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WAPA, PSC AT ODDS OVER DECISION-MAKING POWER

Aug. 12, 2003 – A meeting called by the Public Services Commission to review the Water and Power Authority's progress on street lighting took a different tack Tuesday morning as discussion turned to WAPA's Unit 22 on St. Thomas, which has a history of performing poorly, and then to a new generating unit the authority plans to purchase.
It ended with an executive session which produced an order 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 about 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 member 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 that, as far as he knows, the unit — which cost in the double digit millions by the time it was installed — never worked properly from Day 1. He also said that, as far as he knows — and he wasn't at WAPA when the unit was purchased, the defects were addressed immediately with the manufacturer.
Bruno-Vega said Tuesday night that he doesn't know how the unit got purchased without the PSC's approval.
Unit 22, 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.
"We've spent $18 million so far" on it, Bruno-Vega said, and it is good only for emergencies.
He said eventually the unit will have to be sent off-island for repairs but that he is reluctant to take that step until power on St. Thomas is more stable. Sending it out now could be disastrous, he said.
Who has what say on the new unit
Spurred on by the discussion of Unit 22, the commission 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 back 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 PSC exercised that control, 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 commission was trying to "micro-manage" the authority. Commission members, 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.
Meantime, the authority also has filed a petition in Territorial Court to delete a paragraph from a PSC order dating from April that allows the commission to have rigid oversight of WAPA projects, including design detail, engineering, contract negotiations and all phases of projects.
Bruno-Vega said Tuesday night that while he understands and shares the PSC's concerns over the new unit, "everyone has their own role to play." And the PSC's role is to regulate public utilities, he said.
He said the authority had to go to court 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 chair, said that one of the conditions imposed for approval of 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 and that the 1995 study "that WAPA itself rejected when it purchased the ill-fated Unit 22" continues to be the justification WAPA is using for the purchase.
The commission has "repeatedly sought" WAPA's justification for its selection for the new generator, he said, and the authority is not to proceed until the commission is satisfied with the justification.
Bruno-Vega said Tuesday night he is confident that the PSC members will get "some comfort" once they have an update on previous studies from R.W. Beck, a consultant to WAPA.
Several studies, few choices
Although 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. "Apparently the PSC hadn't seen the 1999 study," he said.
"There are not too many options out there," Bruno-Vega said, and "the GE frame six is state of the art" for industrial-grade combustion turbine generators.
Bruno-Vega described the Unit 22 problems as a "triangle" comprising WAPA, the manufacturer and the installer. "Everybody's pointing fingers at each other," he said.
That won't happen with the frame six because it will be a turnkey project, meaning GE also will install the unit, he said, adding: "We certainly have gone through our growing pains with Unit 22."
WAPA has sent 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 ongoing problems with aging generators, Bruno-Vega said he is anxious to get the new unit on-line. With Unit 11 off-island for repairs that are expected to take eight months, he said, "WAPA is undergoing a very, very critical period."
Street lights are going up
Before the PSC meeting got sidetracked, Bruno-Vega, said the WAPA governing board had authorized the $75,000 needed to continue work on the Melvin Evans Highway lighting project, which involves replacing 1,500 lights. He said 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 street lighting, which by law became WAPA's responsibility at the end of 2001. Bruno-Vega said the surcharge will see the authority through the first two phases of the project — emergency lighting and replacement of downed lights.
For Phase 3, "we need to establish what the criteria would be for adding new street lights," he said. "Everybody would like to have a new street light in front of their home."
The materials to complete Phase 2 have been ordered, he said, and if they are delivered on time, the job could be completed by December. He said WAPA has a "very aggressive" strategy to replace the 1,500 missing lights on Melvin Evans Highway.
WAPA, owed millions, is out of spare cash
One impediment to the smooth functioning of the authority is the nearly $10 million owed to WAPA by various V.I. government agencies and instrumentalities for both electricity and water. That total breaks down as follows:
Electricity:
$2.5 million — Juan F. Luis Hospital
$1.4 million — Public Works Department
$1.2 million — Education Department
$400,000 — V.I. Housing Authority
Water:$2.9 million — VIHA
$700,000 — Housing Parks and Recreation Department
$560,000 — Luis Hospital
$300,000 — Housing Finance Authority
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.
Robert J. Vodzack, WAPA chief financial officer, said, "All reserve cash has been spent."
Meanwhile the utility has been under-billing customers for its fuel costs under the 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.
A job for the board chair?
PSC member Verne David said he had heard talk that Carol Burke, WAPA governing board chair, was going to be hired by the authority.
Bruno-Vega said there was a job opening as the result of the authority's recent administrative reorganization, but that Burke had not been hired for the position — director of corporate services.
Burke said her term as chair is up but denied that board member Andrew Rutnik has replaced her. "I am still the chair," she said.

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