Sept. 18, 2003 – While the Water and Power Authority's board chair, Carol Burke, called Fiscal Year 2003 "a very successful year," that was not to say the utility has sailed through it without problems.
Burke, whose term as chair recently expired, delivered her "State of the Authority" address on Thursday morning in the upscale confines of the Ritz-Carlton Hotel, where the board is spending three days at a retreat, to be highlighted by seminars on Friday and Saturday with mainland utility executives.
On the bright side, she reported, WAPA received the highest bond rating in the utility's history, maintaining its BBB rating from both Fitch and Standard and Poor's and receiving a Baa3 rating from Moody's.
For the new fiscal year, Burke said, the utility anticipates improving and expanding the water system territorywide, taking more electric lines underground and further reducing electric and water line losses.
She said WAPA's successful floating of a $70 million bond issue allowed the authority to pay off $18 million in line-of-credit debt owed local banks, make a $3.6 million payment into the Debt Service Reserve Fund, and put $48 million toward the authority's capital improvement program. That commitment includes $17.5 million for what is known as Unit 23, a new frame six combustion turbine generator that the Public Services Commission just authorized WAPA to purchase.
WAPA's relationship with the PSC has been strained in the last year, with the utility challenging the commission's authority in a public battle of wills. (See "PSC, WAPA officials trade accusations".) WAPA has an appeal before Territorial Court of the PSC's claimed right to dictate terms to the utility in such areas as the purchase of the new generator.
The PSC has granted WAPA rate increases this year, but at its last meeting it refused to even hear the authority's most recent plea — for a water rate increase of 15.2 percent to be followed shortly by another of 9.3 percent. (See "WAPA wants to raise water bills by 24.5 percent".)
Alberto Bruno-Vega, executive director, said recently that the increases are necessary to meet the utility's principal and interest payments on borrowing. He said failure to get approval for the emergency rate increase could result in the water system being placed in receivership by WAPA's bond trustees.
In a relatively brief discussion on Thursday of the ongoing battle between the two agencies, WAPA board member Andrew Rutnik, commissioner of Licensing and Consumer Affairs, suggested the utility try a different tack than confrontation. "I don't think they [the PSC] are right," he said, "but I don't think challenging them is the solution. We have to go through a healing process."
His comments didn't meet with enthusiasm from the board.
One of the two new board members, Roy Anduze, took quite the opposite view: "We have to assert our independence from the PSC," he said. "I think their authority to set our rates is unwarranted and unlawful." Echoing an opinion which Bruno-Vega has expressed, he added: "It's absurd to have two government boards managing one utility."
Losses of water, power and revenue
Another problem facing the authority, which was discussed at length Thursday, is its continuing water and power line losses.
Burke said in her report that on St. Thomas power losses were cut from 5.48 percent in FY 2002 to 3.48 percent in FY 2003. However, on St. Croix they increased, from 12.14 percent to 14.41 percent.
She said that water system losses on St. Thomas decreased from 16.39 percent to 11.75 percent, while those on St. Croix showed a slight decrease, from 30.80 percent to 30 percent.
Board member Alphonso Franklin said the losses from electricity and water amount to $5 million annually, while the authority collects $130 million annually from its legitimate customers.
Angel Flecha, WAPA revenue protection manager, told the board that he does not penalize those who steal from the utility. He said the policy is to back-bill the perpetrators, impose a reconnect charge, assess a tampering charge, and work out a repayment system. Some board members appeared incredulous.
"Stealing is a crime," Anduze, a lawyer, said. "If all I have to do is repay, why not do it?" He added: "We are encouraging people to play cat and mouse with WAPA. We should take the worst offenders and prosecute them to set an example."
Flecha said the reasoning behind the policy of leniency is that at least the authority is getting some money this way. "If we take them to Small Claims Court, they say they can't pay, and then we have the court costs on top of what they owe," he said. WAPA doesn't charge interest on past-due bills for the same reason, he said: "If a person can't pay his bill, he can't pay his interest."
Flecha said he has collected $128,000 so far this year in back billings and $14,000 in tampering charges.
Board attorney Arturo Watlington Jr. said the V.I. Code sets penalties for utility infringements. The first violation is a misdemeanor, he said, and a person can be fined up to $2,000. For a second violation, the offender can be fined up to $5,000 and face up to a year in prison.
Bruno-Vega said "the law doesn't have sufficient teeth" and he is working with the V.I. Inspector General on the issue, but he declined to provide details. Anduze volunteered to help draft a proposed amendment to the law.
In her report, Burke said another "troubling" matter — WAPA's acquisition of the so-called Devcon property on St. Croix under questionable circumstances — has been turned over the Inspector General's Office. WAPA's own investigation into the purchase of the property "uncovered specific improprieties regarding the matter in which the acquisition took place," Burke said.
Pressure to purchase power still hanging
Another thorn in WAPA's side covered in Burke's report is the executive branch of government's demand that the authority negotiate with Caribe Waste Technologies, the company the Turnbull administration selected more than two years ago to build and operate a plant or plants to process the territory's solid waste using a technology called gasification.
CWT's proposal called for WAPA to buy the electricity that would be produced in the waste processing — at an estimated cost of $10 million to $12 million a year for 30 years. In November 2001, the WAPA board said no. Its arguments were that the process CWT intends to employ is not commercially proven and that the utility can meet consumer demands for power on its own.
Last year CWT asked the Public Services Commission to review the matter, challenging WAPA's allegation that the proposed technologies are unproven. The PSC in July certified CWT as a "small power supplier," saying it met the criteria for the designation: a fixed address, compliance with federal guidelines for distances between the proposed energy plants, and compliance with the standards for production capacity.
Burke said WAPA has hired a team of experts to draft a request for proposals to address federal Public Utility Regulatory Policy Act requirements regarding independent power producers. "At the same time," Burke said, "we will be addressing the diversification issue."
By law, public utilities must entertain requests from alternate power producers. But Bruno-VEGA pointed out that WAPA doesn't need additional power. "We can absorb our own power over 10 years of slow growth," he said.
However, he said, should an alternate power producer be able to provide WAPA with cheaper power than it can produce on its own, then, of course, WAPA
would buy it.
Several companies have made presentations to WAPA in the last year, including the privately owned Renaissance Park on St. Croix — which Bruno-Vega said he favors largely because it is local, and it actually exists.
"When are we going to stop wasting time with CWT?" board member Claude "Tappy" Molloy asked. "They have no facility; they're just on paper; their gasification method is unproven."
Bruno-Vega said that putting out a request for proposals will allow CWT in the bidding process, but along with the other power providers, and "they will have to compete."
Think-tank settings with premium prices
With WAPA telling the PSC that it needs an increase in water rates to make ends meet, Bruno-VEGA was asked by reporters how he thought rate-payers would feel about the authority holding the three-day retreat at the Ritz-Carton, the priciest hotel on St. Thomas.
He responded: "It was at the board's invite. They have to isolate themselves and get completely away to meet together and discuss issues. It's sort of a think-tank." Suggesting that the cost could have been higher, he added: "We wanted to keep it in the territory, and not go outside."
A number of WAPA staff members also are attending the retreat. Renee Somme, the board's executive assistant, said the retreat is costing $13,000, some of which she said will be reimbursed by the $75 per-person-charge for Friday's seminar.
According to a knowledgeable source, WAPA's 2002 retreat, held at St. John's exclusive Caneel Bay Resort, cost $20,000.
The Friday seminar is on "Managing Our Prospects for Economic Development" and "Workforce Development/Succession Planning." It runs from 9 a.m. to 3 p.m. Herman Morris Jr., Gas and Water Division president at Memphis Light, and Robert Wendover, managing director of the Center for Generational Studies, are the presenters.
Morris attended Thursday's board meeting. Speaking briefly, he said WAPA's problems aren't unique and that his company faces similar issues. "Right now, I just want to enjoy your beautiful island," he added.
Bruno-Vega noted that the Memphis, Tennessee, power company was among those that "sent crews to help us after Hurricane Hugo, and again for Hurricane Marilyn."
Early in the meeting, the other new board member, Daryl Lynch, a retired WAPA employee, made a motion to hold election of board officers, given that the terms of the current officers have expired. The motion received no second.
Attending the meeting in the morning were board members Anduze, Burke, Franklin, Ira Hobson, Lynch, Molloy, Rutnik and Iver Stridrion. William Lomax was absent. The board was to continue meeting in an afternoon session.

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