

“PG&E may be a public utility – the biggest electric utility in the US – and it may have been shutting off its lines to millions of people in the interest of public safety, but it is not, and has never been, owned by the public,” the same article goes on to say.

“With their huge monopoly markets and guaranteed rates of return, California utilities are attractive businesses for investors. Earlier this year, utilities asked the state for an even bigger payday. Meanwhile, PG&E invested millions in state lobbying, paid out $4.5 billion in profits to shareholders over the last five years, and millions in executive bonuses – all while deferring necessary maintenance and repairs to its system.”

That deferred maintenance also included tree trimming, which was part of what caused the fires.

“A lot of money went to dividends that should’ve gone to your trees,” a federal bankruptcy judge told the company in April.

Several countries, including nearby Dominican Republic, have already seen the various down sides of privatization – none of them as dramatic as the catastrophes in California – and have moved to reclaim their utilities. In 2003, the DR’s government renationalized two distribution utilities previously acquired by Spanish utility Union Fenosa, according to an article in a renewable energy website.

“The failure of privatization in the energy sector and why today’s consumers are reclaiming power.

During a break at the recent Clinton Global Initiative Conference held earlier this year at the University of the Virgin Islands, an energy expert on loan from New York Power to the U.S. Virgin Islands, urged in a not-for-attribution conversation that WAPA take full ownership of its power operations – including renewables like solar and wind – by any means possible.

With climate change a looming factor in energy reliability and the Federal Emergency Management Agency available to support government owned entities during catastrophes, that was sage advice. PG&E went belly up due to the very real challenges of climate change, deferred maintenance and the enormous costs of its personal liability in causing two wildfires that killed upwards of 85 people.

Certainly WAPA and its 55,000 customers have suffered due to deferred maintenance, but one thing is certain, it was not put off due to lining individual pockets.

Next: Fact and Reality Check

Editor’s note: Bill Kossler and Kelsey Nowakowski contributed to this report.

Earlier installments:

Melee and Missed Opportunities: A Short History of WAPA Part I

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