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HomeNewsLocal newsPSC Looks at Ferries and WAPA VITOL Cost Overruns, Suggests Default an...

PSC Looks at Ferries and WAPA VITOL Cost Overruns, Suggests Default an Option

VITOL propane shipment arrives on St. Croix in 2015, from V.I. Source archives
VITOL propane shipment arrives on St. Croix in 2015.

What the Water and Power Authority should do about cost overruns in its propane conversion project and the resumption of ferry schedules between St. John and St. Thomas were the main topics of discussion at the Public Services Commission meeting Wednesday.

Chairman David Hughes said there were three options for resolving the situation of WAPA’s project which ballooned from the $87 million which the PSC approved, to around $200 million, which the PSC did not approve.

Hughes said the cost overruns could be put on the backs of ratepayers, or the government could find some emergency funds, or WAPA could just default on the loan.

“There is a third option. It is to abandon the project and conclude the facility is not needed for the operation of the utility,” Hughes said. “One option is to simply not to pay for the project,” Hughes said, adding, “Default is a strong word.”

He said the third option might be available because VITOL deserved some culpability for not managing the project properly. He said WAPA could conclude the project was not needed and abandon it.

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A rate increase of around 5 cents per kilowatt-hour was approved for five years to pay for the project. It will expire in February. If nothing happens before then, according to Hughes, a public announcement could go out to residents that WAPA rates were going to decrease.

WAPA Chief Executive Officer Noel Hodge said if the rate designated to pay for the project was discontinued it would negatively impact the utility.

Commissioner Raymond Williams said he would not be in favor of extending the rate hike that had been approved to pay for the project. He said he was tired of the utility using income from rate hikes approved for specific projects for unspecified projects. Hughes said one question the Commission wanted to be answered was “Where did the money go?”

To help in its decision about what to do about VITOL and the rate hike, the Commission has asked WAPA what it has collected from ratepayers so far that was targeted for the VITOL project.

WAPA’s Joan Foy told the Commission that WAPA had billed ratepayers over $100 million to pay for the propane project, but she was not sure how much was collected. She promised to get more information to the Commission before its next meeting. Hodge urged the Commission not to take any action before seeing all the information.

Hughes said the decision about what to do would be a tough one for the Commission and raised in his hand holding what looked like the Inspector General’s report last month which was highly critical of how WAPA handled the contract, said, “This report makes it even more complicated.”

In another WAPA matter, PSC Commission members questioned Property and Procurement Commissioner Anthony Thomas about the delay in WAPA leasing property from the government for another project – wind turbines in the Bovoni area. The site had been identified almost 10 years as a good site for turbines but, according to Thomas, Property and Procurement had just learned about the particular sites proposed for the turbines in recent weeks. The questions mostly concerned why the land was being leased to WAPA who would then sublease it to Advance Power instead of a direct lease to Advance Power who was going to sell power to WAPA.

Advance Power was awarded a contract to sell power to WAPA in March. It was found to be the best bidder when a request for proposal was issued in April 2017.

The National Renewable Energy Laboratory published a study in 2012 evaluating the potential for wind energy in the territory. The study pointed to the Estate Bovoni peninsula on the southeast coast of St. Thomas, among many possible sites, as a good first candidate for utility-scale wind power.

Advance Power is expected to put six wind turbines on the peninsula and produce approximately 10 megawatts of wind energy for WAPA.

Ferry services between Red Hook Cruz Bay have not run full schedule since COVID descended on the territory. Ferry officials, under pressure from Hughes, indicated they will bring back almost a full schedule by next Monday. The only missing run from the old schedule will be the midnight ferry from Red Hook to Cruz Bay.

Ferries raft up at Cruz Bay. (Source photo by Amy H. Roberts)

Delrise Varlack said that the ferry from downtown Charlotte Amalie to Red Hook returned to its regular schedule on Nov. 13. It leaves from Charlotte Amalie at 10 a.m.,3 p.m., and 5 p.m. She said the ferry from downtown only averages about 10 passengers per trip. She said taxi drivers who earn larger fares by taking their passengers to Red Hook do not let passengers know there is a ferry that leaves from downtown. Another problem, according to Varlack, is that there are operators who operate that route illegally.

Attending the meeting besides Hughes and Williams were commissioners Andrew Rutnik and Pedro Williams.

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VITOL propane shipment arrives on St. Croix in 2015, from V.I. Source archives
VITOL propane shipment arrives on St. Croix in 2015.
What the Water and Power Authority should do about cost overruns in its propane conversion project and the resumption of ferry schedules between St. John and St. Thomas were the main topics of discussion at the Public Services Commission meeting Wednesday. Chairman David Hughes said there were three options for resolving the situation of WAPA’s project which ballooned from the $87 million which the PSC approved, to around $200 million, which the PSC did not approve. Hughes said the cost overruns could be put on the backs of ratepayers, or the government could find some emergency funds, or WAPA could just default on the loan.
"There is a third option. It is to abandon the project and conclude the facility is not needed for the operation of the utility,” Hughes said. “One option is to simply not to pay for the project,” Hughes said, adding, "Default is a strong word."
He said the third option might be available because VITOL deserved some culpability for not managing the project properly. He said WAPA could conclude the project was not needed and abandon it. A rate increase of around 5 cents per kilowatt-hour was approved for five years to pay for the project. It will expire in February. If nothing happens before then, according to Hughes, a public announcement could go out to residents that WAPA rates were going to decrease. WAPA Chief Executive Officer Noel Hodge said if the rate designated to pay for the project was discontinued it would negatively impact the utility. Commissioner Raymond Williams said he would not be in favor of extending the rate hike that had been approved to pay for the project. He said he was tired of the utility using income from rate hikes approved for specific projects for unspecified projects. Hughes said one question the Commission wanted to be answered was “Where did the money go?” To help in its decision about what to do about VITOL and the rate hike, the Commission has asked WAPA what it has collected from ratepayers so far that was targeted for the VITOL project. WAPA’s Joan Foy told the Commission that WAPA had billed ratepayers over $100 million to pay for the propane project, but she was not sure how much was collected. She promised to get more information to the Commission before its next meeting. Hodge urged the Commission not to take any action before seeing all the information. Hughes said the decision about what to do would be a tough one for the Commission and raised in his hand holding what looked like the Inspector General’s report last month which was highly critical of how WAPA handled the contract, said, “This report makes it even more complicated.” In another WAPA matter, PSC Commission members questioned Property and Procurement Commissioner Anthony Thomas about the delay in WAPA leasing property from the government for another project – wind turbines in the Bovoni area. The site had been identified almost 10 years as a good site for turbines but, according to Thomas, Property and Procurement had just learned about the particular sites proposed for the turbines in recent weeks. The questions mostly concerned why the land was being leased to WAPA who would then sublease it to Advance Power instead of a direct lease to Advance Power who was going to sell power to WAPA. Advance Power was awarded a contract to sell power to WAPA in March. It was found to be the best bidder when a request for proposal was issued in April 2017. The National Renewable Energy Laboratory published a study in 2012 evaluating the potential for wind energy in the territory. The study pointed to the Estate Bovoni peninsula on the southeast coast of St. Thomas, among many possible sites, as a good first candidate for utility-scale wind power. Advance Power is expected to put six wind turbines on the peninsula and produce approximately 10 megawatts of wind energy for WAPA. Ferry services between Red Hook Cruz Bay have not run full schedule since COVID descended on the territory. Ferry officials, under pressure from Hughes, indicated they will bring back almost a full schedule by next Monday. The only missing run from the old schedule will be the midnight ferry from Red Hook to Cruz Bay.
Ferries raft up at Cruz Bay. (Source photo by Amy H. Roberts)
Delrise Varlack said that the ferry from downtown Charlotte Amalie to Red Hook returned to its regular schedule on Nov. 13. It leaves from Charlotte Amalie at 10 a.m.,3 p.m., and 5 p.m. She said the ferry from downtown only averages about 10 passengers per trip. She said taxi drivers who earn larger fares by taking their passengers to Red Hook do not let passengers know there is a ferry that leaves from downtown. Another problem, according to Varlack, is that there are operators who operate that route illegally. Attending the meeting besides Hughes and Williams were commissioners Andrew Rutnik and Pedro Williams.