Aug. 8, 2006 — An operating budget of approximately $249.5 million for fiscal year 2007 will be offset by about $163.4 million worth of debt, V.I. Water and Power Authority officials told senators during the first round of budget hearings Tuesday.
While WAPA representatives said that measures are being put in place to cut down on fuel costs, they also explained that $245.5 million worth of revenues anticipated for FY 2007 is not enough to cover the utility's costs unless water and power bills, both current and outstanding, are paid.
During a Committee of the Whole meeting Monday, WAPA's Executive Director Alberto Bruno-Vega outlined how the utility is "strapped for cash" and currently running at a deficit of $42.6 million. He said WAPA's debt includes $30.2 million worth of un-recovered fuel costs and $12.4 million outstanding receivables owed by government departments and agencies, along with $2.1 million for streetlight services owed by the District Streetlight Maintenance Fund.
During Tuesday's meeting, WAPA officials added that in order to recoup these costs, funds have been diverted to cover the skyrocketing price of fuel, which is anticipated to top $164 million in FY 2007. According to Gregory Rhymer, WAPA's director of system planning and environment affairs, this has, in turn, created a $6.7 million shortfall in WAPA's capital improvements budget, which is funded through bond proceeds.
Bruno-Vega added that the lack of capital funding has taken its toll on the utility's already aging equipment. During the meeting, he said that St. Croix currently has two units down, while St. Thomas is operating without a waste heat recovery boiler.
WAPA's Chief Financial Officer Nellon Bowry gave senators a broader picture of WAPA's financial situation by adding that the utility has to pay off, on its electric side, $146.6 million worth of bonds and $16.6 million borrowed from a working capital line of credit established at two local banks–a total outstanding debt of $163.4 million – along with $13 million from an additional line of credit established for capital projects.
While Bowry said WAPA has $2 million still available on the capital projects line of credit, he explained that the utility has exhausted all the credit available for the electric system. To date, the utility has only been able to repay the principal interest accrued on the loans, which have to be repaid in full by Oct. 1, 2008, he added.
WAPA will incur more debt when it refinances a set of Electric System Revenue Bonds issued in 1998. The refinancing is expected to yield approximately $11 million in proceeds, earmarked for the purchase of two new waste heat recovery boilers for the territory. According to Bruno-Vega, the implementation of the two boilers could result in a 20 percent reduction in the LEAC.
Bruno-Vega explained that WAPA currently has $10 million earmarked for the project from the 1998 series bonds and is working with the Public Services Commission to secure an additional $6 million, which will be repaid through the LEAC charge. Bruno-Vega said the utility would be able to repay the PSC loan once the boilers have been running for about six months – if the present LEAC rate is maintained.
However, this initiative could be hindered by a bill pending in the Legislature calling for a two-year freeze on any increases in the LEAC. According to WAPA's bond counsel, the bill will affect WAPA's credit rating, thus preventing the utility from refinancing the bonds (See "Stabilized Energy Rates Debated in Committee Hearing").
While WAPA does not receive an annual General Fund budget appropriation from the local government, Bruno-Vega suggested that the Legislature help in reducing the debt owed to the utility by the central government and its semiautonomous agencies.
"We are certain that this payment delinquency can be cured if you were to approve a budget line-item for the exclusive payment of water and power bills since these funds could not be used to pay for any other purpose other than to pay WAPA for the services it renders," Bruno-Vega said.
He added that a significant chunk of the outstanding accounts receivables — approximately $6.7 million — are held by Juan F. Luis Hospital on St. Croix and Schneider Regional Medical Center on St. Thomas, which owe $5.2 million and $1.2 million, respectively.
He also requested that senators look at amending local laws which require the utility to: pay for assessments mandated by the Public Services Commission; install overhead lines and poles at no cost to customers; and absorb the cost of various unfunded Legislative mandates.
Present during Tuesday's meeting were Sens. Roosevelt C. David, Liston Davis, Pedro "Pete" Encarnacion, Juan Figueroa-Serville, Louis P. Hill, Norman Jn Baptiste, Neville James and Usie R. Richards.
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