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PSC to Reconsider WAPA Petition Concerning Line Losses

Sept. 13, 2006 – The Public Services Commission spent nearly three hours Tuesday night taking testimony and asking questions to decide whether or not to reconsider a previous decision that disallowed the V.I. Water and Power Authority to recoup fuel costs associated with the company's line losses.
In the end, the commissioners granted WAPA's petition to reconsider the disallowance of line losses — the energy waste resulting from the transmission across power lines (plus incidences of theft) — but not before covering a lot of other ground relative to the utility.
The line-loss question is related to the Levelized Energy Adjustment Clause (LEAC) under which the authority is allowed to recover its monthly fuel costs by charging them back to the customers. The way the LEAC works varies according to what the PSC allows at any given time. Recently WAPA went from an automatic LEAC where the authority could automatically adjust the LEAC rate up or down whenever the price of oil fluctuated more than $1.75 a barrel.
In a PSC meeting in July, the commission did away with the automatic LEAC, putting it back on a six-month basis, leaving the authority to come to the PSC every month to ask for adjustments, if necessary. In the same meeting the commissioners adjusted the LEAC to reflect the line-loss disallowance.
In the April 2005 order establishing the automatic LEAC, the authority was required to reduce its line losses by a certain percentage over an 18-month period or face disallowance. At the time the authority asked for five years to meet the benchmarks (and some other issues), and 36 months to meet the line-loss benchmarks.
The PSC instead gave them 30 months, which included an 18-month checkpoint.
When WAPA failed to meet the 18-month goal, the disallowance went into effect, amounting to $3 million in unrecovered costs.
Meanwhile, the company is also collecting from its customers on $24 million in previous unrecovered fuel costs.
Alberto Bruno-Vega, WAPA executive director, pointed out that utilities in other jurisdictions – specifically Guam – had far greater line losses but weren't being penalized. He also covered familiar ground in the criminal activities that have caused the line losses. He said that 70 cases – up from 65 – have been sent to the Attorney General's Office for prosecution, and several employees who were caught assisting customers in stealing power and water have been fired and will face criminal prosecution.
Recently, two such cases have been prosecuted, but Bruno-Vega said unless the Justice Department makes an example of those who have been found guilty, the theft will continue unabated.
Bruno-Vega also said the 30-month period to reduce the line losses was not enough. He said given the astronomical rise in fuel costs, the authority did not have the resources to address the line losses as quickly as it had hoped.
Commissioners asked about the $16 million owed to the utility by the V.I. government. Sen. Juan Figuero-Serville, who is a nonvoting member of the commission, said the Senate in recent budget hearings had agreed to appropriate money to pay the government's tab. He wanted to know what the authority intended to do with the money.
"We have to address critical projects," Bruno-Vega said, including the completion of the Yacht Haven substation and the upgrading of the Randolph E. Harley power plant in Sub Base.
Commissioner Donald Cole asked, "What has to happen to reduce the ratepayers rates?" To which Bruno-Vega replied, "In the short term, I feel very strongly that the biggest contribution can be made by the customer turning away from WAPA." He said expanded use of alternative power, such as solar, will be the best way for customers to reduce their bills.
"On WAPA's side we need to improve our efficiency," Bruno-Vega said, which will be accomplished by getting several of the more efficient units back on line and by "breaking away from our addiction to fuel." The much-touted heat recovery boiler, which will save $20 million to $25 million a year, was also mentioned.
But improving efficiency will take money, Bruno-Vega said, adding his oft-heard lament that the authority needs an automatic LEAC and recovery of the disallowance in order to go to the bond market and get more funding to make capital improvements.
The commission has 60 days to make a decision about whether to reconsider its decision on the disallowance and grant relief to the authority. In the meantime, the authority has that time to present its case.
Voting to reconsider the disallowance were commissioners Cole, Verne David, H. Thomas Jackson, Alecia Wells and Raymond Williams. Joseph Boschulte voted against reconsideration. Newly appointed commissioner Sirri Hamad was absent.
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