V.I. Public Services Commission Chairman David Hughes issued a stern warning to the V.I. Water and Power Authority on Friday, saying WAPA must pay nearly $800,000 in overdue assessments before the PSC will entertain any petitions for a rate increase.
WAPA owes the PSC $580,117.78 for outstanding 2021 annual assessments and there is a total of $200,684.91 outstanding “docket specific” assessments — money that Hughes said is critical to the PSC’s ability to fulfill its legal mandates.
“Clearly, we acknowledge the debt, but really this has been a struggle for us with the escalating fuel costs, all this year,” said WAPA Treasury Director Michael Dow Sr. “We are making our best efforts to pay, we were able to make a payment a couple weeks ago, and I’m hoping to be able to make another one within two weeks.”
Dow said he’s assured PSC Director Donald Cole “on a number of occasions that we are making our best efforts to make these payments. Hopefully, the petitions that are on their way to you will assist us in this regard, in due course.”
Dow was referring to WAPA’s notice of petition for an increase in the Levelized Energy Adjustment Clause — which was rejected outright later in the meeting because the extensive advance public notice requirements enshrined in the V.I. Code were not met.
Hughes said WAPA could seek an injunction from the court for relief from the onerous rules that require weeks of advance notice, but under the current law, the applications were insufficient. The PSC rejected a petition to increase the rate for deferred fuel costs because WAPA has not completed audited financial statements since 2019.
Hughes also explained that WAPA isn’t permitted to raise rates to pay for regulatory expenses that should be covered by past collections for the LEAC and base rate.
“These amounts are included in rates. They are really not available to you to be redirected to other expenses of the utility. You’re collecting the money and you’re spending it on other things,” Hughes said. “These are funds which are specifically included in rates for the benefit of paying for the services of the Public Services Commission, and as such, I am offended that they continue to be redirected.”
Hughes further explained that some of those PSC services include hiring experts to review WAPA’s petitions for rate increases.
“Your lack of compliance under these payment obligations is now substantially affecting the ability of this commission to serve the utility in its rate applications,” Hughes said.
“We are in no position to actually address the application. We do not have the ability to hire consultants and evaluate your rate applications because we don’t have the funds to pay those consultants and we’re not going to ask them to work for free. So, if you’d like to be timely serviced in your requests before the commission, you need to pay your assessments.”
Hughes added that “if we receive a valid rate application in the future, it’s going to be returned to you until you can forward it with a check.”
“I perfectly understand your statement and as you might imagine, the PSC is certainly not the one entity we should say, we would not want to pay or prioritize our payments,” Dow said. But “we are hemorrhaging because of the cost of fuel and the escalating cost all year long.”
Fuel payments must come first “in order to continue to offer service, but I understand the position as you’ve articulated,” Dow said. “It’s really a matter of being able to find the funds for fuel and the PSC.”
PSC Commissioner Raymond Williams Sr. expressed shock and disgust at WAPA’s responses throughout Friday’s five-hour meeting, and said he can’t understand how WAPA has spent years on the verge of being unable to pay basic expenses.
“I’m really struggling to appreciate and understand how it is that the utility continues to hemorrhage at the rate it’s hemorrhaging. People are paying their bills, I’m sure,” Williams said. “I’m literally totally 100% on the side of the chair. We can’t manage, maintain and continue to run our operation,” and “the excuses just can’t continue.”
WAPA is “not paying for $300 million a year in fuel, that’s not a true statement,” Hughes told Dow. “You are collecting at a rate of $300 million, perhaps overcollecting” and “the money is going someplace.”
The PSC is not the only entity being affected by WAPA’s inability to pay its debts, and WAPA is currently working to catch up on about $2 million in overdue employer contributions to the cash-strapped Government Employees Retirement System.
Given WAPA’s ongoing struggles, the commission issued an order of inquiry to WAPA, which is “a relatively new thing for the PSC,” Hughes said. “It’s the start of a legal process within the Public Services Commission for a fully regulated utility.”
The PSC could choose to exercise authority over aspects of WAPA’s decisionmaking, and issue requests for proposals or take other action to speed renewable energy projects initiatives intended to increase generation efficiency and capacity while reducing costs and emissions.
“We’ve made no decisions, had no discussion on any of the topics today, we do all that in the public forum. But we’re starting that process today and hope to get a great deal of information from you,” Hughes said.
PSC members questioned WAPA Interim CEO Noel Hodge and interim COO of electric systems Vernon Alexander about plans to create a solar farm on St. Croix, but WAPA officials said they are waiting on federal funding.
Hughes asked if WAPA has explored buying power from Limetree Bay, which has generators being underutilized in the bankruptcy process, but WAPA officials said the refinery and fuel storage facility is — like WAPA — working to reduce reliance on huge, rundown generators in favor of smaller generators that can be more easily repaired and replaced.
WAPA’s reliance on failing generators is “crushing the Virgin Islands’ consumers, so we have to deal with that in the near term,” Hughes said. “You’ve got to do something, OK? And you’ve got to do something now. You can’t be in a planning process forever for this stuff.”
WAPA has been paying astronomical rates to lease generators from Aggreko, and “it’s one of the few things you can probably afford to buy, honestly, these small engines with fuel tax financing,” Hughes said.
“This is how you get the cost of power down. You take a short-term lease and you turn it into a mortgage,” Hughes said. WAPA’s lease payments to Aggreko are worth two of the approximately 43 cents per kilowatt hour rate, “and you could drop that in half with long-term financing.”
WAPA officials also said the Property and Procurement Department is being slow to approve a 2-acre ground lease for a wind farm on about two acres near the Bovoni landfill on St. Thomas, delaying that project.
And U.S. Department of Housing and Urban Development funding requirements have made it difficult to obtain new Wartsila generating units, which have finally arrived in the territory. The four 9-megawatt units can burn both propane and diesel, and will have a major impact on reducing rates, Hodge said.
But the installation won’t be complete for at least another 15 months, and Williams said the public needs to understand how long this process will take.
WAPA tried to cut costs by switching from fuel oil to propane — “the cost of which has gone up. We’ve got to do better than this, Jesus Christ,” Williams said, exasperated.
“It really bothers me to sit as a member of this organization when I have people in the streets berating me when we are raising LEAC every time.”
Williams said WAPA officials are doing their best, but they “have got to really, really give us something more for our Christmas gift than what we’re getting today.”