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WAPA FACING A VARIETY OF CHALLENGES

Aug. 12, 2003 – A meeting called by the Public Services Commission to discuss the Water and Power Authority's progress on street lighting took a different tack Tuesday morning as discussion turned to WAPA's historically poorly performing Unit 22 and then to a new generating unit the authority plans to purchase. It ended with an executive session out of which an order came for WAPA to "take no further steps" to commit to purchasing the new generator.
However, discussion of the defective unit was limited by WAPA officials' concern that too much talk on the record could jeopardize the authority's position if litigation should arise over the Pratt & Whitney gas turbine engine that has never worked properly, according to WAPA officials, since its purchase in 1998.
Alberto Bruno-Vega, WAPA executive director, sidestepped questions concerning the official "acceptance test" of the unit – which he says the unit has never passed.
He also avoided answering questions on Pratt & Whitney's position on the matter.
"Since this may end up in litigation," Bruno-Vega said, "I don't want to go on the record."
PSC Commissioner Desmond Maynard still wanted to know if Pratt & Whitney had communicated its position in writing, at which point WAPA legal counsel Cathy Smith said she wanted to review the documents and the issue before discussing the matter publicly.
Bruno-Vega said as far as he knew the unit – which cost in the double digit millions by the time it was purchased and installed – never worked properly from day one.
He said as far as he knew – though he wasn't at WAPA when the unit was purchased – the defects had been addressed immediately with the manufacturer.
Bruno-Vega said Tuesday night he didn't know how the unit got purchased without the PSC's approval.
Unit 22, which is used primarily as a "peak" unit to fill in when power usage is at a maximum or as an emergency back-up, was purchased with a 1998 bond issue.
Bruno-Vega said, "We've spent $18 million so far," and it is only good for emergencies. He said eventually the unit would have to be sent off-island for repairs, but he was reluctant to do so until power on St. Thomas was more stable. He said sending it out right now could be disastrous.
The new unit
Spurred on by the discussion of unit 22, commissioners turned to concerns over the new $15 million General Electric frame six generator WAPA proposes to purchase for St. Thomas. When the PSC agreed in April to a 9.6 percent electric rate increase to fund a $70 million bond issue it was with the condition that the commission would exercise an "unprecedented" level of control over how the money was spent.
In executive session Tuesday afternoon the commissioners exercised that control by ordering WAPA to "take no further steps to commit to the purchase of a new generating unit for St. Thomas."
WAPA attorney Sam Hall asserted earlier, during the regular meeting, that the PSC had already approved the project, and that the PSC was trying to "micro manage" the authority.
Commissioners, however, continued to express concern that the only study done on the frame six unit was completed in 1995.
Hall said later that WAPA plans to provide the PSC with all of the specifications on the unit.
However the authority has also filed an appeal in Territorial Court to remove a paragraph from a PSC order going back to April that would allow the PSC to have rigid oversight on WAPA projects including; design detail, engineering, contract negotiations and all phases of projects.
Bruno-Vega said Tuesday night that while he understood and shared the PSC's concerns over the new unit that "everyone has their own role to play." The PSC's is to regulate public utilities, he said.
He said the authority had to go to the courts or else "lose our rights forever to appeal" the conditions of the order.
"Sometimes the pendulum swings too far in one direction," he said adding that the appeal seeks to get the pendulum back in the middle.
In a release sent out after the executive session, Valencio Jackson, PSC chairman, wrote that one of the conditions imposed in exchange for the rate increase was that WAPA "seek and receive approval by the commission of the justification and the selection of the final designs of the new generating projects to be financed with bond funds."
Jackson said that hadn't been done, adding that the 1995 study "that WAPA itself rejected when it purchased the ill-fated Unit 22" continued to be the justification WAPA used for the purchase.
Jackson said the commission had "repeatedly sought" WAPA's justification for the selection for the new generator and that they are not to go forward until the commission is satisfied with the justification.
Bruno-Vega said Tuesday night he was confident that the PSC will get "some comfort" once they have an update on previous studies from R.W. Beck, the authority's consultants.
Though the PSC repeatedly referred to the 1995 study, Bruno-Vega said there have been several since then – one in 1999 comparing the frame six to the aero derivative, which is what unit 22 is.
He said, "Apparently the PSC hadn't seen the 1999 study."
"There are not too many options out there,"he said. "The GE frame six is state-of -the -art" for industrial grade combustion turbine generators.
The big difference
Bruno-Vega called the problems with unit 22 a "triangle" that included WAPA, the manufacturer and the installer. "Everybody's pointing fingers at each other."
That won't happen with the frame six because it will be a turnkey project. GE will also install the unit, he said. "We certainly have gone through our growing pains with unit 22."
WAPA has gone as far to send a letter of intent to purchase the new frame six, but no contract has been signed.
With a spate of recent power outages related to the ongoing problems with the aging generators, Bruno-Vega said he was anxious to get the new unit on-line.
"WAPA is undergoing a very, very critical period," Bruno-Vega said with unit 11 off-island for repairs, which are expected to take eight months to complete.
Streetlights are going up
Before the meeting got side tracked Bruno-Vega said the WAPA governing board had authorized the $75,000 needed to continue work on the Melvin Evans Highway lighting project, where WAPA will replace 1,500 lights. Bruno-Vega reported that 11 poles were missing west of Sunny Isle, but that the Public Works Department had found 30 poles that would be used.
In April the PSC granted WAPA a continuation of the $1.50 surcharge added to electric bills to fund the street lighting project.
Bruno-Vega said the surcharge would see the authority through the first two phases of the project, which includes emergency lighting and replacement of downed lights. Phase three, which will include new street lights will have to be evaluated. "We need to establish what the criteria would be for adding new street lights," Bruno-Vega said. "Everybody would like to have a new street light in front of their home."
The materials to complete phase two have been ordered, according to Bruno-Vega. If they are delivered on time the job could be completed by December, he said, adding WAPA had a "very aggressive" strategy to replace the 1,500 missing lights on the Melvin Evans Highway.
Role of the central government
One impediment to the smooth functioning of the authority is the nearly $10 million owed to WAPA by various government agencies and instrumentalities for both electricity and water, which breaks down as follows:
Electricity
– $1.2 million – Education Department
– $2.5 million – Juan Luis Hospital
– $ 400,000 – V.I.
Housing Authority
– $1.4 million – Public Works Department
Water
$2.9 million – VIHA
$300,000 – Housing Finance Authority
$ 700,000 – Housing, Parks and Recreation Department
$560,000 – Juan Luis Hospital
Bruno-Vega said the semi-autonomous agencies don't pay because the central government owes them money, which in turn affects "our ability to pay our vendors."
For now the authority hasn't had to borrow to pay its bills, but it is out of spare cash.
"All reserve cash has been spent," Robert J.Vodzack, WAPA chief financial officer, said.
Meanwhile WAPA has been under- billing its levelized energy adjustment clause (LEAC) resulting in another $10 million in reduced revenues.
"An entity such as WAPA cannot sustain $20 million in accounts receivable," Bruno-Vega said.
Board member could be hired
Verne David, PSC commissioner, said he had heard talk that WAPA governing board chairwoman Carol Burke was going to be hired by the authority.
Bruno-Vega said there was a job opening as the result of the recent reorganization, but that Burke had not been hired for the position – which is director of corporate services.
Burke said her term as chairwoman was up, but denied that board member Andrew Rutnik has replaced her as chairperson.
"I am still the chair," Burke said.

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