In May of this year the Public Services Commission approved a substantial increase in the Water and Power Authority's electrical rates. This decision was not made lightly, but only after a through investigation and consideration of the public benefits and costs of higher rates.
Unfortunately, because of WAPA's past and continuing failures and actions which have cost and will continue to cost ratepayers dearly, the commission was left with little choice but to direct that WAPA take no further steps to commit to the purchase of a new generating unit for St. Thomas until it justifies to the commission the unit WAPA proposes to purchase.
Despite the statements of Mr. Bruno-Vega [Alberto Bruno-Vega, WAPA executive director] and others for WAPA (see "WAPA's board, director want to move on new unit"), any present shortage in generating capacity at WAPA on St. Thomas is neither a surprise nor an emergency. It is the direct result of past and present mistakes by WAPA, over at least the last eight years.
There has been considerable public discussion of the ongoing issue of WAPA's need for additional generation capacity and the jurisdiction of the Public Services Commission. Because this issue is very important, not just immediately but for the long term future of the Virgin Islands, as chairman of the Public Services Commission I am obliged to respond to the many public statements made by the executive director of WAPA and some of its board members.
The commission's responsibility and authority to oversee the reasonableness of the rates and charges of a regulated utility are well established. The commission is required by law to ensure that "just and reasonable" rates are set, and to balance the interests of WAPA and its ratepayers. WAPA as a regulated utility must be able to demonstrate that its costs and rates are prudent and that it is planning and operating its electric and water systems in a manner that is just and reasonable. WAPA has failed to do so.
This year the commission approved a very considerable rate increase to support a new WAPA bond issue; however, the commission approved the bond only with strict controls. The controls resulted from, among other items, WAPA's unjustified purchases of land on St. Croix and the failure of the $20 million Unit 22 generator on St. Thomas to operate properly.
In 1995 the commission approved a bond issue which included money for the purchase of a Frame 6 generator — exactly that which WAPA now announces it is an emergency to purchase. In 1998 the commission affirmed its approval of the purchase of a Frame 6 generating unit. Again, WAPA failed to purchase the unit. Instead, without further communication, WAPA purchased an entirely different type of unit, with a lower power-generating capacity.
This new unit, commonly known as Unit 22, has been such a disaster that it will be required to be removed from service and shipped back to the manufacturer. Although Virgin Islands ratepayers have already been paying for this generator for eight years, including interest, the consumers have precious little to show for it.
In the 2002-2003 rate proceeding WAPA again requested authority to purchase a Frame 6 generator, requesting $15 million to obtain a used but refurbished unit. With the successful bond issuance, WAPA sought and received permission to increase the amount to be spent for new generator to $17.5 million.
One of the conditions imposed for the record $75 million bond issue 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." Recently, it became clear that WAPA is not following that directive and is seeking to purchase a generating unit, apparently relying for justification on a 1995 study that WAPA itself rejected when it purchased the ill-fated Unit 22 instead in 1999.
The commission has repeatedly sought WAPA's justification for the selection of the new generator. WAPA continues to point to the out-of-date study as its justification. As the borrowed funds for a new generator are paid by Virgin Islands ratepayers over 20 years, and the generator itself (with proper maintenance) [should] last 50 years, it is critical that intelligent choices be made — not another completely known and foreseen "emergency" contract.
WAPA has admitted that it does not generate electricity efficiently — even among the plants that it has. Because WAPA needs to generate water as well as electricity, and not all of the current generating capacity is capable of driving the water-makers, all ratepayers pay extra fuel charges due to deliberate inefficient use.
Look at your bills — half the cost of your electricity is fuel. The commission's staff and consultants report that much of the increased fuel costs reflected in the monthly LEAC [levelized energy adjustment clause] charge on consumers' bills stem from WAPA's continued use of inefficient units utilizing antiquated technology. The commission is insisting that WAPA explain how the new generating capacity will work with the water system, how it will improve fuel efficiency and provide reliable service to the Virgin Islands.
WAPA has simply refused to answer any such questions, despite WAPA's demonstrated history of failure to provide reliable and cost-effective electric power to the Virgin Islands consumers. Instead, WAPA labels the commission efforts to protect the ratepayers from future disasters as "micro-management."
Now, instead of responding to the reasonable requests of the commission to explain how the $17.5 million in new generation can best serve the public, WAPA has initiated lawsuits and a public campaign to shift the blame for its own mismanagement. With the very obvious turmoil within WAPA's management and its hostile actions, the commission cannot look to WAPA for reasonable management practices and for the protection of the Virgin Islands ratepayers.
WAPA's management by disaster and emergency declaration must stop. The commission will carry out its legal duties to ensure that the ratepayers obtain quality services at reasonable prices.
Editor's note: Valencio Jackson is the chair of the Public Services Commission.
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