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WAPA’s Chronic Money Problems at a Head, Officials Say

July 26, 2007 — In the wake of a territory-wide power outage, board members and officials from the V.I. Water and Power Authority are trying to find a way to stretch revenues to cover the cost of purchasing new equipment and sustaining the utility during the ongoing hurricane season.
That WAPA has a cash flow shortage is not a new issue. However, officials said at a board meeting Thursday that the authority's dire financial position has come to a head, making it imperative for government departments and agencies to start paying their outstanding utility bills.
WAPA financial documents put outstanding government receivables at about $18.8 million. Combined with a lull in the authority's kilowatt-hour sales, this debt is contributing to a continued decline in revenues, said Nellon Bowry, WAPA's acting executive director.
More residents are seeking to conserve energy as utility bills increase, he said. Though utility charges are lower than they were four years ago, levelized energy adjustment clause (LEAC) rates are driving costs up. While this loss can be offset by increased development within the territory, WAPA still has to balance the government's debt and deferred fuel costs of about close to $14 million, Bowry said.
Several surcharges once tacked onto utility bills have also been eliminated, he added, and the Department of Finance owes about $4 million for streetlight installation and maintenance. Without these funds, it is becoming increasingly more difficult for the authority to pay for rising expenses, such as insurance premiums and personnel costs, Bowry said.
WAPA's financial position was made clear on Thursday as Bowry further expounded on a territory-wide power outage caused earlier this month by an explosion in one of the transformers located at the Randolph Harley plant on St. Thomas. The transformer had been scheduled to be replaced for the past few years, but had to be taken out of the budget because the authority had to use its limited revenues to cover other expenses.
"This is why we scream for cash, why cash is so important,” he said. “We can't even replace the transformers — the transformer that blew has been in the budget three years in succession and was taken out because the money didn't allow us to cover the expense. So the big number we spend on fuel only works if we get paid for it. We need to make a big dent in our deferred fuel costs and government expenses in order for our whole fiscal plan to work."
Though a new transformer has already been ordered, it will still take another 12 months for the equipment to be fully installed, officials said. In the meantime, members of the Public Services Commission (PSC) have asked the authority to come up with a temporary solution for replacing the transformer, which currently supplies power to the district via a backup unit.
During Thursday's meeting, board members decided to solve that problem by authorizing WAPA officials to petition the PSC for immediate access to the electric system self-insurance reserve fund, a pool of money reserved for WAPA's use during emergencies such as hurricanes and other natural disasters. Though board members said they did not want to borrow more money, they also said the utility's lack of revenues has put "WAPA is between a rock and a hard place."
If the commission approves the petition, WAPA could take up to $1.5 million out of the fund to temporarily replace the transformer. If the petition is not approved, residents may have to deal with rotating power until the new transformer is installed.
"This is the fastest way to deal with the situation, since the fund provides us with a ready source of cash," said WAPA board member Noel Loftus. "Otherwise we would have to take it out of a budget that's already short of money for repairs. So, basically, we're in a jam."
The utility's fiscal year 2008 budget was also approved during Thursday's board meeting. Since WAPA is considered an autonomous government entity, no money will be taken from the General Fund to cover the utility's upcoming expenses.
The utility's projected revenues and expenses:
— electric system operating budget: Total operating revenues on this side total $221.26 million, while operating expenses for FY 2008 total $212.4 million, for a net loss income loss of about $1.2 million;
— electric system capital budget: about $67.8 million (covers various salaries, equipment purchases and office supplies);
— water system operating budget: Operating revenues total $35.2 million, while operating expenses for FY 2008 add up to about $31.8 million. Added to the expenses are tax and debt-service payments, for a net loss of nearly $2 million; and
— water system capital budget: approximately $17.7 million.
Working through the rest of their agenda, board members also authorized the use of $614,235 for the purchase of an electrical-equipment building and two transformers associated with the installation of the waste heat-recovery boiler on St. Croix. Once pegged at $34.1 million, the project is now about $500,000 over budget, Bowry explained.
The board also authorized Bowry to negotiate and enter into an agreement with Bison Electric, Dillard Smith Construction and Sumter Utilities to assist WAPA with restoring power to the territory during the upcoming hurricane season. No cost has been associated with the agreement, since crews organized by these entities will be mobilized based on need.
Another $275,625 was also approved for the replacement of an old cable running from the former Vitelco building to the nearby Lucinda Millin Home.
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