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PSC SHOOTS DOWN WAPA RATE INCREASE

Dec. 20, 2003 – The Water and Power Authority's woes continued Friday as the Public Services Commission lowered one rate request and took WAPA to task for what a consultant called the authority's "continued inefficiency," which he said costs rate payers millions of dollars yearly.
The inefficiency comes not only from astronomical line losses but from the ineffectiveness of WAPA's now infamous Unit 22, said Jamshed K. Madan of Georgetown Consulting Group, a consultant hired by the PSC and paid by WAPA to investigate the authority's operation.
The PSC voted unanimously not to allow WAPA the increase in the Levelized Energy Adjustment Clause, or LEAC, surcharge requested by WAPA's executive director, Alberto Bruno-Vega.
The authority had requested an increase in the LEAC surcharge which would raise the average consumers' electric bill about 11.4 percent, adding about $10 a month based on usage of 500 kilowatt hours — to $101.44 from $91.06. The increase for residential water customers would have been about 6.2 percent per month, so that those using about 2,400 gallons per month would have seen a monthly increase of about $2.50.
Sen. Luther Renee, a nonvoting PSC member, said, "If we had granted a $10 increase, "they (the rate payers) would kick us right out the door."
The PSC emphatically said "no," instead granting WAPA a monthly increase of about 2 to 3 percent, which will raise bills a little less than $1 per month.
Glenn Rothgeb, WAPA chief operating officer, strenuously objected to PSC's reduction of the requested rate increase. "We are in a cash flow pinch, and it will affect our capital programs," he said. Rothgeb was representing Bruno-Vega, who didn't attend the meeting.
His objections were joined by those of WAPA attorney Sam Hall, who said, "The PSC has never done this before. It's like getting an interest-free loan for three years. We can't tell Hovensa to wait for three years."
According to WAPA, the requested LEAC surcharge was made necessary by increased oil costs. In his semiannual report on the LEAC, made public in November, Bruno-Vega said, "The authority is requesting a reasonable balance between the impact on its electrical and water customers and its own critical cash-flow situation by providing for a 12-month payback period to recover the under-billing of fuel." He said WAPA is owed nearly $15.4 million for fuel costs.
The PSC granted hefty electric rate increases earlier this year, amounting to about $14 per month for the average consumer.
PSC members and Madan displayed little sympathy for WAPA's woes.
This year the commission and the utility have been increasingly at odds over each agency's respective authority, with a jurisdiction court case still pending. WAPA accuses the PSC of "micro-managing," a term PSC members bristle at.
Under questioning by PSC hearing examiner Boyd Sprehn, Madan gave a detailed account of what he termed WAPA's inefficiencies, saying they cost consumers "dearly."
"While rate payers pay several million dollars each year to support the bonds that were expended to purchase Unit 22, the lost generation from the unit, not functioning normally, is also costing the rate payers several million dollars over the years in both paying for a non-functioning generator and paying higher fuel costs due to the use of less efficient generators. The loss generation from Unit 11 on St. Thomas also costs the ratepayers dearly," Madan said in a December report on WAPA's request for the LEAC increase.
On Friday Madan elaborated further. While conceding that WAPA has no control over some issues, such as the world market fuel prices, he said there are many items which WAPA can control and yet has failed to do so. Line loss is the biggest culprit, along with the continuing saga of Unit 22's under-performance, he said.
Line losses — the electricity and water that are lost to theft or faulty equipment — cost consumers millions of dollars, Madan said. Water losses on St. Croix alone were more than $3 million last year. A huge complaint of the PSC and of Madan is WAPA's apparent ineffectual method of handling the losses. In a retreat a couple months ago, new WAPA board chair, Roy Anduze, an attorney, said they were going to see the losses go to court for fines and reimbursement. They said at the time that WAPA's method of collecting these losses, a pay-back plan with no interest, was not acceptable.
Madan and PSC members, led by commission chair Valencio Jackson, agreed something has to be done. Madan reminded the PSC, "You hold the purse strings."
Jackson said he was tired of hearing the same excuses over a period of years, and seeing no improvement. "This situation cannot go on forever," he said. "Something has got to give."
Madan said the PSC should "put in place a series of corrective measures, and put WAPA on notice." He said the commission should demand accountability. "There are too many items outstanding."
Jackson said, "I've heard this many times before. The system has to be changed and put in place so everybody benefits. WAPA has no consistent plan, and if we don't give them LEAC, they say they can't operate. A management audit was done years ago. Bruno-Vega got federal dollars to do it. Where is it?"
The commission did agree to once again hear WAPA's request for the water rate increase it turned down last month. WAPA maintains that without the increase, it could be forced to default on its bonds. With water sales relatively steady in recent months, Bruno-Vega told members of a Wednesday board meeting, it is probable that WAPA's cash reserves required to secure the utility's water bonds will drop below the mandatory minimum level of 125 percent of bond debt.
Some board members questioned Bruno-Vega's outlook. (See "Bruno-Vega lays out cash reserve concerns".)
Rothgeb said the "bottom line is expense; fuel costs are $69 million yearly." He said the authority's pipeline extension to get water to St. John will be finished by the end of 2004. The line is complete from Cassie Hill to Emerald Hills, but needs to be installed from Emerald Hills to Red Hook, he said. (See ""WAPA: Water to flow on St. John by end of 2004".)
The Friday meeting, which had been scheduled for 9:30 a.m., was delayed until the afternoon because two members – Alecia Wells and Alric Simmonds – were hospitalized in the states, and attorney Desmond Maynard was in court, leaving the commission without a quorum. Maynard finished in court about 11:30 a.m. only to encounter a minor auto accident on his way to the PSC hearing.
The other three voting members, Jerris Browne, Verne David and Jackson, attended the meeting, along with nonvoting member Renee. The other nonvoting member, Sen. Shawn-Michael Malone, was absent.
A rate increase appeal by Innovative Communication Corp. was postponed when the commission could not meet at its scheduled time.

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