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WAPA Experiencing Critical Cash Flow Problems

Feb. 28, 2006 – Thanks to a Public Services Commission ruling, the V.I. Water and Power Authority must spread $27 million in fuel costs over two years rather than collecting the money from customers as the charges are incurred. WAPA officials said at a board meeting Tuesday that this has caused financial hardship on the utility.
WAPA Executive Director Alberto Bruno-Vega said that the figure could rise to $37 million or even $40 million if fuel costs continue to rise. "The only thing that can save us is if the fuel cost comes down," he said.
No one expects that to happen.
WAPA board president Daryl "Mickey" Lynch said WAPA should challenge the PSC on its ruling.
Nellon Bowry, WAPA's chief financial officer, said that while electrical system usage is up 1.4 percent over last year, revenues are dropping because of fuel costs. "And there's creeping deterioration because surcharges are being taken away," Bowry said.
He said that the streetlight surcharge and the self-insurance surcharge had been eliminated from electrical bills, therefore reducing revenues. Bowry said water sales and revenues are also down.
"We just came out of the wet season," he said, explaining why customers are buying less water.
Bowry painted a dismal picture of WAPA's cash flow. He said that the agency has $6 million cash on hand. He said fuel costs average $14 million a month, payroll runs $3 million monthly, and debt service another $1 million a month.
Lynch said the agency should disconnect government agencies and departments that don't pay their bills.
Bruno-Vega said the agency's inability to keep up with maintenance forced Aegis Insurance to terminate the authority's insurance effective March 31. He said WAPA is currently in discussions with AIG Insurance to be the primary carrier. He said Aegis will still be part of the consortium that insures WAPA, but will play a minor role.
Bruno-Vega said premiums will probably rise and the deductible may double — from $250,000 to $500,000.
However, Bruno-Vega did have some good news on WAPA's plans to create an electrical grid system with Puerto Rico and perhaps other Caribbean nations.
He said while the proposal is still in the conceptual stages, WAPA and the Puerto Rico Electrical Power Authority (PREPA) are in the midst of building teams to iron out the details.
"I was completely impressed with the exchanges with PREPA. They seem like they're on the same page as us," board member Alphonso Franklin said.
In other news, the WAPA board approved a proposal to ask the Legislature for a 60-day extension to finalize its contract with Innoventor Technologies Inc. to develop wind-generated power. Bruno-Vega said the company needed to do further research and was thus unable to meet the Feb. 16 deadline.
The board also approved a $2.5 million "bank overdraft facility" — a line of credit allowing WAPA access to cash so it doesn't have to lose interest by taking money out of its certificates of deposit.
Bruno-Vega also updated the board on its plans for the upcoming hurricane season. He said contracts are in place to bring in U.S.-based crews to assist WAPA crews with repair efforts in the event of damaging storms.
He said WAPA wants to make sure it has a stock of items like telephone poles on hand so it can begin repairs immediately after a storm occurs.
"We're ordering materials on a regular basis," he said.
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