Aug. 4, 2003 Despite two rate increases already this year, Water and Power Authority executive director Alberto Bruno-Vega told the authority's governing board Monday he may need to seek another emergency increase of the levelized energy adjustment clause (LEAC) from the Public Service Commission.
LEAC is the adjustment made to rates semi-annually based on the cost of oil.
In January WAPA approached the PSC with a similar request and it was granted. In March the authority was also granted a 9.6 percent rate hike to fund a $70 million bond issue to pay for a number of projects.
Bruno-Vega told the board Monday that the cost of oil continues to rise, preventing WAPA from recouping already under-billed monies from customers.
Glenn Rothgeb, authority chief operating officer, explained Monday night that WAPA has been carrying a debt from under-billing customers for years. "We've been lagging behind in billing for at least five years."
WAPA is allowed to adjust rates twice a year based on the cost of oil. The LEAC increase in January was based on a request made in November 2002.
Rothgeb said it wasn't his impression that Bruno was certain he was going to ask for an emergency increase, but that the increased cost of oil made it a possibility. Normally, the LEAC adjustment would be sought again in November.
A release from WAPA Monday afternoon set the "financial break even recovery barrel price" at $26. Rothgeb said WAPA had paid as much as $34 a barrel in July.
The per barrel cost before the Iraq war was $34. After the U.S. invasion it dropped to $24, but has gradually crept up again, he said.
"At $30 we're losing money again," Rothgeb said, adding, "The irony is that OPEC's (Organization of the Petroleum Exporting Countries) official range is between $24 and $28."
Rothgeb said at those rates the authority should be able to recoup its previous losses but at anything over that it couldn't.
Monday's meeting was called to review the 2003 budget year which ended June 30.
When the fiscal year began WAPA needed to recoup about $10 million from its customers.
But, the release said, "the continual spiking of oil prices increases the under billing of fuel costs to customers and results in cash flow problems to the authority."
In other business the board approved spending for several projects, including:
$153,000 for an underground duct bank for the St. John submarine cable.
$584,705 to purchase and install a switchgear extension at the East End substation.
$75,000 for the extension of an emergency maintenance contract for both districts.
$82,570 to renew a maintenance agreement for the power plants.
$92,072 to replace parts on the governor control system on unit 10.
$1.5 million to repair and upgrade unit 11
$2 million to manufacture, install an underwater power cable from Great Bay to St. Thomas to Frank Bay, St. John.
$75,350 addition for engineering services to design a waterline and pump station.
$82,000 for phase one of the St. John business office.
Only two of these projects appear to be funded from the $70 million bond issue the work on unit 11 and the St. John power cable.
The board also approved the extension of contracts with Commercial Securities Services and Ernst & Young at a cost of about $1 million.
Due diligence studies to purchase land, wells and other facilities from Albert Lindqvist of Ideal Water for the future construction of authority facilities on St. Croix were given the go-ahead.
The meeting was held at the authority board room on St. Thomas.
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