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PSC Says 'No' to Automatic LEAC Increase, Nothing About Hurricane Mitigation

July 19, 2006 – Despite predictions of "dire consequences" and contrary to the advice of its consultants, the Public Services Commission failed Tuesday night to approve the Water and Power Authority's request that the automatic LEAC (Levelized Energy Adjustment Clause) increase be reimplemented for the next six months.
At the end of a four-hour meeting that concluded at 10 p.m., Commissioner Verne David made a motion to continue the automatic adjustment, which kicks in anytime the price per barrel of oil increases more than $1.75. The former automatic adjustment agreement between WAPA and the PSC expired July 1.
But of the four commissioners in attendance, two voted against the motion – Chairwoman Alecia Wells and Joseph Boschulte. David and Raymond Williams voted in favor. (In the case of a tie, a motion does not carry.)
WAPA Executive Director Alberto Bruno-Vega predicted during the sometimes acrimonious meeting that failure to allow the automatic adjustment would have dire consequences in the bond market.
Reminding commissioners that WAPA was already on a negative watch, Bruno-Vega said he was at the end of his ability to borrow and WAPA's credit line was running out (See "Bond-rating Firm Puts WAPA on 'Watch Negative'").
Bruno-Vega said the bondholders were counting on the stability provided by the automatic adjustment to secure their investment.
But Boschulte said he wanted to see WAPA take some responsibility for its predicament and provide some reports before automatically allowing rate increases. "I don't hear any accountability from the company," Boschulte said.
Wells agreed with Boschulte, saying, "Many times reports never materialize."
One area where commissioners were in line with its consultants was to allow for an increase to .237047 cents per kilowatt hour for the next six months — the amount PSC consultant Jim Madan suggested. That figure was a full 0.1 cent less than what WAPA requested, but nevertheless represents a 6 percent increase in consumers' bills.
The rancor came into play between Madan — who recommended the automatic increase, but with the caveat that WAPA be required to file reports monthly about its progress in the areas of increased efficiency and capital projects — and Bruno-Vega, who said monthly reports were an unnecessary burden. "We are being robbed of precious time to do WAPA's business," Bruno-Vega said, adding that quarterly reports should be sufficient.
But Madan said he wasn't asking for anything more than what WAPA should be reporting to its board of directors every month.
Further sparks flew when Madan said Bruno-Vega's contention, that the commission's failure to pass the automatic increase was tantamount to requiring the authority to petition for a rate increase every month, was "over the top." Madan said he would be surprised if it amounted to more than five hours extra work every month.
But concerns about wasted time and energy producing monthly reports did not move Madan, who said, "If they've got to do a little reporting in order to pass through $40 million then they have to do a little reporting." At a meeting held in June, Madan made it clear that consumers should not have to pay for inefficiencies (See "Consumers Shouldn't Have to Pay for WAPA's Inefficiencies, Consultants Say").
Ira Bowry, WAPA chief engineer at St. Croix's Richmond Plant, added to the contentious atmosphere, saying, "Our people are working hard, and it hurts us when we hear we are inefficient."
But David didn't buy into Bowry's complaint. Putting the stress on the word "perception," he asked Bowry: "Do you think it's the perception in the community that WAPA is inefficient?"
"Yes," Bowry answered.
Hurricane Mitigation Money
Another potentially dire matter that was not dealt with Tuesday night is the matter of the $3.5 million WAPA borrowed last year from the Self-Insurance Guarantee Fund so that it could fill its fuel tanks during hurricane season. The tanks have a tendency to blow away if they are not full, Bruno-Vega said, and the authority needs the extra fuel on hand anyway in the event that fuel barges can't reach the islands should a major storm strike.
Bruno-Vega reported that WAPA has no way to pay back the $2.5 million it still owes on the loan and furthermore needs to fill those tanks again for hurricane season. Only this year it will cost about double, or $7 million to fill them.
The fund has about $5.5 million in it now, not nearly to cover the cost of fuel and potential repairs.
Hurricane season starts June 1 and runs through Nov. 30. The most active month for the Virgin Islands is September.
PSC nominees Donald Cole and M. Thomas Jackson, who were approved by the Rules Committee Monday night and only await full Senate approval to take their seats on the commission, were also in attendance, as was Sen. Juan Figueroa-Serville, who is a nonvoting member of the commission.

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