A petition for an electric base rate increase approved by the V.I. Water and Power Authority board Monday would cover six more months of lease payments for the Unit 29 generator, along with an overhaul to Unit 25 for a total of $8.3 million.
The board approved the filing of three petitions during its emergency meeting on St. Thomas; the first would cover an interim increase in the electric base rate that would be effective Jan. 1. The petition comes after more than a year of back and forth between WAPA and the Public Services Commission over the authority’s rate financing mechanism (RFM), a surcharge within the Levelized Energy Adjustment Clause (LEAC) that helped WAPA pay for maintenance costs.
At a PSC meeting last November, the commission voted to remove that portion of RFM that would have allowed WAPA to bring on an independent agency to monitor the day-to-day operations of the utility. At the meeting, WAPA officials testified that proposals received from companies that could do the job were too expensive and what had so far been collected was not enough to cover the cost.
During its next meeting in December, based on additional recommendations from its consultants, the PSC voted to further reduce the RFM so that it took away funds that are collected to cover WAPA’s maintenance and spare parts costs, which the authority has said is needed to keep its plants operating at an efficient level.
Commission members said they found the RFM had “exceeded its useful life” and was no longer needed as an emergency charge, but said WAPA could seek to cover the costs through the base rate.
The PSC gave its approval in June for the transfer of the RFM to the base rate, which would also increase base rates in each category by 1.8-cents per kilowatt hour.
Most recently, at a meeting in August, the PSC allowed WAPA reinstate a portion of the RFM from Sept. 1 through Dec. 31 that would allow the authority to collect an additional 1.0105-cents per kilowatt hour. During Monday’s WAPA meeting on St. Thomas, board members said the first “interim” or emergency petition asks that the 1.8-cents be extended until permanent rates are adopted and that the electric base rate increase to 2.69-cents per kilowatt hour for a total $3.56 electric rate increase for the average residential customer.
WAPA consultant Henry Thomas, who presented the details of the petitions to the board Monday, said that lease payments on the Unit 29 generator would total $3.1 million, while the overhaul of Unit 25 – which is needed to convert the unit for propane use – totals $4.7 million.
“As each project is complete, it will result in efficiency improvements,” WAPA Executive Director Hugo Hodge Jr. added Monday.
WAPA will also be filing for a permanent electric base rate increase, which would go into effect July 1, if it is approved by the PSC. The rate increase is a follow up to WAPA’s 2012 rate case and will help WAPA maintain its investment grade credit rating, which Hodge said sustains the authority’s energy and capital projects.
Hodge said it is “not only tied to our future development of projects, but also to maintaining the current structure of the agreements we have right now with our bond holders.”
The proposed new increase – which would add $15.5 cents to the typical residential bill – would also cover $145.5 million in projects. According to Thomas, the increase is $7.30 less than the average residential bill from June of 2015 and also does not reflect LEAC reductions that could come as a result of WAPA’s increase in efficiency.
The board also authorized the filing of a new water base rate petition, which would increase the water base rate by 9.2 percent, or $1.9 million, beginning July 1, 2016.