Feb. 6, 2004 – The territory's two major utilities, Innovative Telephone and the Water and Power Authority, were harshly criticized on Friday by the Public Services Commission for their failure to pay assessments in full.
"I have a problem with Innovative just taking it upon themselves to do what they want to this commission," PSC member Alric Simmonds said.
Innovative currently owes the PSC $76,994.50 for its annual assessment plus $27,000 for three docket-specific assessments.
Valencio Jackson, the commission chair, noted that Innovative has made a habit of not paying its assessments in full on a timely basis. In December 2002, the telephone company and the commission clashed over unpaid assessments. (See: "PSC, Innovative still at odds over assessments".)
Innovative Telephone legal counsel Julio Brady said on Friday that the company had sent a letter to Keithley Joseph, PSC executive director, asking to pay the assessments in installments. PSC policy stipulates that assessments must be paid in full.
Joseph said he never made arrangements with Innovative for the assessments to be paid partially. "I think the record should clearly show that Innovative decided to do what they wanted to do," he told the commission members.
Since the payments are long overdue, "We're going to have to go to court," Jackson said. "The law states that you pay first and then contest it. We would like all the money to be paid post haste."
The commission voted unanimously to give Innovative until Feb. 13 to pay the assessments in full, and to take the company to court if it fails to do so.
WAPA owes the PSC $200,125 — half of its annual assessment fee — plus $196,000 in docket-specific assessments including for streetlighting and a water rate investigation in progress.
Simmonds, who is deputy chief of staff to Gov. Charles W. Turnbull, said: "There's no authority for them to pay 50 percent or pay quarterly as they so choose."
PSC member Verne David added, "If you're having a financial problem, gentlemen, there's something called professional courtesy. Make a request."
WAPA's executive director, Alberto Bruno-Vega, told the commission he had spoken with Jackson about the authority's "dire" financial straits.
"As we speak, we don't have funds to pay Hovensa for the fuel," Bruno-Vega said, referring to the oil the utility burns to produce electricity. He said WAPA owes the refinery about $1 million at the moment. "We're doing the best we can," he said. "We cannot pay this commission if we don't pay Hovensa."
Bruno-Vega said the authority had to do some "financial acrobatics" to come up with the money to pay the PSC half of its annual assessment.
The commission gave WAPA a Feb. 13 deadline, as well: to submit a cash-flow statement as proof that the utility is unable to pay its full assessment at this time.
Regulatory asset advanced as solution
Bruno-Vega said one reason for the authority's cash-flow problem is the large amount of money owed by the central government and its instrumentalities. The central government currently owes $8.8 million, he said, with $5 million of that amount owed by the V.I. Housing Authority.
Jackson told Bruno-Vega that if he failed to pay his electric bills, WAPA would "cut my lights." The same should be done for the government departments and instrumentalities, he said, because they budget for utility payments.
But WAPA legal counsel Samuel Hall Jr. asked: "Should we cut the hospitals? The schools?" Juan F. Luis Hospital owes WAPA $3 million, and the Education Department owes $2.2 million, officials said.
Jackson said he understands why the authority wouldn't cut off power to the hospitals, but he said all other government agencies and instrumentalities should be cut if they are not paying.
"That will cut the fuel cost to you, to us, to every homeowner on St. Thomas and St. Croix," he said.
The commission voted to extend to June 30 from April 30 the completion date for its WAPA water-rate investigation.
WAPA officials urged the PSC to give the authority the security that it needs by putting a "regulatory asset" in place. A regulatory asset is an accounting mechanism that allows a utility to postpone for future years an extraordinary expense incurred within a fiscal year.
The authority is in danger of seeing its cash reserves fall below the mandated level of 1.25 times its bonded indebtedness. The debt-service ratio is currently 1.26, Bruno-Vega said, and could drop to1.12, which would put WAPA at risk of going into default on its bonds.
Bruno-Vega said WAPA needs a letter from the PSC stating that the commission will put a regulatory asset in place for the authority before the end of this fiscal year, which the utility can then take to the bond market.
Commission members said PSC attorneys would sit down with WAPA bond counselors to work out the best way to draft such a letter by the PSC's March meeting.
Water-rate increase dropped for now
Bruno-Vega also told the commission that the utility has decided to withdraw its request for an emergency potable water-rate increase for the time being. "We believe that because of the economic situation of the Virgin Islands, that we should postpone the increase," he said.
The PSC voted last September to defer action on the utility's request for a 16.2 percent emergency increase as well as a permanent increase. WAPA returned in November with a request for a 7 percent increase that was recommended by the commission's hearing examiner for the matter, but the PSC turned it down. (See "WAPA loses bid for emergency water rate hike".) In December, however, the commission agreed to reconsider an emergency increase.
At the WAPA board's December meeting, Bruno-Vega said that with water sales relatively steady in recent months, it was probable that the authority's cash reserves would drop below the mandatory minimum level of 125 percent of bond debt and that a temporary rate increase of 7.8 percent was needed to avoid this.
Peppertree Hill residents protest
Also appearing before the PSC on Friday were two representatives of the Peppertree Hill Landowners Association of St. Croix. Sonia Moore-Williams and Anton Dotschkal told the commission that the association members are being double billed for streetlights. They are receiving a charge for "security lights" plus a surcharge placed on every consumer bill for the streetlights, they said.
Bruno-Vega told the PSC that the Peppertree Landowners have not paid for their security lights for two years and owe WAPA $13,000.
"The roads that serve the Peppertree area are private roads," he said, and before streetlights became WAPA's responsibility, the Peppertree residents had to pay WAPA for lighting on their roads.
The residents said the legal mandate of streetlights in "urban and rural residential areas" includes their location. Furthermore, they said, the law does not make a distinction between private and public roads.
Sen. Shawn-Michael Malone, one of two senators who hold non-voting seats on the commission, said the law is unclear and the Legislature may have to revisit it.
The PSC voted unanimously to hold the Peppertree landowners liable for paying WAPA what they owe through Aug. 31, 2003, the day they filed an official complaint, and to require them to place the rest of the money owed into an escrow account until the matter is resolved.
The commission also plans to ask the Legislature to clarify the law regarding WAPA's obligation to provide streetlighting.
Attending Friday's meeting were all six voting PSC members — Jerris Brown
e, David, Jackson, Desmond Maynard, Simmonds and Alecia Wells — and Malone. Not present was the other non-voting member, Sen. Luther Renee.
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