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WAPA Losing Financial Ground


Sept. 13, 2005 – Recent amendments to the Job Creation Act of 2005 may give the Water and Power Authority some relief in terms of finding the best company to supplement its power needs in the long term, but it isn't changing anything in the short term about the utility's financial woes.
Alberto Bruno-Vega, WAPA executive director, told members of the Public Services Commission Tuesday, "WAPA has resorted to the last hope." The authority last week announced it would have to borrow $12 million in order to complete capital projects and service existing equipment.
"We have taken an aspirin to cure a cancer," Bruno-Vega said. The money has to be paid back within five years.
Ailing or aging equipment, skyrocketing fuel costs, inefficient use of equipment, the inability to make up for lost revenues and a staggering $12 million owed to the utility by the V.I. government have left the utility crying for relief.
"This is the last resort," Bruno-Vega said. "After this we do not know where we are going to go."
But commission chairman Valencio Jackson had a strong suggestion about where to go. "It is obvious we need a different kind of fuel."
WAPA, along with the PSC, was in the process of reviewing various alternatives for small, alternative power production in response to the Job Creation Act, when amendments to the act changed the nature of the bill. The most recent amendments — which substantially reduce the required investment, the number of jobs that need to be created and change the terms under which power providers can negotiate with WAPA — have not been signed into law by Gov. Charles W. Turnbull.
Be that as it may, Jackson was adamant that alternative energy was the solution. Commissioner Jerris T. Browne agreed and went further, saying the current law governing small power producers doesn't go far enough. "We need to look for more than 20 to 30 megawatts per island." The small power provider law, passed in the mid 1980s, says for a producer to qualify as a small power provider, it cannot produce more than 30 megawatts per island.
WAPA currently produces about 85 megawatts to power St. Thomas, according to Bruno-Vega.
Browne wants to see the small power providers that in most cases use renewable, cleaner energy sources to produce power, play a much bigger role in the islands' energy production.
Meanwhile, despite the commission's approval more than a year ago of an automatic LEAC charge, the authority is losing ground on its deferred fuel costs, which have reached $19 million.
The automatic LEAC has allowed the utility to adjust part of the monthly rate based strictly upon fuel costs. But the LEAC is always a month behind, PSC counsel Boyd Sprehn explained, and the overwhelming increases in fuel costs have left the utility unable to catch up. That is despite the fact that an additional amount was factored into the automatic LEAC to make up for losses that occurred during the time when the PSC refused to allow the LEAC.
The utility is left in the position of perhaps even losing its bond ratings, Bruno-Vega said Tuesday. He said the authority's borrowing ability could be reduced to the level of "junk bonds" if the authority is unable to make good on its current borrowing due to increasing costs.
"We have not been able to keep apace of the exorbitant fuel increases."
Jackson pointed out, "When we started this conversation, oil was $40 a barrel, now it is $60." That supported his view that WAPA needs to work with other providers who use alternative energy.
Some hope was offered in the form of the recently passed Federal Energy Policy Act of 2005, which provides grants for the Insular areas, Bruno-Vega said. The grants will fund up to 75 percent in some cases for improvements in transmission and distribution.
Sprehn advised that if the territory wanted to take advantage of the grants, it was imperative to "get the application in early – get the process underway."
The automatic LEAC is due to expire Oct. 31.
In attendance at Tuesday afternoon's meeting were commissioners, Browne, Verne David, Jackson, and Alecia Wells.

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